This document provides an introduction to Islamic banking and finance. It defines key terms like Shariah, Fiqh, and Muamalat and explains their relationship. Shariah is defined as the complete legal system of Islam that governs all aspects of life. Fiqh refers to the body of Islamic law derived from religious sources that deals with practical rulings. Muamalat Fiqh specifically deals with financial dealings and transactions. The document then contrasts conventional finance with Islamic finance, noting the latter operates according to Shariah law. It provides examples of financing activities and outlines some opportunities and challenges facing the Islamic finance industry.

1. UnHjshhiversity of Hargeisa
School of Economics
Program name: Islamic banking and finance
Chapter One: Introduction of Fiqh for Finance.
University of Hargeisa

2. Outline
 Definition of Shariah,
 Definition of Fiqh and its types.
 Position of Fiqh Muamalat in the
Shariah.
 Brief introduction About Finance in
general.
 Conventional Finance vs. Islamic
Finance.

3. What is Shariah?

4. The word "shari'ah" literally means;
1) The water path
2) The water pool
Other meaning; "a way” “straight path”
In Islamic terminology, it means the legal system of Islam.
Technically;
Shariah Ad-din/religion
Believe (usul ad-din) and
Practice (shariah law_furu’
addin)
What is Shariah?

5. What is Shariah?
Shariah is a complete way of life
It covers all aspects of human life; personal and family, religious and
social, moral and political, economic and business
Muslim  one who submit to God
When Allah and His Messenger have decreed a matter, it is not for
any believing man or believing woman to have a choice in their
affair. And whosoever disobeys Allah and His Messenger has gone
astray into clear error. (Surah Al-Ahzaab, 33:36)

6. Faith &
belief
• Al-ahkam al-shar’iyyah
al-I’tiqadiyyah
Practical • Al-ahkam al-
shar’iyyah al-
’amaliyyah
Virtues &
spiritual
• Al-ahkam al-
shar’iyyah al-
khuluqiyyah wa al-
wijdaniyyah

7. WHAT ABOUT
FIQH?

8. FIQH
Literally;
Knowledge, understanding, and intelligence
of a matter
Fiqh
Ibadah
Technically; Imam al-Shafi’i
The knowledge of Shariah rulings
that relates to the practical aspects
and derived from its detailed
evidences
Fiqh
Muamalat

9. MU’AMALAT
Literally;
‘ mu’amalah”
Mutual dealing
Technically;
Procedure or series of action
between human in all aspects of
life.
FM  the knowledge of
Shariah rulings that relates to
the practical aspects in the
area of business and financial
dealings and derived from its
detailed evidences

10. Shariah
Fiqh
Muamalat
The relationship between Shariah, Fiqh, and
Muamalat

11. Goal/Reason/Motive of FM: Maqasid Syari’yyah
Protection of al-din
Protection of life (al-nafs)
Protection of dignity (pride) (al-’ird)
Protection of intellect (al-’aql)
Protection of property (al-mal)

12. Maqasid Syari’yyah,Cont…
“The obligation of the Shari’a is to provide
the wellbeing of all humankind, which
lies in safeguarding their faith, their
human self (nafs), their intellect (’aql),
their progeny (nasl) and their wealth
(mal)”
Al-Ghazali

13. The history of the Conventional
finance
 Before we begin, first let’s understand the origin of
word “FINANCE.”
 If we trace the origin of finance, there is evidence to
prove that it is as old as human life on earth.
 The word finance was originally a French word.
 In the 18th century, it was adapted by English
speaking communities to mean “the management of
money.” Since then, it has found a permanent place
in the English dictionary.

14. cont…
 Today, finance is not merely a word else has
emerged into an academic discipline of greater
significance. Finance is now organized as a branch
of Economics.
 At present, we cannot imagine a world without
Finance. In other words, Finance is the soul of our
economic activities.
 To perform any economic activity, we need certain
resources, which are to be pooled in terms of money
(i.e. in the form of currency notes, other valuables,
etc.).

15. Cont..
 Hence, In General sense,
 "Finance is defined as the management of
money and includes activities like
investing, borrowing, lending, budgeting,
saving“.

16. Types of finance.
There are three main types of finance:
 (1) personal
 (2) corporate, and
 (3) public/government.
Personal finance is not more important
these days because it only belongs to
single person. But Public finance and
corporate finance are two parallel growing
terms and widely used in all industries.

17. Examples of financing
activities
 Investing personal money in stocks,
bonds.
 Borrowing money from institutional
investors by issuing bonds on behalf
of a public company.
 Lending money to people by providing
them a mortgage to buy a house.
 Saving personal money in a high-
interest savings account

18. What is an Islamic finance?
 Genelly speaking, Islamic finance is a
financial system that operates according
to Islamic law (which is called sharia)
and is, therefore, sharia-compliant.
 Just like conventional financial systems,
Islamic finance features banks, capital
markets, fund managers, investment
firms, and insurance companies.
However, these entities are governed
both by Islamic law and the finance
industry rules and regulations that apply
to their conventional counterparts.

19. Islamic Finance cont.
 Although the Islamic finance industry itself
is quite young, Islamic theories of
economics have existed for more than a
millennium; by the mid-12th century, in
fact, many Muslims scholars had
presented key concepts of Islamic
economics that are still relevant today.

20. Conventional vs. Islamic
finance
 The main difference between Islamic and
conventional finance is the treatment of risk, and
how risk is shared.
 In this step we examine what these differences
can teach us about risk and risk management in
conventional banking and financial markets.
 The two main forms of Islamic finance are bank
finance and issuing Islamic securities (called
sukuk).
 In conventional terminology you might think of
these as debt – bank loans and bond issues
respectively, but that is inaccurate. Those
categories cannot be applied to pure Islamic
finance.

21. Old Ideas, Young Industry.
2019 AD = 1441 Hijri; but
industry barely 50
50s & 60s: initial
theoretical work, some
experimentation
70s: DIB, IDB, petrodollars
80s: OIC’s, initiatives in
Malaysia, Bahrain,
Pakistan, Sudan
90s: AAOIFI.

22. Industry Statistics.
•Size estimates go up to US $3.7 trillion (small)
by 2018
•2007 asset mix, as per IFSL 2009 Report:
Commercial banks (74%) Investment banks
(12%) Sukuk (11%) Funds (2%), Takaful (1%)
•Major countries, as per The Banker: Iran, Saudi
Arabia, Malaysia, Kuwait, UAE, Bahrain, Qatar,
UK
•Estimated 300 IFI, 50+ countries
•Industry reports available on the net for free

23. •Economics takes human behaviour as given
•Religion seeks to influence human behaviour
 Accountability to God should be a permanent
concern
 Earning an honest living an act of worship
 Moral economy of Islam (a theoretical ideal)
neither communism, nor capitalism

24. Opportunity of Islamic finance
• Inclusive, simple, tied to real economy
• Small size means growth potential;
petrodollars to invested
• More countries promoting Islamic
finance
• Industry reports & surveys still
suggesting double digit growth

25. Challenges of Islamic finance
• Covering gap of centuries in decades
• Global economy - lending money,
trading risk
• Lack of global Shari’a standards
• Industry requires multidisciplinary
expertise

26. THANK YOU & WASSALAM