Islamic_Banking_Slides_-_Copy_bw.pdf islamic banking

Islamic ifb baning

1. Lehrstuhl für Bankwirtschaft und Finanzdienstleistungen
Prof. Dr. Hans-Peter Burghof with
Ahmad Abu-Alkheil and Ulli Spankowski
2
Islamicbanking&Finance
•Introduction
•Evolution

2. 3
TerminArabicTerminArabicTerminArabicTerminArabic MeaningMeaningMeaningMeaning
Reba Interest
Al-wadiah Safe keeping
Bai'muajjal Deferred-payment sale
Bai'salam pre-paid purchase
Zakat Islamic tax
Halal lawful
Haram unlawful
Ijara leasing
Mudaraba profit-sharing
Mudarib Entrepreneur-borrower
Murabaha Cost-plus or mark-up
Musharaka Equity participation
Qard hasan Benevolent loan (interest free)
Gharar Uncertainty or chance
Sukuk Islamic bond
Qirad Mudaraba
Rabbul-mal Owner of capital
Shariah Islamic law
Shirka Musharaka
GlossaryGlossaryGlossaryGlossary:
IslamicBankingandFinance
IslamicBankingandFinance
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Islamic Economics
Islamiceconomics:Islamiceconomics:Islamiceconomics:Islamiceconomics:
•IseconomicsinaccordancewithIslamiclaw.IseconomicsinaccordancewithIslamiclaw.IseconomicsinaccordancewithIslamiclaw.IseconomicsinaccordancewithIslamiclaw.
GoalsofIslamicEconomics:GoalsofIslamicEconomics:GoalsofIslamicEconomics:GoalsofIslamicEconomics:
•Broad"basedeconomicwell"beingwithfullemploymen tandoptimumrateofeconomic
growth.
•Stabilityinthevalueofmoneytoenablethemediu mofexchange tobeareliableunitof
accountandastablestoreofvalue.
•Ajustreturnisensuredoninvestmentanddevelopm entprojects.
•Effectiverenderingofallservicesnormallyexpect edfromthebankingsystem.
•Socio"economicjusticeandequitabledistributiono fincomeandwealth

3. 5
RulesregardingIslamicfinance:RulesregardingIslamicfinance:RulesregardingIslamicfinance:RulesregardingIslamicfinance:
•Anypredeterminedpaymentoverandabovetheactual amountofprAnypredeterminedpaymentoverandabovetheactual amountofprAnypredeterminedpaymentoverandabovetheactual amountofprAnypredeterminedpaymentoverandabovetheactual amountofprincipalisprohibitedincipalisprohibitedincipalisprohibitedincipalisprohibited
•ThelendermustshareintheprofitsorlossesarisingoutofthThelendermustshareintheprofitsorlossesarisingoutofthThelendermustshareintheprofitsorlossesarisingoutofthThelendermustshareintheprofitsorlossesarisingoutoftheenterpriseforwhichtheeenterpriseforwhichtheeenterpriseforwhichtheeenterpriseforwhichthe
moneywaslentmoneywaslentmoneywaslentmoneywaslent
•MakingmoneyfrommoneyisnotMakingmoneyfrommoneyisnotMakingmoneyfrommoneyisnotMakingmoneyfrommoneyisnotIslamicallyIslamicallyIslamicallyIslamically acceptable(AssetBasedFinancing)acceptable(AssetBasedFinancing)acceptable(AssetBasedFinancing)acceptable(AssetBasedFinancing)
•GhararGhararGhararGharar (Uncertainty,RiskorSpeculation)isalsopr ohibited(Uncertainty,RiskorSpeculation)isalsoprohibited(Uncertainty,RiskorSpeculation)isalsoprohibited(Uncertainty,RiskorSpeculation)isalsoprohibited
•Investmentsshouldonlysupportpracticesorproduc tsthatarenInvestmentsshouldonlysupportpracticesorproduc tsthatarenInvestmentsshouldonlysupportpracticesorproduc tsthatarenInvestmentsshouldonlysupportpracticesorproduc tsthatarenotforbiddenotforbiddenotforbiddenotforbidden
IslamicBankingandFinance
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Islamicbanking:Islamicbanking:Islamicbanking:Islamicbanking:
Abankingsystemthatisbasedontheprinciplesof Islamiclaw(alsoknownasSharia,
andguidedbyIslamiceconomics).
