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Fundamentals of Islamic Finance and Banking. Wiley Finance

  • ID: 4449619
  • Book
  • 312 Pages
  • John Wiley and Sons Ltd
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A Comprehensive Introduction to Islamic Finance

Islamic finance is on the rise around the world, growing faster than the supply of specialized human capital. Fundamentals of Islamic Finance and Banking is the ideal introductory text for undergraduate and graduate students hoping to fill this major gap in the market. Broad in scope to provide a complete overview of the field, the discussion also maintains an appropriate level of depth to provide a solid, beyond–the–surface understanding of major topics.

  • Understand the historical foundations of Islamic finance and track its growth to modern times
  • Learn how Shariah Law applies to finance, in terms of ethics, principles, prohibitions and governance
  • Delve into the uses, mechanisms, challenges and benefits of the six major Islamic banking products: Murabaha, Mudaraba, Musharaka, Ijara, Salam and Istisna
  • Build an essential knowledge base surrounding Islamic insurance (Takaful) and Islamic investment and Sukuks
  • Compare and contrast conventional versus Islamic finance, and learn how Islamic finance is used today in the Muslim Community, the Middle East, South and South East Asia and beyond

Comprehensive coverage plus a full set of ancillary materials makes Fundamentals of Islamic Finance and Banking the ideal primary text for introductory–level classes.

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List of Figures

List of Tables


About the Author


About the Companion website

Chapter 1: Introduction to Islamic Finance and Islamic Economics


Creation of Money and Conventional Finance and Banking

Definition of Islamic Finance and Banking

Distinctive Features of Islamic finance

Economics and Islam

Economics in Ancient Times

Modern Economics

Islamic Economics

History of Islamic Economic Thought

Principles of Islamic Economics

Islam s Solution to the Classic Economic Problem

Islam and the Welfare Economy

Property Ownership in Islamic Economics

Zakat and Sadaqah

Ban on Interest Versus Cost of Capital in Islam

Conventional Economics Versus Islamic Economics

Evolution of Islamic Finance

Early Days

Birth of Modern Islamic Finance

Institutional Developments During the Revival of Modern Islamic Finance

The Mit Ghamr Experiment

Tabung Haji

Rapid Growth of the Islamic Finance and Banking Industry

Islamic Finance and Banking in the Muslim Communities and Countries

Islamic Finance and Banking in Non–Muslim countries

Sub–sectors in the Islamic Finance and Banking Industry

Current Status of Modern Islamic Finance and Banking

Timeline of Development of Contemporary Islamic Finance and Banking

Chapter 2: Shariah Law and Shariah Supervisory Board

Introduction to the Islamic Law Shariah

Sources of Shariah

Schools of Islamic Jurisprudence

Ethics in Shariah compliant business and finance

Major Shariah Prohibitions and Principles and their Implications

Prohibition of interest or Riba

Prohibition of Uncertain dealings or Gharar

Prohibition of Speculative behavior or Maysir

Shariah Supervisory Board or SSB

Introduction to the SSB

Formation of the SSB

Status of the SSB within the Industry

Functions of the SSB

Corporate and Shariah Governance

Shariah Governance Process

Chapter 3: Islamic Banking versus Conventional Banking

Introduction to Islamic Banking

Islamic Banking versus Conventional Banking

Similarities Between Conventional and Islamic Banks

Differences Between Conventional and Islamic Banking

Relationship with the Central Banks

Risks of Banks Generic and Specific to Islamic banks

Generic risks

Risks specific to Islamic banks

Financial intermediation

The Definition of Financial intermediation

Conventional Financial intermediation

Islamic Financial Intermediation

Islamic Financial Intermediation Models

Distribution of Islamic Banking Products

Conventional Versus Islamic Financial Intermediation

Balance Sheet of an Islamic Bank – Sources and Uses of Funds by an Islamic Bank

Sources of funds

Application of funds

Contracts in the Shariah Law

Contracts of Exchange in Shariah Compliant Commerce and Finance

Common Islamic Banking Products

Retail Islamic Banking Products

Corporate Islamic Banking Products

Financial accounting in Islamic banking

Challenges Faced by Islamic Banks

Islamic Finance and the Financial Crisis

International Islamic Regulatory and Standard Setting Bodies

Accounting and Auditing Organization for Islamic Financial Institutions

Islamic Financial Services Board

Liquidity Management Centre LMC and the International Islamic Liquidity Management IILM

International Islamic Financial Market IIFM

International Islamic Rating Agency IIRA

General Council for Islamic Banks and Financial Institutions CIBAFI

International Islamic Centre for Reconciliation and Commercial Arbitration for Islamic Finance Industry IICRCA

