THE BASIS OF ISLAMIC BANKING & FINANCE

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Chapter 1

THE BASIS OF ISLAMIC BANKING &

FINANCE

THE BASIS OF ISLAMIC BANKING & FINANCE

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IFQ - CONTENTS
Chapter

Description

# Question & Weight

The Basis of Islamic Banking & Finance (IB&F)

2%

An Introduction to IB&F

2%

Islamic Law of Contracts

14

18%

Financial Techniques Applied by Islamic Banks

30

25%

Islamic Asset & Fund Management

10

10%

Sukuk Market

14

16%

Islamic Insurance Takaful

11

8%

Financial Statements for Islamic Banks

10%

Islamic Corporate Governance

9%

100

100%

Real Exam (Computer Based Testing-CBT):

No. of Questions
No. of Minutes

100 (MCQs)
120

THE BASIS OF ISLAMIC BANKING & FINANCE

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INTRODUCTION TO IB&F
What is Islamic Banking & Finance?
Islamic Banking & Finance is built on the principles prescribed Islam
governing the activities, transactions & interactions between two parties
(financial institutions & customers) for various financial needs.
What Islam has to do with economics & business?
Business transactions (Muamalat) are integral part of human life and
which is based on Islamic economic model.
Islam is the complete way / code of conduct, some teachings of Islam
are as follows;
The Islamic way of drinking, eating, sleeping, bathing, walking
How to do business
The contract between two parties
The social responsibilities
Environment protection
How to conduct ourselves with neighbors
How to manage time
Etc.
THE BASIS OF ISLAMIC BANKING & FINANCE

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ISLAMIC COMMERCIAL ETHICS (ICE)

Principles of Islamic Business is the Islamic Commercial Ethics (ICE) and

ethics are integral part of Shariah

The basic Shariah foundation for Islamic Commercial Ethics (ICE) are:

Integrity (Honesty or Virtue) or Pure, Stead fast adherence to strict

moral or ethical code)

Stewardship of Humanity (on Erath) - Allah is supreme and the

Creator and Man is entrusted in looking after the Almightys
Creations

Sincerity (Obeying God),

Piety (Fearing God conscious in Secret & Public),

Righteousness (Not only to confine oneself in occupational and

professional duties also to be perfect in ones duty/work).

THE BASIS OF ISLAMIC BANKING & FINANCE

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GENERAL FEATURES OF ISLAMIC ECONOMICS

Moral & Ethical
Uphold truth
Be honest
Respect other peoples right
Dont hoard
Fulfill the promise on time
Stand for social welfare based on universal brotherhood
Promotion of healthy competitions
Wealth Distribution, Charity & social activities
Money should be treated as Medium of Exchange not as an asset, where
it has no inherent value
Dont deal with prohibited items

(Gambling, Casino, Pork, Tobacco, Liquor, etc)

Full employment & satisfaction of human needs
Asset backed transactions. (no fictitious creation of assets)
And many more.
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GENERAL FEATURES OF ISLAMIC ECONOMICS

Charitable Distribution
Zakat is mandatory almsgiving levied on anyone who has in excess
of a minimum level of wealth.
The Quran also encourages Muslims to make charitable
donations ((Sadaqat plural, Sadaqa singular) which is voluntary and
dependant on the goodwill of the donor.
Wealth Creation
Earnings should be directly linked to economic activity and
production. Making money purely from the passage of time (ie,
charging interest) is prohibited. No fictitous asset creation.

THE BASIS OF ISLAMIC BANKING & FINANCE

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INTRODUCTION TO ISLAM

OURCES OF SHARIA (ISLAMIC LAW)

Primary Sources
o Quran (Text of God)
o Sunnah (Sayings, Actions & Tacit Approvals of the Prophet [SAW])

Secondary Sources
o Ijma (Consensus Majority of opinions of Ulama learned jurists)
o Ijthihad (Interpretation use of human reason to demonstrate the Sharia law)
o Qiyas (Analogy to create / adopt the permitted solution for current issues)

Others
o Authorities of Interpretations
o The Shari'ah Supervisory Board (SSB)
o The Islamic Fiqh Academy
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INTRODUCTION TO ISLAM

ISLAM

Aqidah

Shari'ah

Akhlaq

(Faith & Belief)

(Practices & activities)

(Moralities & Ethics)

Ibadah

Muamalat

(Man-to-God worship)

(Man-to-man activities)

Political

Economic

Social

activities

activities

activities

Other Economic

Banking & Financial

activities

activities

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ISLAM, ECONOMICS, FINANCE

SHARIAH

Aqidah

Practices & Activities

Faith & Belief

Hajj

Ethics & moralities

Muamalat

Ibadath
Zakat

Akhlaq

Fasting

Economic

Political

Social

Prayer
All of them reflect
Man to God Relationships

THE BASIS OF ISLAMIC BANKING & FINANCE

All of them reflect

Man to Man Relationships

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INTRODUCTION TO ISLAM
Authorities on Interpretation
Sunni Schools
of thought

Shia Schools
of thought

Maliki

Jaafari

Hanbali

Zaidi

Islamic Fiqh
Academy

Shari'ah Scholars

Hanafi

Shaafii
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SSB FUNCTIONS & RESPONSIBILITIES

Shariah
Supervisory
Board (SSB)

Adv
iso
ry R

tion
Educa ess
ren
& Awa

Offer interviews,
lectures or other
public education
about Islamic banking
in general

Approve new products or

suggest revisions to
P
De ro
ve du proposed new
lop ct
products
& Advise
me
nt on complex
corporate deals

ole

Prepare an annual report of

the IBs key practices to
ah ce
i
r
n
a
document compliance
Sh plia
with Shari'ah Law
om

Respond to
inquiries from
management, employees,
and customers as needed

Zakath & Charity

Ensure that
Zakath is paid in
required amounts
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THE ISLAMIC FIQH ACADEMY

This was created in Jeddah, KSA following a decision of
the Organisation of the Islamic Conference (OIC) in 1981
Academy includes most Islamic countries which are
represents by scholars, knowledgeable people in scientific,
economic, social, etc.
The Academy meets periodically to discuss and
contemporary issues related to Islam & issues resolutions
More info: www.fiqhacademy.org.sa

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Chapter 1

THE BASIS OF ISLAMIC BANKING &

FINANCE
COMPLETED

THE BASIS OF ISLAMIC BANKING & FINANCE

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