Islamicbankingdistinguishingfeatures:Islamicbankingdistinguishingfeatures:Islamicbankingdistinguishingfeatures:Islamicbankingdistinguishingfeatures:
•Zerointerestandcapital guarantee(interest"free)
•Multi"purposeandnotpurelycommercial
•Stronglyequity"oriented
•Full"reservebanking
IslamicBankingandFinance

4. 7
TypesofIslamicfinancing:
•Tradefinancing
•Investmentfinancing
•Lending
•Services
UsesOfFunds(FinancingTechniques):
•Musharaka (financebywayofpartnershippartnershippartnershippartnership"""" JointVentureJointVentureJointVentureJointVenture)
•Mudarabah (ProfitLossSharing)
•Murabahah (cost"plusfinancing)
•Bai'salam(prepaidpurchase)
•Bai'muajjal (deferredpayment)
•Istisnaa (manufacturing).
•ijara (Leasing)…
IslamicBankingandFinance
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MusharakaMusharakaMusharakaMusharaka ::::
It means partnership. It involves you placing yourcapital with another person and both
sharingtheriskandreward.Thedifferencebetween Musharaka arrangements
and normal banking is that you can set any kind ofprofit sharing ratio, but
losses mustbe proportionatetotheamountinvested.
TypesofTypesofTypesofTypesofMusharakaMusharakaMusharakaMusharaka ::::
• DecliningDecliningDecliningDeclining""""BalanceSharedEquity:Commonlyusedtofinancea homepurchase,BalanceSharedEquity:Commonlyusedtofinanceah omepurchase,BalanceSharedEquity:Commonlyusedtofinanceah omepurchase,BalanceSharedEquity:Commonlyusedtofinanceah omepurchase,
thethethethe declining balance method calls for the bank andthe investor todeclining balance method calls for the bank and the investor todeclining balance method calls for the bank and the investor todeclining balance method calls for the bank and the investor to purchasepurchasepurchasepurchase
the home jointly, with the institutional investor gradually tranthe home jointly, with the institutional investor gradually tranthe home jointly, with the institutional investor gradually tranthe home jointly, with the institutional investor gradually transferring itssferring itssferring itssferring its
portion of the equity in the home to the individual homeowner, wportion of the equity in the home to the individual homeowner, wportion of the equity in the home to the individual homeowner, wportion of the equity in the home to the individual homeowner, whosehosehosehose
paymentsconstitutethehomeowner'sequity.paymentsconstitutethehomeowner'sequity.paymentsconstitutethehomeowner'sequity.paymentsconstitutethehomeowner'sequity.
• PermanentPermanentPermanentPermanent Musharaka:
In this form of Musharaka an Islamic bank
participatesintheequityofaprojectandreceive sashareofprofitona
proratabasis.Theperiodofcontractisnotspeci fied.Soitcancontinue
solongasthepartiesconcernedwishittocontinu e.
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5. 9
Mudaraba :
Referstoaninvestmentonyourbehalfbyamoresk illedperson. Ittakestheformofa
contractbetweentwoparties,onewhoprovidesthe fundsandthe otherwhoprovides
theexpertiseand whoagreetothedivisionofanyp rofitsmadeinadvance.Inother
words, IslamicBankwould makeSharia’a compliantinve stmentsandsharetheprofits
withthecustomer,ineffectchargingfor thetimea ndeffort.Ifnoprofitismade,theloss
isborneby thecustomer and IslamicBank.
ADCB
IslamicBankingandFinance
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Sayyid Tahir
(MurabahahMurabahahMurabahahMurabahah (cost(cost(cost(cost""""plusfinancing):plusfinancing):plusfinancing):plusfinancing):
Murabaha is a contract for purchase and resale and a llows the customer to make
purchaseswithouthavingtotakeoutaloanandpay interest.IslamicBank purchasesthe
goodsforthecustomer,andre"sellsthemtothecu stomeronadeferredbasis,addingan
agreed profit margin. The customer then pays the sal e price for the goods over
instalments,effectivelyobtainingcreditwithoutp ayinginterest.