Islamic Development Bank IDB

International Islamic Fiqh Academy

Chapter 4: Murabaha

Introduction to Murabaha

Conditions Related to Murabaha

Calculation of Murabaha Profit

The Murabaha Process

Practical Applications of Murabaha

Tawarruq or Reverse Murabaha or Commodity Murabaha

Challenges and Problems Associated with Murabaha

Comparison of the Murabaha with the Conventional Loan

Chapter 5: Mudaraba

Introduction to Mudaraba

Use of Mudaraba for Financial Intermediation of the Islamic Banks

Profit Calculation in Mudaraba

Provisions and Reserves Related to Mudaraba

Mudaraba as a Limited Recourse Debt Finance

Types of Mudaraba

Shariah Conditions Related to Mudaraba

Challenges and Problems Related to Mudaraba

Practical Applications of Mudaraba

Comparison of Mudaraba with Interest Based Conventional Banking

Accounting Issues related to Mudaraba

Chapter 6: Musharaka

Introduction to Musharaka

Types of Musharaka

Shariah Rules and General Principles Guiding Musharaka Contracts

Problems related to Musharaka

Practical uses of Musharaka

Comparison of Musharaka with interest based financing

Comparison of Musharaka with Mudaraba Financing

Chapter 7: Ijara

Introduction to Ijara

Ijara in Islamic Banks

Types of Ijara

The Ijara Process

Shariah Rules and General Principles Guiding Ijara Contracts and its Characteristics

Documentation Related to the Ijara Contract

Main difference between Ijara and conventional lease

Difference Between Ijara and a Conventional Loan Contract

Difference and Similarities Between Ijara Wa Iqtina And Diminishing Musharaka

Practical Applications of the Ijara Contract

Chapter 8: Salam

Introduction to Salam

Important Characteristics of the Salam Contract

History of the Salam Contract and its Shariah Acceptability

Benefits of the Salam Contract

Role of Islamic Banks in Salam and the Parallel Salam Contract

Salam and Parallel Salam Diagram and Process

Practical application of Salam

Problems Related to Salam Contracts

Comparison of Salam Contract with Conventional Banking

Chapter 9: Istisna

Introduction to Istisna

Shariah Rules and General Principles Guiding Istisna Contracts and its Characteristics

Role of Islamic banks in Istisna and Parallel Istisna

Problems Related to Istisna and Parallel Istisna

Comparison of Istisna with interest based finance

Difference between Salam and Istisna

Comparison of Istisna with Ijara

Practical application of Istisna

Chapter 10: Takaful

Background of Takaful

Modern Takaful Industry as an Alternative to Conventional Insurance

Parties in Takaful

Shariah Rules and General Principles Guiding Takaful Contracts and Key Characteristics

The Development of Takaful

Challenges Faced by Modern Takaful Industry

Types of Takaful

General Takaful

Family Takaful

Operational Structure of Takaful

Takaful Models

Pure Wakala Model

Pure Mudaraba Model

Wakala and Mudaraba Combined or Hybrid Model

The Waqf–Wakala–Mudaraba Model

Comparison of the Different Takaful Models

Underwriting Surplus or Deficit and Technical Provisions

Conventional Mutual Insurance and Takaful

Similarities and Difference Between Takaful and Conventional Insurance


Similarities between Retakaful and Reinsurance

Differences Between Retakaful and Reinsurance

Chapter 11: Islamic Investments and Sukuk

Investment Markets and Products

Islamic Investments

Money Markets Islamic Perspective

Capital Markets Islamic Perspective

Shariah Compliant Stocks

Dealing with non–compliant stocks

Purification of income distribution

Islamic Asset and Fund Management

Islamic Unit Trust or Mutual Fund

Common Types of Islamic Investment Fund

Islamic Real Estate Investment Trusts IREITs

Similarities between REITs and Islamic IREITs

Similarities between REITs and Islamic IREITs

Risks and Challenges Inherent in the Islamic Capital Markets

Shariah Governance and the Shariah Supervisory Board in Islamic Investment

Comparison of Islamic Investments with Conventional Investments

Introduction to Sukuks

Characteristics of the Islamic Investment Product – Sukuk

Types of Sukuks

Ijara Sukuk

Istisna Sukuk

Salam Sukuk

Murabaha Sukuk

Mudaraba Sukuk

Musharaka Sukuk

Controversy Related to Sukuks

Rating of Sukuks

Trading of Sukuks on the Secondary Markets

Comparison of Sukuks with Conventional Bonds

Common Advantages of Both Conventional Bonds and Sukuks

Differences Between Conventional Bonds and Sukuks

Chapter 12: Global Standing of Islamic Finance and Banking

Background of Modern Islamic Finance and Banking

Conventional versus Islamic Finance

Global Growth of the Islamic Finance and Banking Industry

Islamic Finance and Banking and the Muslim Community

Banking and Islamic Banking in the Middle East and the GCC

Banking and Islamic Banking in the South and South East of Asia and Beyond

Achievements and Opportunities in Global Islamic Finance and Banking

Challenges Faced by Islamic Finance and Banking

Social Responsibilities of Islamic Finance

Going Forward


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Syeda Fahmida Habib
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