Islamic finance is not a recent invention. In medieval times, interest taking and undue financial speculation were considered both sinful and illegal and were duly avoided. Before the advent of Islam and for centuries thereafter, Muslims in the Arabian peninsula did business without taking or receiving interest. When needed, traders employed partnership (musharaka and mudaraba) contracts to finance their commerce. The absence of interest was never an impediment to the economic progress of Muslims.

It is only during the period of European colonization that Islamic commercial practices were eclipsed by capitalism. But Islamic finance was reborn with the independence of Muslim countries.

Islamic finance and banking have enjoyed success in common law jurisdictions such as England, New Zealand, Australia and India. In fact, Islamic banks willingly submit themselves to common law courts to enforce shariah-compliant commercial contracts.

Islamic banks in the UK have in their murabahah (Islamic financing) agreements a governing law clause that states: "Subject to the principles of the Glorious Shariah, this Agreement shall be governed by and construed in accordance with the laws of England".