IslamicBankingandFinance

6. 11
IslamicBankingandFinance
Leasing or ijara is also frequently practiced by Islamic banks. Under this mode, the banks
wouldbuythe equipment ormachineryandleaseito ut to their clients who may opt to buy
theitemseventually,(HireHireHireHire Purchase)Purchase)Purchase)Purchase)inwhichcasethemonthlypaymentswillconsistof two
components,i.e.,rentalforthe useof the equipment and installment towards the purchase
price.
Thedescriptiongivenabove,containsthefollowingessentialingredients for
outliningthebasicrulesunderShari'ah:
IThattherehastobeavaluableuseoftheassetan dtransferabilityofthatusufruct.
I
Thattheownershipoftheassetisretainedbythe transferoror lessor throughoutthe
leaseperiod.Consumablecannotbeleased.
IThattheriskandliabilitiesofownershipliewiththelessor.Theleasedasset shall
remaintheriskofthelessor throughouttheleasep eriod.Anylossorharmcausedby
factorsbeyondthecontrolofthelesseeshallbebornebythelessor
IThat the risk and liabilities associated with the use of the asset shall be borne by
thelessee
Islamicleasing:Islamicleasing:Islamicleasing:Islamicleasing:
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IslamicForwardModes:IslamicForwardModes:IslamicForwardModes:IslamicForwardModes:
•IstisnaaIstisnaaIstisnaaIstisnaa (manufacturing)(manufacturing)(manufacturing)(manufacturing)
Isacontracttoacquiregoodsonbehalfofathirdpartywherethepriceispaidtothe
manufacturerinadvanceandthegoodsproducedand deliveredatalaterdate.
Acontractinwhichadvancepaymentismadeforgoo dstobedeliveredlateron.Theseller
undertakestosupplysomespecific goodstothe buy eratafuture dateinexchange ofan
advance price fully paid at the time of contract. It is necessary that the quality of the
commodity intended to be purchased is fully specified leaving no ambiguity leading to
dispute.
•Bai'salamBai'salamBai'salamBai'salam(prepaidpurchase)(prepaidpurchase)(prepaidpurchase)(prepaidpurchase)
IslamicBankingandFinance

7. 13
SUMMARY:SUMMARY:SUMMARY:SUMMARY:
An Islamic bank is a deposit"taking banking institution whose scope of activities
includes all currently known banking activities, excluding borrowing and lending
onthebasisofinterest.Ontheliabilitiesside,itmobilizesfundsonthe basisofa
Mudarabah orWakalah (agent)contract.Itcanalsoac ceptdemanddepositswhich
are treated as interest"free loans from the clients to the bank. and which are
guaranteed.Ontheassetsside,itadvancesfundso naprofit"and–losssharingora
debt"creating basis, in accordance with the principles of the Sharīah. It plays the
role of an investment manager for the owners of time deposits, usually called
investment deposits. In addition, equity holding as well as commodity and asset
trading constitute an integral part of Islamic banking operations. An Islamic bank
shares its net earnings with its depositors in a way that depends on the size and
date"to"maturity of each deposit. Depositors must be informed beforehand of the
formulausedforsharingthenetearningswiththe bank.
