Product development process is very technical as this involves various technical and non technical matters which makes it bit difficult from conventional banking.

1. Product development- Process
Shariah Based (IFI)
BY
Lt Col (R) Jamshed Mukhtar Khan
MIBF,MBA

3. Product development-Process
Shariah Based (IFI)
3

4. Product development-Process
Shariah Based (IFI)
Pt-I Product Development Process
Pt-II Product Dev : Shariah Analysis
Pt-III Product Dev : A Glance
4

5. Product Development Process
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A Product Development Process: is the entire
set of activities required to bring a new concept to
a state of market readiness.
Design process
A is the set of technical
activities within a product development process.
It does not include business, financial, or
marketing activities.

6. Product Design Process
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Understanding the Opportunity
Develop a Concept
Implement a Concept

7. Understanding the Opportunity
Develop a vision
Market opportunity analysis
Customer/user need analysis
Competitive products analysis
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Characterized by four activities

8. Develop a vision
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The first step in product development is to have a vision.
What product do we like to have ?
Why product not coming up to expectations?
What is difficult with the current product we use?

9. PART - II
Product Development : Shariah Analysis
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10. Product development : Shariah Analysis
 THE IMPERATIVE OF IF PRODUCT DEVELOPMENT
 ASPECTS OF IF PRODUCT DEVELOPMENT
 IJTIHAD AS A MEAN OF IF PRODUCT DEVELOPMENT
 THE BASIS FOR IF PD: SALIENT FEATURE FIQH UL
MAMLAT
 THE STARTING POINT OF SHARIAH ANALYSIS FOR PD.
 THE MAIN SHARIAH ISSUES IN IF PD
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11. THE IMPERATIVE OF IF PRODUCT DEVELOPMENT
 The banking and financial services industry is highly
competitive.
inferior product will be discarded by the customers.
– The product offered must be sound in all regards.
– Protect and enhance the reputations of those institutions that
associate their name with it.
 New generation of well-informed consumers demanding
differentiated and sophisticated products.
 Banking and financial institutions should focus their
resources and talents on serving the customer
– in order to ensure continuous presence in the market.
 Hence, product development is an integral part
component in the quest to serve the customer
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12. THE IMPERATIVE OF IF PRODUCT DEVELOPMENT
 Rapidly changing financial environment in which the Islamic
banks are operating,
– it is vital that every player of this sector attempts to ensure both its short
term competitive and long-term strategic presence.
 Islamic banking institutions as well as Islamic banking
consultants need to be :
– continually innovative and create new ideas and new products.
 Procedure for financial product and service development is the
most imperative tool in order to meet their increasing concern
about
– Liquidity
– risk management
so as to ensure the value of the assets created by them as well as
sustained growth and profitability for the business
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13. THE IMPERATIVE OF IF PRODUCT DEVELOPMENT
 Product development is an important area in which
Islamic banking and financial institutions
– should focus their resources.
 There is already a pool of Islamic banking institutions
and consultants in the Muslim World but the study on
how the institutions carry out :-
– Product development process is still in absence
 It is observed that much of the Islamic products are
introduced into the market place by adapting and
reengineering the conventional products –
– following the success of the conventional products.
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14. THE IMPERATIVE OF IF PRODUCT DEVELOPMENT
 CONSIDERABLE INNOVATION AND VALUE-ADDED PUT BY
THE ISLAMIC FINANCIAL INSTITUTIONS: SKEPTICISM
– SUBSTANCE OF THE PRODUCTS
– CRITICISM ON THE INSTITUTIONS AND SYSTEM
– REENGINEERING PROCESS IS SUBSTANTIALLY PRACTICED
 ISLAMIC BANKING AND FINANCIAL INSTITUTIONS
– FORESEE THE NEEDS OF THE MARKET
– ROLL OUT ISLAMIC FINANCIAL PRODUCTS
– SERVICES IN ADVANCE OF CONVENTIONAL PRODUCTS
– ENSURE CONSTANT GROWTH
– COMPETITIVENESS OF ISLAMIC BANKING AND FINANCIAL PRODUCTS.
 ESSENTIAL FOR THE ISLAMIC BANKS
– TO MOVE BEYOND THE ADAPTATION OF CONVENTIONAL PRODUCTS
– STIMULATE NEW IDEAS THAT WILL HELP THE ISLAMIC BANKING AND
FINANCIAL INDUSTRY NOURISH.
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15. THE ASPECT OF IF PRODUCT DEVELOPMENT
THE STANDARD PRODUCT
DEVELOPMENT PROCESS
• MARKET INTELLIGENCE
• RESOURCES ALLOCATION
• TEAM SELECTION
• MARKETING AND DISTRIBUTION
• RESEARCH AND DEVELOPMENT
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16. THE ASPECT OF IF PRODUCT DEVELOPMENT
 The Scholars have recognized seven main aspects that
should be observed in developing Islamic financial
product development : -
 SHARIAH (ISLAMIC LAW)
 (GOVERNING) LAW
 TAX STRUCTURE
 ACCOUNTING STANDARD
 TECHNICAL SYSTEM
 FINANCE
 MARKETING
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17. THE ASPECT OF IF PRODUCT DEVELOPMENT
 The core of Islamic financial products is the Shariah
compliance.
 The Shariah scholars are responsible in giving fatwa on
the product with the underlying supporting evidences to
the Islamic investors.
 The product must be Islamically acceptable and
economically viable in all aspects.
 Criticality of Shariah analysis - carried out in order to
ensure the marketability of the end-product.
– The Shariah scholars must be involved in the whole process from
beginning and not only at the end of the process
– They must be adequately informed to clear doubts, if any,
surrounding the product.
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18. IJTIHAD AS A MEAN OF IF PRODUCT DEVELOPMENT
The term ijtihad refers primarily to the “utmost effort by
the mujtahid (competent Shariah scholar) to derive
Shariah rulings on matters from the sources of Shariah”
and the past scholarly interpretations of Islamic jurists
on the Shariah sources. In carrying out the ijtihad, the
mujtahid should have specific method of Ijtihad which is
recognized in the Islamic jurisprudence discipline
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19. IJTIHAD AS A MEAN OF IF PRODUCT DEVELOPMENT
Based on the definition:
 It is observed that ijtihad is not an upfront process rather it is
later stage after the existence of matters to be the subject of
ijtihad.
The involvement of Shariah scholars:
– at the end of the Islamic financial product development has slow down the
introduction of Islamic banking products and services,
– Compared to conventional products, as the fatwa or religious decrees issued
by Shariah scholars pertaining the products are carried out late.
This fact indicates that the positioning of Shariah scholars:
– in Islamic financial product development process should be changed to
upfront position
– Must play active role in documenting the necessary information on the
product.
– The approach of al-tafri (projecting matters before their existence and
issuing decrees on them) as practiced by some previous Islamic jurists may
be adopted in the Islamic financial product development process.

