Understanding Islamic Finance,9780470724101

Understanding Islamic Finance

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ISBN13: 9780470724101
ISBN10: 0470724102
Format: eBook
Pub. Date: 2008-04-01
Publisher(s): Wiley
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Summary

In Understanding Islamic Finance Muhammad Ayub introduces all the essential elements of this growing market by providing an in-depth background to the subject and clear descriptions of all the major products and processes associated with Islamic finance.Key features include: Discussion of the principles of Islamic finance; Introduction to the key products and procedures that International Financial Institutions are using or may adopt to fund a variety of clients ensuring Sharī´ah compliance; Discussion of the role Islamic finance can play in the development of the financial system and of economies; Practical and operational examples that cover deposit and fund management by banks involving financing of various sectors of the economy, risk management, accounting treatment, and working of Islamic financial markets and instruments.This book is not only an important text for all banks and financial institutions entering this particular market with a commitment to building Islamic financial solutions, but is also essential reading for undergraduate and postgraduate students of Islamic finance.

Table of Contents

List of Boxes and Figures
Foreword
Preface
Acknowledgements
Fundamentals
Introduction
Economic Scenario in the Neoclassical Framework
Conventional Debt: A Recipe for Exploitation
Growth per se May not Lead to Socio-economic Justice
Social Welfare Activities of the States
The Main Culprit
The Need of the Hour
Economics and Religion
Islamic Principles Can Make the Difference
Regulating Trade and Business
Islamic Finance Passing Significant Milestones
Could it Work to Achieve the Objectives?
About this Book
Distinguishing Features of the Islamic Economic System
Introduction
Islamic Shar?´ah and its Objectives
Why Study Islamic Economics?
Islamic Economics: What should it be?
Paraphernalia of Islamic Economics
Summary
The Main Prohibitions and Business Ethics in Islamic Economics and Finance
Introduction
The Basic Prohibitions
Prohibition of Riba
Business Ethics and Norms
Summary and Conclusion
The Philosophy and Features of Islamic Finance
Introduction
The Philosophy of Islamic Finance
Debt versus Equity
Islamic Banking: Business versus Benevolence
Exchange Rules
Time Value of Money in Islamic Finance
Money, Monetary Policy and Islamic Finance
Summary
Contractual Bases In Islamic Finance
Islamic Law of Contracts and Business Transactions
Introduction
M?l (Wealth), Usufruct and Ownership
Defining Various Related Terms
General Framework of Contracts
Elements of a Contract
Broad Rules for the Validity of Mu'?mal?t
W'adah (Promise) and Related Matters
Types of Contracts
Commutative and NonCommutative Contracts
Conditional or Contingent Contracts
Summary
Trading in Islamic Commercial Law
Introduction
Bai' - Exchange of Values
Legality of Trading
Trade (Profit) versus Interest: Permissibility versus Prohibition
Types of Bai'
Requirements of a Valid Sale Contract
Riba Involvement in Sales
Gharar - A Cause of Prohibition of Sales
Conditional Sales and "Two Bargains in One Sale"
Bai' al'Arb?n (Downpayment Sale)
Bai' al Dayn (Sale of Debt)
Al 'Inah Sale and the Use of Ruses (Hiyal)
Options in Sales (Khiyar)
Summary
Loan and Debt in Islamic Commercial Law
Introduction
The Terms Defined
Illegality of Commercial Interest
Loaning and the Banking System
Guidance from the Holy Qur'?n on Loans and Debts
The Substance of Loans
Repayment of the Principal Only
Time Value of Money in Loans and Debts
Instructions for the Debtor
Instructions for the Creditor
Husnal Qadha (Gracious Payment of Loan/Debt)
Remitting a Part of a Loan and Prepayment Rebate
Penalty on Default
Insolvency of the Debtor
Hawalah (Assignment of Debt)
Security/Guarantee (Kafalah) in Loans
Bai´ al Dayn (Sale of Debt/Debt Instruments)
Impact of Inflation on Loans/Debts
Summary
Islamic Finance - Products And Procedures
Overview of Financial Institutions and Products: Conventional and Islamic
Introduction
What is Banking or a Bank?
The Strategic Position of Banks and Financial Institutions
Categories of Conventional Financial Business
The Need for Islamic Banks and NBFIs
The Issue of Mode Preference
Islamic Investment Banking
Islamic Financial Markets and Instruments
Summary and Conclusion
Murabaha and Musawamah
Introduction
Conditions of Valid Bai'
Murabaha - a Bai' al Am?nah
Bai' Murabaha in Classical Literature
The Need for Murabaha
Specific Conditions of Murabaha
Bai' Murabaha and Credit Sale (Murabaha-Mu'ajjal)
Possible Structures of Murabaha
Murabaha to Purchase Orderer (MPO)
Issues in Murabaha
Precautions in Murabaha Operations
Musawamah (Bargaining on Price)
Summary
Forward Sales: Salam and Istisna'a
Introduction
Bai' Salam/Salaf
Benefits of Salam and the Economic Role of Bai' Salam
Features of a Valid Salam Contract
Security, Pledge and Liability of the Sureties
Disposing of the Goods Purchased on Salam
Alternatives for Marketing Salam Goods
Salam - Post Execution Scenarios
Salam-Based Securitization - Salam Certificates/Sukuk
Summary of Salam Rules
Salam as a Financing Technique by Banks
Istisna'a (Order to Manufacture)
Ijarah - Leasing 279
Introduction
Essentials of Ijarah Contracts
General Juristic Rules of Ijarah
Modern Use of Ijarah
Islamic Banks' Ijarah Muntahia-bi-Tamleek
Summary of Guidelines for Islamic Bankers on Ijarah
Participatory Modes: Shirkah and its Variants
Introduction
Legality, Forms and Definition of Partnership
Basic Rules of Musharakah
The Concept and Rules of Mudarabah
Mudarabah Distinguished from Musharakah
Modern Corporations: Joint Stock Companies
Modern Application of the Concept of Shirkah
Diminishing Musharakah
Diminishing Musharakah as an Islamic Mode of Finance
Summary and Conclusion
Some Accessory Contracts
Introduction
Wakalah (Agency)
Tawarruq
Ju'alah
Bai´ al Istijrar (Supply Contract)
Application of the System: Financing Principles and Practices
Introduction
Product Development
The Nature of Financial Services/Business
Prospects and Issues in Specific Areas of Financing
Islamic Banks' Relationship with Conventional Banks
Fee-based Islamic Banking Services
Summary and Conclusion
Appendix: The Major Functions of a Shar?´ah Supervisory Board in the Light of the AAOIFI'S Shar”?´;´ah Standard
Sukuk and Securitization: Vital Issues in Islamic Capital Markets
Introduction
The Capital Market in an Islamic Framework
Securitization and Sukuk
Summary and Conclusion
Takaful: An Alternative to Conventional Insurance
Introduction
The Need for Takaful Cover
The Shar?´ah Basis of Takaful
How the Takaful System Works
Takaful and Conventional Insurance Compared
Status and Potential of the Takaful Industry
Takaful Challenges
Appendix: Fat?wa (Juristic Opinions) on Different Aspects of Insurance
An Appraisal of Common Criticism of Islamic Banking and Finance
Introduction
The Common Myths and Objections
Appraisal of Conceptual Criticism
Appraisal of Criticism on Islamic Banking Practice
Conclusion
The Way Forward
Introduction
Agenda for the Policymakers
Potential, Issues and Challenges for Islamic Banking
Conclusion
Acronyms
Glossary
References
Arabic/Urdu References
Suggested Further Reading
Index
Table of Contents provided by Publisher. All Rights Reserved.

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