DifferencebetweenIslamic&ConventionalBankingDifferencebetweenIslamic&ConventionalBankingDifferencebetweenIslamic&ConventionalBankingDifferencebetweenIslamic&ConventionalBanking
IslamicBankingandFinance
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Sayyid Tahir
DifferencebetweenIslamic&ConventionalBankingDifferencebetweenIslamic&ConventionalBankingDifferencebetweenIslamic&ConventionalBankingDifferencebetweenIslamic&ConventionalBanking
Islamic Banking and Finance

8. 15
Atthedepositendofthescale,Islamicbanksnorm allyoperatefourbroadcategoriesof
account:
•Thecurrentaccount
•Thesavingsaccount
•Investmentaccounts
•Specialinvestmentaccounts
CategoriesofAccount:
IslamicBankingandFinance
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IslamicIslamicIslamicIslamicSukukSukukSukukSukuk (Bonds):(Bonds):(Bonds):(Bonds):
Is commonly described as an “Islamic bond”. which r epresent an undivided beneficialrepresent an undivided beneficialrepresent an undivided beneficialrepresent an undivided beneficial
ownershipof an underlying assetownershipof an underlying assetownershipof an underlying assetownershipof an underlying asset
,,,, SukukSukukSukukSukuk isaTrustcertificateinwhichinvestorretur nsisaTrustcertificateinwhichinvestorreturnsisaTrustcertificateinwhichinvestorreturnsisaTrustcertificateinwhichinvestorreturns
are derived from legal or beneficial ownership of assets . Certiare derived from legal or beneficial ownership of assets . Certiare derived from legal or beneficial ownership of assets . Certiare derived from legal or beneficial ownership of assets . Certificates of equal valueficates of equal valueficates of equal valueficates of equal value
representingproportionateownershipoftangibleas setsorusufrrepresentingproportionateownershipoftangibleas setsorusufrrepresentingproportionateownershipoftangibleas setsorusufrrepresentingproportionateownershipoftangibleas setsorusufructsorservicesorofuctsorservicesorofuctsorservicesorofuctsorservicesorof
theassetsofaprojectorinaninvestmentactivity.(AAOIFI)theassetsofaprojectorinaninvestmentactivity.(AAOIFI)theassetsofaprojectorinaninvestmentactivity.(AAOIFI)theassetsofaprojectorinaninvestmentactivity.(AAOIFI)
IslamicBankingandFinance
•KindsofKindsofKindsofKindsofSukukSukukSukukSukuk ::::
•SukukSukukSukukSukuk representingownershipintangibleassets(mos tlybasedonSalerepresentingownershipintangibleassets(mostlyb asedonSalerepresentingownershipintangibleassets(mostlyb asedonSalerepresentingownershipintangibleassets(mostlyb asedonSale andandandand
Leasebackordirectlease)Leasebackordirectlease)Leasebackordirectlease)Leasebackordirectlease)
•SukukSukukSukukSukuk representingUsufructsorServices(basedons ubleaseorsalerepresentingUsufructsorServices(basedonsuble aseorsalerepresentingUsufructsorServices(basedonsuble aseorsalerepresentingUsufructsorServices(basedonsuble aseorsaleofofofof
services)services)services)services)
•SukukSukukSukukSukuk representingequityshareinaparticularbusi nessorinvestmenrepresentingequityshareinaparticularbusiness orinvestmenrepresentingequityshareinaparticularbusiness orinvestmenrepresentingequityshareinaparticularbusiness orinvestmentportfoliotportfoliotportfoliotportfolio
(basedon(basedon(basedon(basedonMusharakahMusharakahMusharakahMusharakah////MudarabahMudarabahMudarabahMudarabah))))
•SukukSukukSukukSukuk representingreceivableorfuturegoods(based onrepresentingreceivableorfuturegoods(basedonrepresentingreceivableorfuturegoods(basedonrepresentingreceivableorfuturegoods(basedonM urabahaMurabahaMurabahaMurabaha ororororSalamSalamSalamSalam))))
IstisnaIstisnaIstisnaIstisna’’’’).).).).

9. 17
TypicalTypicalTypicalTypicalSukukSukukSukukSukuk StructureforsaleandleasebackStructureforsaleandleasebackStructureforsaleandleasebackStructureforsaleandleaseback…………
IslamicBankingandFinance
Hamad Rasool
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IslamicBankingandFinance
FlowofFundsFlowofFundsFlowofFundsFlowofFunds"""" Acquisition&RentalsAcquisition&RentalsAcquisition&RentalsAcquisition&Rentals
Hamad Rasool

10. 19
FlowofFundsFlowofFundsFlowofFundsFlowofFunds"""" Repayment&MaturityRepayment&MaturityRepayment&MaturityRepayment&Maturity
IslamicBankingandFinance
Hamad Rasool
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IslamicBankingandFinance
SukukSukukSukukSukuk AlAlAlAl""""IjaraIjaraIjaraIjara basedModel(Example)basedModel(Example)basedModel(Example)basedModel(Example)
Hamad Rasool

11. 21
TypicalInternationalSukuk Mechanism– Step
bystep…
IslamicBankingandFinance
Hamad Rasool
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IslamicinsuranceIslamicinsuranceIslamicinsuranceIslamicinsurance"""" TakafulTakafulTakafulTakaful
IJoint guarantee, Islamic alternative to insurance,is based on the concept of social
solidarity, cooperation and mutual indemnificationof losses of members. It is an accord
amongagroupofpersonswho agreetojointlyindem nifytheloss ordamagethatmaybe
caused,outofthefundtheydonatecollectively.
