Professional Documents
Culture Documents
Introduction
à
Ô Financial system can be defined as processes and
procedures used by a firm's management to exercise
financial control and accountability.
Ô inancial Instruments:
Ô bank deposits, life insurance policies, mutual fund unit
certificates.
Ô Share of bank is a secondary instrument.
Ô inancial Markets:
Ô Financial markets are ones in which funds are transferred
from those who have excess funds available to those who
have a shortage.
ë
Ô ºature:
Ô absence of interest- based financial institutions/transactions,
doubtful transactions,
Ô stocks of companies dealing in unlawful activities,
Ô unethical or immoral transactions such as market
manipulations, insider trading, short- selling, etc.
Ô Ñ ectives:
Ô based on Islamic Law, , which is to be treated as an
important vehicle to transfer funds from the surplus to the
deficit units.
Mudarabah Ô A profit-sharing partnership to which one contributes the capital and the other
[ the entrepreneurship; or
Ô the bank provides the capital, the customer manages the project.
Ô Profit is shared according to a pre-agreed ratio
Qard Hasan Ô Charitable loans free of interest and profit-sharing margins, repayment by
installments.
Ô A modest service charge is permissible.
Wakalah Ô An authorization to the bank to conduct some business on the customer¶s behalf
[
Hawalah Ô An agreement by the bank to undertake some of the liabilities of the customer
[
for which the bank receives a fee.
Ô When the liabilities mature the customer pays back the bank
Ôdvance purchase financing products:
Murabahah Ô A sales contract between a bank and its customers, mostly for trade
[ financing.
Ô The bank purchases goods ordered by the customer;
Ô Customer pays the original price plus a profit margin agreed upon by the
two parties.
Ô Repayment by installments within a specified period
Istithna¶ Ô A sales contract between bank and customer where the customer specifies
goods to be made or shipped,
Ô Which the bank then sells to the customer according to a pre-agreed
arrangement.
Ô Prices and installment schedules are mutually agreed upon in advance.
3
Kafil %Tadamun,
Takaful - Guarantor
Islamic insurance with joint risk-sharing
Wakil Agent
À
.
Ô As interest is prohibited, suppliers of funds become investors instead of
creditors.
Ô The provider of financial capital and the entrepreneur share business risks
in return for shares of the profits.
×
Ô It becomes actual capital only when it joins hands with other resources to
undertake a productive activity.
Ô Islam recognizes the time value of money, but only when it acts as
capital, not when it is "potential" capital.
G
î
.
Ô An Islamic financial system discourages hoarding
Ô Prohibits transactions featuring extreme uncertainties, gambling, and
risks.
Ô Islam upholds contractual obligations and the disclosure of information
as a sacred duty.
Ô This feature is intended to reduce the risk of asymmetric information and
moral hazard.
^. Shariah-
.
Ô Only those business activities that do not violate the rules of 6
qualify for investment.
Ô For example, any investment in businesses dealing with alcohol,
gambling, and casinos would be prohibited.
Ô
3mura aha:
Ô ÿ
3iara.
Ô Another popular instrument, accounting for about
percent of Islamic financial transactions, is leasing.
3mudara a.
Ô This is identical to an investment fund in which managers handle
a pool of funds.
Socialenvironmental o not consider the social & ¦nsure social & environmental
welfare environmental welfare. welfare.
Sourcesofthesystem Intellectual¶s brain storming of evine book µAl Quran¶ & prophet¶s
the economic problems of men¶s speeches.
life.
Socialenvironmental o not consider the social & ¦nsure social & environmental
welfare environmental welfare. welfare.