documents of islamic finance

1. DEPARTMENT OF FINANCE
UNIVERSITY OF DHAKA
MBA PROGRAM
MBA 22ND
BATCH
Course Code and Title: F-545: Islamic Finance and Banking
Instructor : Dr. H. M. Mosarof Hossain
Professor
Department of Finance
University of Dhaka
Class Schedule : 9:00 a. m. to 11:00 a. m. (Sunday)
Contact No. : 9661900-73, Ext. 8044: E-mail: mosaroffb@yahoo.com and
mosarof@du.ac.bd
Basic Information about the Course:
Credit Hours : 03
Contact Hours : 45
Pre-requisite courses : Principles of Finance/ Managerial Finance
Teaching Method : Mainly the text book would be followed under the class framework. Other
materials also may be supplied (if required) by the course teacher. Class lecture
might be based on multimedia presentations. Students must have their personal
copy of the text book and standard scientific calculator in the class.
Evaluation Method: Term paper preparation and presentation 15
Case Presentation 15
1st Mid-term 15
2nd Mid-term 15
Term Final Examination 40
Total 100
Course Objectives: The primary objective of establishing Islamic bank all over the world is to promote,
foster and develop the application of Islamic principles, law and tradition to the transaction of financial,
banking and related business affairs and to promote investment companies, enterprises and concerns which
shall themselves be engaged in business as are acceptable and consistent with Islamic principles, law and
traditions. But the objective of Islamic bank when viewed from the context of its role in an economy, its
specific objectives may be enlisted as following:
 To offer contemporary financial services in conformity with Islamic Shariah;
 To contribute towards economic development and prosperity within the principles of Islamic justice;
 To facilitate efficient allocation of resources;
 To help achieving stability in the economy;
The course aims to introduce students to a discussion of the main principles of Islamic banking and finance
and to analyses of the relationship between Islamic banks and conventional banks and non-financial
corporations. One objective is to understand the principles and practice of modes of Islamic finance for
industry and commerce and explore their implications on investment and funding corporations and projects.
Another objective is to enable students to evaluate the current practices of Islamic banks, their merits and
limitations. The academic elements of the course will be reinforced by contributions from practitioners to the
international management program's seminar series. The most important objective of this course is to provide
idea about financial transactions according to shariah so that as muslim we can do business and invest our fund in
halal products and services by financing through shari’ah modes. The learning objectives are to enable students:
 To understand the main principles of Islamic banking and finance
 To explain the rationale for the prohibition of riba and its consequences for savings and investment
 To consider the nature and scope of Islamic finance and its relationship with conventional finance
 To understand the long-term and short-term modes of Islamic finance for industry and commerce
 To explore the range of Islamic financial instruments available for investors and corporations
 To evaluate the current practices of Islamic banks and their relationship with non-financial
corporations
 To assess the merits and weaknesses of Islamic finance
Course contents/description:
Chapters’ Title Topics to be covered
01. Introduction to
Islamic Financial
System (ISRA 01)
Why study islamic finance?; Shariah is the bedrock of the I slamic financial system;
What exactly is shariah?; Value proposition of the Islamic financial system;
Functions Islamic financial system; Types of Islamic financial markets; Islamic
financial intermediaries; Types of Islamic financial intermediaries; Requisites of
Islamic financial system. Principles and development of Islamic finance.
02. Overview of
Islamic Economics
and Financial
Systems( ISRA 02)
Islamic economics; Objectives of Islamic economics; Why Islamic economics? The
three central economic problems; Economics of riba; Economics of financial
system; The structure of Islamic financial system; Islamic financial Markets; Islamic
financial instruments.

2. 03. Development of
Islamic Financial
System (ISRA 04)
Historical overview of Islamic finance; Modern day Islamic finance; International
infrastructure institutions – AAOIFI, IIFM, CIBAFI, IFSB, IIRA, IILM; Models of
islamic finance; Infrastructure for development; Development of vibrant islamic
financial markets.
Mid-Term Examination # 01
04. Shari’ah
Framework and
Principles for the
Islamic Financial
System ( ISRA 05)
Definition of shari’ah; Sources of Islamic shari’ah; Maqasid Al-shari’ah vis-à-vis
Islamic finance; Legal maxims pertinent to Islamic finance; Differences of opinion
among scholars; Role of ijtihad and mujtahid in Islamic banking and finance;
Fundamental prohibited elements in islamic finance; Mutuality of risk sharing;
Governance and transparency.