ISuch a contract usually involves the concepts ofSuch a contract usually involves the concepts ofSuch a contract usually involves the concepts ofSuch a contract usually involves the concepts of MudarabaMudarabaMudarabaMudaraba,,,, TabarruTabarruTabarruTabarru (to donate for(to donate for(to donate for(to donate for
benefit of others). It is based on the concept of mutual sharingbenefit of others). It is based on the concept of mutual sharingbenefit of others). It is based on the concept of mutual sharingbenefit of others). It is based on the concept of mutual sharing of losses with the aim ofof losses with the aim ofof losses with the aim ofof losses with the aim of
eliminatingtheelementofuncertainty.eliminatingtheelementofuncertainty.eliminatingtheelementofuncertainty.eliminatingtheelementofuncertainty.
ITakafulTakafulTakafulTakaful representsanimportantcomponentintheove rallIslamicfinancrepresentsanimportantcomponentintheoverallIs lamicfinancrepresentsanimportantcomponentintheoverallIs lamicfinancrepresentsanimportantcomponentintheoverallIs lamicfinancialsystemgivenialsystemgivenialsystemgivenialsystemgiven
itsroleinthemobilizationoflongitsroleinthemobilizationoflongitsroleinthemobilizationoflongitsroleinthemobilizationoflong""""termfundsandprovidingriskprotection.termfundsandprovidingriskprotection.termfundsandprovidingriskprotection.termfundsandprovidingriskprotection.
ITakafulTakafulTakafulTakaful isawaytoreducethefinancialriskoflos sduetoaccidentaisawaytoreducethefinancialriskoflossduetoaccidentaisawaytoreducethefinancialriskoflossduetoaccidentaisawaytoreducethefinancialriskoflossduetoaccidentandmisfortunes.Inndmisfortunes.Inndmisfortunes.Inndmisfortunes.In
takafultakafultakafultakaful, the participant would pay particular amount of money as contri, the participant would pay particular amount of money as contri, the participant would pay particular amount of money as contri, the participant would pay particular amount of money as contribution (premium)bution (premium)bution (premium)bution (premium)
partly to risk fund (the participantspartly to risk fund (the participantspartly to risk fund (the participantspartly to risk fund (the participants’’’’ special account) using the concept ofspecial account) using the concept ofspecial account) using the concept ofspecial account) using the concept of tabbarutabbarutabbarutabbaru
(donation) and another party ((donation) and another party ((donation) and another party ((donation) and another party (takafultakafultakafultakaful organization) with a mutual agreement that thereorganization) with a mutual agreement that thereorganization) with a mutual agreement that thereorganization) with a mutual agreement that there
wouldbealegalresponsibilitytoprovidefortheparticipantswouldbealegalresponsibilitytoprovidefortheparticipantswouldbealegalresponsibilitytoprovidefortheparticipantswouldbealegalresponsibilitytoprovidefortheparticipantsafinancialprotectionagainstafinancialprotectionagainstafinancialprotectionagainstafinancialprotectionagainst
unexpectedloss,shouldithappenwithintheagreed period.unexpectedloss,shouldithappenwithintheagreed period.unexpectedloss,shouldithappenwithintheagreed period.unexpectedloss,shouldithappenwithintheagreed period.
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12. 23
IslamicBankingandFinance
RecapitulationsinIslamicMoneyandbanking:RecapitulationsinIslamicMoneyandbanking:RecapitulationsinIslamicMoneyandbanking:RecapitulationsinIslamicMoneyandbanking:
1111"""" ThereisnoneedtobeconcernedwithsupplyofmoneyaslongasThereisnoneedtobeconcernedwithsupplyofmoneyaslongasThereisnoneedtobeconcernedwithsupplyofmoneyaslongasThereisnoneedtobeconcernedwithsupplyofmoneyaslongas factorsofproductionexist.Inotherfactorsofproductionexist.Inotherfactorsofproductionexist.Inotherfactorsofproductionexist.Inother
words,supplyofmoneyiscloselytiedwithavailabilityoffactwords,supplyofmoneyiscloselytiedwithavailabilityoffactwords,supplyofmoneyiscloselytiedwithavailabilityoffactwords,supplyofmoneyiscloselytiedwithavailabilityoffactorsofproduction. Thiswillnecessarilyleadorsofproduction.Thiswillnecessarilyleadorsofproduction.Thiswillnecessarilyleadorsofproduction.Thiswillnecessarilylead
tofullemployment.tofullemployment.tofullemployment.tofullemployment.
