islamic banking com islamic finance aspx

Download Islamic Banking Com Islamic Finance Aspx

Post on 03-Jun-2018

222 views

Category:

Documents

0 download

Embed Size (px)

TRANSCRIPT

  • 8/12/2019 Islamic Banking Com Islamic Finance Aspx

    1/44

    pdfcrowd comopen in browser PRO version Are you a developer? Try out the HTML to PDF API

    This text is replaced by the Flash mo vie.

    Founded in 19 90 28 Rabbi'al-Akhir 1435 H

    IIBI Services Search

    Courses | Student Login

    Training

    Lectures & Seminars

    Executive Development

    Publications

    NewHorizon Magazine

    Information Services

    Research

    Knowledge

    Links

    Test Your Knowledge

    Islamic Banking

    Takaful

    Glossary

    Upcoming Events

    Home > Knowledge > Islamic Financial System

    Islamic Financial SystemDescribing the Islamic financial systemsimply as "interest-free" does not provide a truepicture of the system as a whole. While prohibitingthe receipt and payment of interest is the nucleus of the system, it is supported by other principles of Islamicteachings advocating individuals' rights and duties, property

    rights, equitable distribution of wealth, risk-sharing, fulfilmentof obligations and the sanctity of contracts. Similarly, the Islamicfinancial system is not limited to banking but covers insurance,capital formation, capital m arkets, and all types of financialintermediation and suggests that moral and ethical aspects in theregulatory framework are also necessary in addiiton to prudentand sound controls.

    The philosophical foundation of an Islamic financial system goes beyond theinteraction of factors of production and economic behavior. The Islamic financialsystem can be fully appreciated only in the context of Islam's teachings on thebusiness ethic, wealth distribution, social and economic justice, and the role of thestate. W hereas the conventional financial system focuses primarily on theeconomic and fi nancial aspects of transactions, the Islamic sys tem places equalemphasis on th e ethical, moral, social, and religious dimensions, to enhanceequality and fair ness `the principles of Islamic law (Shariah) and its practicalapplication through the development of Islamic economics. Practitioners and clientsneed not be Muslims, but they must accept the ethical restrictions underscored byIslamic values. Islamic finance may be viewed as a form of ethical investing, or ethical lending,except that no loans are possible unless they are interest-free. The general

    IIBI Discussion Forum

    Video Presentations

    Islamic Economic Thought

    Islamic Jurisprudence

    Islamic Economics

    Islamic Financial System

    Islam and Business Ethics

    Shari'ah Rulings and Finance

    Islamic Finance Glossary

    Corporate Social Responsibility

    Heritage of Islam

    Vision of The Qur'anThis text is replaced by the Flash movie.This text is replaced by the Flash movie.

    http://www.islamic-banking.com/resources/3/BAC%20Certificate.pdfhttp://www.islamic-banking.com/quick_registration.aspxhttp://www.islamic-banking.com/default.aspxhttp://www.islamic-banking.com/default.aspxhttp://www.islamic-banking.com/default.aspxhttp://www.islamic-banking.com/default.aspxhttp://www.islamic-banking.com/default.aspxhttp://www.islamic-banking.com/default.aspxhttp://pdfcrowd.com/http://pdfcrowd.com/redirect/?url=http%3a%2f%2fwww.islamic-banking.com%2fislamic-finance.aspx&id=ma-140228163841-6eac53dehttp://pdfcrowd.com/customize/http://pdfcrowd.com/html-to-pdf-api/?ref=pdfhttp://www.islamic-banking.com/default.aspxhttp://www.islamic-banking.com/quick_registration.aspxhttp://www.islamic-banking.com/resources/3/BAC%20Certificate.pdfhttp://www.islamic-banking.com/default.aspxhttp://www.islamic-banking.com/knowledge.aspx
  • 8/12/2019 Islamic Banking Com Islamic Finance Aspx

    2/44

    pdfcrowd comopen in browser PRO version Are you a developer? Try out the HTML to PDF API

    objectives (maqsid) of Islamic finance transactions may be summarised as below:

    To be true to the Shariah principles;Should be free from unjust enrichment;Must be based on true consent of all parties; must be an integral part of areal trade or economic activity such as a sale, lease, manufacture or partnership.

    Islamic Financial System The global financial crisis: can Islamic finance help?' Stability of the Islamic Financial System Conventional and Islamic Financial Systems Quotes about Banking and Monetary System Islamic Banking Islamic Insurance

    Islamic Financial System[ Extract from article on Islamic Financial System by Zamir Iqbal, World Bank publication

    What is Islamic finance?Islamic finance was practiced predominantly in the Muslim world throughout theMiddle Ages, fostering trade and business activities with the development of credit.In Spain and the Mediterranean and Baltic states, Islamic merchants becameindispensable middlemen for trading activities. In fact, many concepts, techniques,and instruments of Islamic finance were later adopted by European financiers andbusinessmen.