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20. IJTIHAD AS A MEAN OF IF PRODUCT DEVELOPMENT
THE RESPONSIBILITY OF BEING SHARIAH SCHOLARS
 Very serious by all means. In issuing the decrees
 They have to interpret the word of God and actions and deeds
of the Prophet Muhammad in their effort to prescribe the solutions
to govern the activities of Islamic financial institutions.
This is a formidable duty as the integrity of the interpretation of
the sources of Islamic law must be upheld.
Among the criteria for a Shariah scholar is mastery of the Arabic
language, sciences of Hadith and Quran, and the various skills of
legal reasoning (ijtihad)
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21. THE BASIS FOR IF PD: SALIENT FEATURE FIQH UL MAMLAT
• THE NATURE OF ISLAMIC FINANCIAL PRODUCT
DEVELOPMENT IS BASED ON
• THE NATURE OF FIQH MUAMALAT (ISLAMIC COMMERCIAL
JURISPRUDENCE) ITSELF.
• THE AREA OF FIQH MUAMALAT DIFFERS FROM THE FIQH
IBADAT FROM THE PERSPECTIVE OF ISLAMIC
JURISPRUDENCE IN SEVERAL WAYS.
• QAL’AHJI (2000) OUTLINES THE MAIN SALIENT FEATURES OF
FIQH MUAMALAT VIS-A-VIS FIQH IBADAT
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22. SALIENT FEATURES OF FIQH
MUAMALAT VIS-A-VIS FIQH IBADAT
22
Salient Features of
Fiqh Muamalat Fiqh Ibadat
The primary ruling is permissibility
except where the Shariah prohibition
states.
The primary ruling is impermissibility except
where the Shariah permission states.
Fatwa or verdict in based on the
easiest/most appropriate (al-aysar)
opinion.
Fatwa or verdict is based on the most
cautious (al-ahwath) opinion.
Legal rulings are based on rational
reasoning (illah aqliyyah)
Legal rulings cannot be based on rational
reasoning (it is a submissive action).
Specific Quranic and Sunnah
resources are few and general in
nature; hence
the rational thinking can be applied.
Specific Quranic and Sunnah resources are
many and detailed in nature; hence it
cannotbe developed extensively by
rationalization