2222"""" Intheabsenceofinterest,interestIntheabsenceofinterest,interestIntheabsenceofinterest,interestIntheabsenceofinterest,interest""""basedloansdisappearandbanksbecome"asset"producers.basedloansdisappearandbanksbecome"asset"producers.basedloansdisappearandbanksbecome"asset"producers.basedloansdisappearandbanksbecome"asset"producers.
3333"""" Theeliminationofinteresterodesmoneywhirlpool,aswellasTheeliminationofinteresterodesmoneywhirlpool,aswellasTheeliminationofinteresterodesmoneywhirlpool,aswellasTheeliminationofinteresterodesmoneywhirlpool,aswellas anyspeculativedemandformoney.Thisanyspeculativedemandformoney.Thisanyspeculativedemandformoney.Thisanyspeculativedemandformoney.This
4444"""" History testifies that rate of profit is much higher than longHistory testifies that rate of profit is much higher than longHistory testifies that rate of profit is much higher than longHistory testifies that rate of profit is much higher than long""""term interest rates. In fact, so long asterm interest rates. In fact, so long asterm interest rates. In fact, so long asterm interest rates. In fact, so long as
speculation is permitted they never become equal. Therefore, depspeculation is permitted they never become equal. Therefore, depspeculation is permitted they never become equal. Therefore, depspeculation is permitted they never become equal. Therefore, depositors in Islamic banking system willositors in Islamic banking system willositors in Islamic banking system willositors in Islamic banking system will
enjoyhighratesofprofit,howevervolatile.Thiswillsomehowenjoyhighratesofprofit,howevervolatile.Thiswillsomehowenjoyhighratesofprofit,howevervolatile.Thiswillsomehowenjoyhighratesofprofit,howevervolatile.Thiswillsomehowbridgethegapamongincomestrata.bridgethegapamongincomestrata.bridgethegapamongincomestrata.bridgethegapamongincomestrata.
5555"""" RiskofdepositinginanIslamicbankingsystemislessthantRiskofdepositinginanIslamicbankingsystemislessthantRiskofdepositinginanIslamicbankingsystemislessthantRiskofdepositinginanIslamicbankingsystemislessthanthatofbuyingashareinstockmarket,hatofbuyingashareinstockmarket,hatofbuyingashareinstockmarket,hatofbuyingashareinstockmarket,
Thisisduetoseveralfactors:Thisisduetoseveralfactors:Thisisduetoseveralfactors:Thisisduetoseveralfactors:
(a)depositsandreturnstonumerousfinancedprojectsarebein(a)depositsandreturnstonumerousfinancedprojectsarebein(a)depositsandreturnstonumerousfinancedprojectsarebein(a)depositsandreturnstonumerousfinancedprojectsarebeingpooled.Furthermore,risksofthesegpooled.Furthermore,risksofthesegpooled.Furthermore,risksofthesegpooled.Furthermore,risksofthese
projectsarenotofthesamekindneitherofthesamemagnitude.projectsarenotofthesamekindneitherofthesamemagnitude.projectsarenotofthesamekindneitherofthesamemagnitude.projectsarenotofthesamekindneitherofthesamemagnitude. ItfollowsthatpooledriskislogicallyItfollowsthatpooledriskislogicallyItfollowsthatpooledriskislogicallyItfollowsthatpooledriskislogically
expectedtobelessthanthatofoneindividualshare.expectedtobelessthanthatofoneindividualshare.expectedtobelessthanthatofoneindividualshare.expectedtobelessthanthatofoneindividualshare.