05. Shari’ah Contracts
for Islamic Financial
Instruments (ISRA 06
& 07)
Elements of shari’ah contracts- form of the contract ( Sighah Al-Aqd), subject-
matter of the contract (Mahal Al-Aqd), contracting parties (Al-Aqidan);
Classification of shari’ah contracts- exchange-based contract (Uqud Al-Mu’awadat),
charity-based contract (Uqud Al-Tabarru’at), waiving contracts (Uqud Al Isqadat),
partnership contract (Uqud Al-Ishtirak); Concept of exchange-based contracts-Bay’
Al Murabahah (mark-up sale), Bay Al-Istisna (manufacturing sale), Bay Al-Salam
(forward sale), Bay Al-Dayn (sale of debt), Bay Al-Sarf ( sale of currency), Bay Al-
Inah (sale and buyback), Bay Al-Tawarruq (cash financing/procurement);
Partnership contracts in Islamic finance; Security contract; Charitable contracts;
Agency contract; Supporting contract.
06. Islamic Banking
Operations and
Instruments (ISRA 08)
Role of islamic bank as an efficient financial intermediary; Balance sheet of an
Islamic bank; Sources of funds-Savings deposits, current deposit, term deposit,
investment deposit, underlying contracts for savings and current deposit; Uses of
funds-islamic retail financing, corporate financing, working capital financing;
Islamic trade financing instruments and practices-islamic letter of credit, Islamic
trust receipt, Islamic accepted bills, Islamic bank guarantee, Islamic shipping
guarantee.
Mid-Term Examination # 02
07. Islamic Money
Market (ISRA 09)
Introduction; Money market participants; Money market instruments- treasury bills,
repurchase agreements, negotiable certificates of deposit, commercial papers,
banker’s acceptances; Functions of money market; The need for Islamic money
market; Differences between Islamic and conventional money markets; Components
of Islamic money market; Islamic interbank market; Trading of Islamic money
market instruments.
08. Sukuk Market
(ISRA 10)
Shari’ah framework for Islamic securities- definition of sukuk, origin of sukuk, role
of shari’ah framework in sukuk structuring; Sukuk structures- sales-based sukuk,
lease-based sukuk, and equity based sukuk; Issues, ooprtunities and challenges in
the sukuk market-sukuk-debt or equity, sukuk trading, sukuk pricing, sukuk default.
09. Islamic Equity
Market (ISRA 11)
The characteristics of Islamic equity; Shai’ah permissibility of modern day
corporations; Equity valuation; Supply, demand and price of equity; models of
pricing and equity valuation; Understanding and measuring risks; Islamic equity
market instruments-stocks, preference shares, stock index futures, short selling; Unit
trusts or Mutual fund; Shai’ah screening of shares; Islamic equity market index;
Issues, opportunities and challenges.
10. The Legal
Framework for Islamic
Finance (ISRA 17)
Conceptual meaning of a legal framework; Legal systems in which Islamic finance
operates – civil law, common law and Islamic law; The spread of different legal
systems; Legal framework for Islamic finance-approaches towards the legal
framework for Islamic finance; Legal issues and challenges in Islamic finance-the
enforceability of contract, support of the legislative, status and enforceability of
shai’ah pronouncements, governing laws and jurisdiction of choice, laws supporting
reciprocal enforcement of judgement; Common clauses in financial contracts-
indemnities, warranties, rental period and term, rent calculation, compensation and
liquidated damages, set-off and netting, events of default, insurance and
maintenance, total loss.
11. Islamic Modes of
Investment (Kabir
Hassan 07-IERB)
Introduction; Bai-Murabaha- types, features, practices, application and economic
analysis; Musharaka-meaning, types, applications, steps and economic analysis;
Mudarabah-concept, types, rules and economic analysis; Bai-Salam-concept, steps,
rules, application and economic analysis; Istisna’a Sale-concept, types, rules and
applications; Qard-al Hasana-; Bai-Muajjal- meaning, features and feasibility study;
Ijara-meaning, types, practice, rules; Hire-purchase under shirkatul melk.
12. Practice of Islamic
Finance in Corporate
Sector of Bangladesh
Practice of islamic finance in banking and investment sectors of Bangladesh
Texts: Islamic Financial System: Principles and Operations – International Shai’ah Research Academy
Text Book on Islamic Banking- Islamic Economic Research Bureau (M. Kabir Hassan)
References: Islamic Finance in a Nut shell-Brian Kettell
Theory and Practice of Modern Islamic Finance-Abu Umar Faruq Ahmed, Ph.d