23. THE STARTING POINT OF
SHARIAH ANALYSIS FOR PD
 Having the understanding that the commercial contracts are
permissible except where the Shariah prohibition states
 The Islamic jurists have recognized factors that invalidate and
defect the commercial contracts through their thorough
analysis of Shariah sources
 Invalidating factors refers to the factors that violate the
fundamentals and conditions of the commercial contract
 Hence, an invalid commercial contract is “in effect not
concluded and the exchange of ownership does not result”
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24. THE MAIN INVALIDATING AND
DEFECTING FACTORS AS AVAILABLE IN
THE FIQH LITERATURES
 Al-Riba : Interest & Usury
 Al-Gharar: Uncertainty
 Al- Jahalah: Ignorance
 Al-’Ayb : Flaw, Defect
 Al- Maysir & Al-Qimar : Gambling/Fortune-based Game
 Al-Ghabn :Unjustifiable/Unreasonable Price
 Al-I’anah ala al-Munkar: Helping on unlawful purposes
 Al-Hilah :Legal Device
 Al-Dharar: Harm, Impairment
 Al-Zulum :Injustice,Unfairness,Oppression
 Al-Najsh: Artificial price hiking
 Al-ikrah : Coercion, Complusion
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25. THE MAIN INVALIDATING AND
DEFECTING FACTORS AS AVAILABLE IN
THE FIQH LITERATURES
THE FOUR MAIN CATEGORIES BASED ON
INVALIDITY & DEFECT- by Prof Wahbah al-Zuhayli (1997)
•Eligibility of contracting party
•Non-Compliance of the contract language
•Non-Compliance of the objects of sale
• Non-Compliance of description (wasf), condition (sharth) and
legal prohibition
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26. THE MAIN INVALIDATING AND
DEFECTING FACTORS AS AVAILABLE IN
THE FIQH LITERATURES
THE FOUR MAIN CATEGORIES BASED ON
Illegal purpose of commercial contracts –
by Prof Dr.Usman Syubayr
•Illegality of Subject Matter
•Helping unlawful (haram) activities
•Oppression and taking others property unrightfully
• Violation the Islamic brotherhood (Ukhwah Islamiyah)
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27. THE MAIN INVALIDATING AND
DEFECTING FACTORS AS AVAILABLE IN
THE FIQH LITERATURES
THE FOUR MAIN CATEGORIES BASED ON
Illegal purpose of commercial contracts –
by Mr. Muhammad Muda & Mr. Abdul Jalil
•Al-Riba
•Al-Gharar & Al-Jahalah
•Al-Zulm & Al-Dharar
•Violation of the Shariah sanctity
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28. Shariah Issues in IF PD
Heavy Reliance on the Fixed Mode of Islamic
Concepts
The Underutilization on Islamic Partnership
Concepts
The Practice of Legal Device
Harmonization of Opinions
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29. THANKS
Developed & Based on the paper of:
MR. Muhammad Muda
&
Mr,Abdul Jalil
for which I’m indebted.