(b)Twokindsofdepositscanbesuggestedtodepositors;onew(b)Twokindsofdepositscanbesuggestedtodepositors;onew(b)Twokindsofdepositscanbesuggestedtodepositors;onew(b)Twokindsofdepositscanbesuggestedtodepositors;onewithvariablereturnandtheotherwithithvariablereturnandtheotherwithithvariablereturnandtheotherwithithvariablereturnandtheotherwith
fixedreturn.Bothofthese,ofcourse,shallbecompensatedforfixedreturn.Bothofthese,ofcourse,shallbecompensatedforfixedreturn.Bothofthese,ofcourse,shallbecompensatedforfixedreturn.Bothofthese,ofcourse,shallbecompensatedfor bythepooledreturnsofthefinancedbythepooledreturnsofthefinancedbythepooledreturnsofthefinancedbythepooledreturnsofthefinanced
projects.projects.projects.projects.
7777"""" InflationdoesnothaveanadverseeffectonthebalancesheetInflationdoesnothaveanadverseeffectonthebalancesheetInflationdoesnothaveanadverseeffectonthebalancesheetInflationdoesnothaveanadverseeffectonthebalancesheet ofanIslamicbank.ThisderivesfromofanIslamicbank.ThisderivesfromofanIslamicbank.ThisderivesfromofanIslamicbank.Thisderivesfrom
thenatureofprofitandlosssharinginwhichtherealvaluesothenatureofprofitandlosssharinginwhichtherealvaluesothenatureofprofitandlosssharinginwhichtherealvaluesothenatureofprofitandlosssharinginwhichtherealvaluesofassetsandliabilitieswouldmoveinthefassetsandliabilitieswouldmoveinthefassetsandliabilitieswouldmoveinthefassetsandliabilitieswouldmoveinthe
samedirectionintheeventofeconomicshocks.Whereas,incasesamedirectionintheeventofeconomicshocks.Whereas,incasesamedirectionintheeventofeconomicshocks.Whereas,incasesamedirectionintheeventofeconomicshocks.Whereas,incase ofconventionalbanking,theofconventionalbanking,theofconventionalbanking,theofconventionalbanking,the
purchasingpowerofloansdeclineduringinflationaryperiods.Hpurchasingpowerofloansdeclineduringinflationaryperiods.Hpurchasingpowerofloansdeclineduringinflationaryperiods.Hpurchasingpowerofloansdeclineduringinflationaryperiods.Hence,theIslamicbankingprotectsence,theIslamicbankingprotectsence,theIslamicbankingprotectsence,theIslamicbankingprotects
depositorsagainstanydeclineintherealvalueoftheir(monetdepositorsagainstanydeclineintherealvalueoftheir(monetdepositorsagainstanydeclineintherealvalueoftheir(monetdepositorsagainstanydeclineintherealvalueoftheir(monetary)assets..ary)assets..ary)assets..ary)assets..
Iraj Toutounchian, Ph.D.
BankingandFinance
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1.1.1.1. TimeValueofMoneyTimeValueofMoneyTimeValueofMoneyTimeValueofMoney
Islamic principles differ from the capitalist theory as money and commodity have different
characteristics,forinstancemoneyhasnointrinsi cvaluebutisonlyameasureofvalue
or a medium of exchange, it is not capable of fulfilling human needs by itself, unless
convertedintoacommodity.
2.2.2.2. Tradinginstocks:Tradinginstocks:Tradinginstocks:Tradinginstocks:
Aslongasthecompany’sbusinessandfinancialpos itionareacceptable,thereisnoreason
tobelievethattradinginthecompany’ssharesis notpermissible.
SubjectsinQuestionsSubjectsinQuestionsSubjectsinQuestionsSubjectsinQuestions
3.legalstatusofloansinIslamiclaw:3.legalstatusofloansinIslamiclaw:3.legalstatusofloansinIslamiclaw:3.legalstatusofloansinIslamiclaw:
Loansareacharitablecontract
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13. 25
IslamicWindowsintheconventionalbanks:
•Commerz bank
•DeutscheBank
•HSBCBank
•StandardChartered
DeutscheBank… AnExample:
IslamicBankingandFinance
ADCB
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IslamicBankingandFinance
Thankyouforattention
ForQuestions,pleasecontactmeat:
alkheil@uni"hohenheim.de