    In contrast, the term Islamic financial system is relatively new, appearing only inthe mid-1980s. In fact, all the earlier references to commercial or mercantileactivities conforming to Islamic principles were made under the umbrella of either interest-free or Islamic banking. However, describing the Islamic financial systemsimply as interest-free does not provide a true picture of the system as a whole.Undoubtedly, prohibiting the receipt and payment of interest is the nucleus of thesystem, but it is supported by other principles of Islamic doctrine advocating risksharing, individuals' rights and duties, property rights, and the sanctity of contracts.Similarly, the Islamic financial system is not limited to banking but covers capitalformation, capital markets, and all types of financial intermediation.

    Interpreting the system as interest free tends to create confusion. The

    http://www.islamic-banking.com/resources/3/BAC%20Certificate.pdfhttp://pdfcrowd.com/http://pdfcrowd.com/redirect/?url=http%3a%2f%2fwww.islamic-banking.com%2fislamic-finance.aspx&id=ma-140228163841-6eac53dehttp://pdfcrowd.com/customize/http://pdfcrowd.com/html-to-pdf-api/?ref=pdfhttp://www.islamic-banking.com/resources/3/BAC%20Certificate.pdfhttp://www.islamic-banking.com/IIBI_magazine.aspxhttp://www.islamic-banking.com/islamic_banking.aspxhttp://www.islamic-banking.com/takaful_insurance.aspx
  • 8/12/2019 Islamic Banking Com Islamic Finance Aspx

    3/44

    pdfcrowd comopen in browser PRO version Are you a developer? Try out the HTML to PDF API

    philosophical foundation of an Islamic financial system goes beyond the interactionof factors of production and economic behavior.

    Whereas the conventional financial system focuses primarily on the economic andfinancial aspects of transactions, the Islamic system places equal emphasis on theethical, moral, social, and religious dimensions, to enhance equality and fairnessfor the good of society as a whole. The system can be fully appreciated only in thecontext of Islam's teachings on the work ethic, wealth distribution, social andeconomic justice, and the role of the state.

    The Islamic financial system is founded on the absolute prohibition of the paymentor receipt of any predetermined, guaranteed rate of return. This closes the door tothe concept of interest and precludes the use of debt-based instruments. Thesystem encourages risk-sharing, promotes entrepreneurship, discouragesspeculative behavior, and emphasizes the sanctity of contracts.

    An Islamic financial system can be expected to be st able owing to the eliminationof debt-financing and enhanced allocation efficiency. A two-windows model for Islamic financial intermediaries has been suggested in which demand deposits arebacked 100 percent by reserves, and investment deposits are accepted purely onan equity-sharing basis. Analytical models demonstrate that such a system will bestable since the term and structure of the liabilities and the assets are

    symmetrically matched through profit-sharing arrangements, no fixed interest costaccrues, and refinancing through debt is not possible.

    Allocat ion efficiency occurs because investment alternatives are s trict ly s electedbased on their productivity and the expected rate of return. Finally, entrepreneurshipis encouraged as entrepreneurs compete to become the agents for the suppliers of financial capital who, in turn, will closely scrutinize projects and managementteams.

    Basic instrumentsIslamic markets offer different instruments to satisfy providers and users of funds ina variety of ways: sales, trade financing, and investment.

    Basic instruments include cost-plus financing ( murabaha ), profit-sharingmudaraba), leasing ( ijara ), partnership ( musharaka ), and forward sale ( bay' salam ). These instruments serve as the basic building blocks for developing a widearray of more complex financial instruments, suggesting that there is great potentialfor financial innovation and expansion in Islamic financial markets.

    Principles of an Islamic financial systemThe basic framework for an Islamic financial system is a set of rules and laws,collectively referred to as shariah , governing economic, social, political, and culturalaspects of Islamic societies. Shariah originates from the rules dictated by theQuran and its practices, and explanations rendered (more commonly known as

    http://pdfcrowd.com/http://pdfcrowd.com/redirect/?url=http%3a%2f%2fwww.islamic-banking.com%2fislamic-finance.aspx&id=ma-140228163841-6eac53dehttp://pdfcrowd.com/customize/http://pdfcrowd.com/html-to-pdf-api/?ref=pdf
  • 8/12/2019 Islamic Banking Com Islamic Finance Aspx

    4/44

    pdfcro d comopen in bro ser PRO ersion Are you a developer? Try out the HTML to PDF API

    Sunnah ) by the Prophet Muhammad. Further elaboration of the rules is provided byscholars in Islamic jurisprudence within the framework of the Quran and Sunnah