Islamic finance (fahad.p)


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Islamic finance (fahad.p)

  1. 1. ISLAMIC FINANCE FAHAD.P (12351046)
  2. 2. ISLAMIC FINANCE: AN OVERVIEW  Islamic finance refers to the means by which corporations in the Muslim world, including banks and other lending institutions, raise capital in accordance with Shariah, or Islamic law.  Islamic law views money as a measuring tool for value and not an 'asset' in itself.
  3. 3.  Islamic law views lending with interest payments as a relationship that favors the lender, who charges interest at the expense of the borrower.  These teachings and principles of Islam are either provided in the holy Qur’an and the Traditions of the Prophet Muhammad(S.A) as well as interpreted by the Muslim Jurists.
  4. 4. Ayah’s From holy Qur’an :  “and that which you give in gift (to others), in order that it may increase (your wealth by expecting to get a better one in return) from other people’s property, has no increase with Allah…” (Ar Rum 30: 39)  “O you who believe, Eat not Riba doubled or multiplied, but fear Allah that you may be successful.” (3:130)
  5. 5. Salient Features of Islamic Finance  Essentially, Islamic finance shall be free from all prohibited items and practices which include: a) Paying and charging interest (riba) b) Gambling (maysir) c) Uncertainty in the object, price and delivery d) Practices/clauses which against the Islamic law e.g. Capital guarantee in equity-based contracts. e) Buying/selling and/or leasing non-halal items e.g. liquor, non-halal food, etc
  6. 6.  The main underlying principle of Islamic finance is to depart from “money for money transaction”.  Money can only earn more money if put into real productive economic activities such as sale, lease, investment, services, etc.  Money provided via loans cannot be expected to pay returns.  Islamic finance is essentially reflective of both economic and financial functions of money
  7. 7. Conventional vs Islamic Finance  Islamic finance must be conducted for Halal(fair) activities only, whereas conventional finance cover wider spectrum.  Interest mechanisms which is key in conventional finance must be avoided in Islamic Finance
  8. 8.  Derivatives and its trading is popular in conventional finance but it’s application is very limited in Islamic finance  Islamic finance shall be governed by both modern law and Shariah principles as interpreted by the Shariah Supervisory Board
  9. 9. Contracts in I.F : a) Mudarabah (Profit and loss sharing) b) Musharakah (Partnership) c) Qard (Benevolent loan) d) Salam (forward sale) e) Istisna’ (manufacturing & construction contract) f) Tawarruq (cash financing)
  10. 10. THE FUTURE OF ISLAMIC FINANCE  Western and Far East financial institutions      embracing Islamic finance – the fourth wave. Petrol wealth and diversification of assets and geography. Competitiveness and synergy. Risk management and prudential standards. Global Islamic financial institutions in banking, takaful, retakaful, asset management and derivatives. Human capital and education.
  11. 11. CASE STUDY : The Islamic Bank Bangladesh Limited  Based on Islamic principles and shariah.  Incorporated on March 13, 1983 as a Public Limited Company.  first interest free banks in South Asia.  Authorized capital of TK. 500 million (12.5 million US dollars) .
  12. 12. Objectives of IBBL:  To develop morals among the people and to establish the shariah in the field of trade and commerce  To invest to those businesses sectors that are found legal from the religious point of view.  To invest on profit and risk sharing basis.  accept deposits on profit and loss sharing basis.
  13. 13. Thank You & Wassalam...