Fundamentals Of Islamic Finance And Banking

A comprehensive and fully up-to-date introductory textbook to Islamic finance and banking

Islamic finance and banking is being used increasingly globally — especially in the regions of Middle East and North Africa, South East and South Asia. To cater to the need of trained Islamic finance staff, a large number of Educational institutions are beginning to offer courses, majors and minors in Islamic finance and banking. The major challenge faced by these institutions are suitable textbooks for both undergrad and post-grad levels and especially with the relevant instructor resources (PPTs, test bank, practice activities and answer keys).

Luckily, Fundamentals of Islamic Finance and Banking is here to cover the most important topics related to Islamic finance and banking (IF&B) that are relevant for students of business, finance and banking. 

• Offers an historical background of Islamic finance
• Covers the principles of Sharia Law as pertinent to finance and banking
• Provides in-depth discussion of the six key Islamic banking products: Murabaha, Mudaraba, Musharaka, Ijara, Salam and Istisna
• Discusses the Islamic insurance (Takaful)
• Gives an overview of Islamic investment, especially Sukuks
• Concludes with the global standing of the Islamic Finance and Banking industry

Would-be colleges and universities offering this subject as a course within their finance and/or banking program can’t be without this invaluable guide.  

List of Figures xv

List of Tables xvii

Acknowledgements xix

About the Author xxi

Preface xxiii

About the Website xxv

CHAPTER 1: Introduction to Islamic Finance and Islamic Economics

1 Introduction 1

Creation of Money and Conventional Finance and Banking 2

Definition of Islamic Finance and Banking 3

Distinctive Features of Islamic Finance 3

Economics and Islam 4

Economics in Ancient Times 4

Modern Economics 5

Islamic Economics 6

History of Islamic Economic Thought 6

Principles of Islamic Economics 7

Islam’s Solution to the Classic Economic Problem 7

Islam and the Welfare Economy 8

Property Ownership in Islamic Economics 8

Zakat and Sadaqah 8

Ban on Interest versus Cost of Capital in Islam 9

Conventional Economics versus Islamic Economics 9

Evolution of Islamic Finance 11

Early Days 11

Birth of Modern Islamic Finance 12

Institutional Developments During the Revival of Modern Islamic Finance 12

The Mit Ghamr Experiment 13

Tabung Haji 13

Islamic Development Bank 14

Dubai Islamic Bank 14

Rapid Growth of the Islamic Finance and Banking Industry 14

Islamic Finance and Banking in Muslim Communities and Countries 15

Islamic Finance and Banking in Non-Muslim Countries 16

Sub-sectors in the Islamic Finance and Banking Industry 16

Current Status of Modern Islamic Finance and Banking 17

Timeline of Development of Contemporary Islamic Finance and Banking 18

Key Terms and Concepts 21

Chapter Summary 21

CHAPTER 2: Shariah Law and the Shariah Supervisory Board 27

Introduction to the Islamic Law – Shariah 27

Sources of Shariah 28

Schools of Islamic Jurisprudence 29

Ethics in Shariah-Compliant Business and Finance 30

Major Shariah Prohibitions and Principles and their Implications 31

Prohibition of Interest or Riba 31

Prohibition of Uncertain Dealings or Gharar 32

Prohibition of Speculative Behaviour or Maysir 33

Shariah Supervisory Board (SSB) 34

Introduction to the SSB 34

Formation of the SSB 35

Status of the SSB Within the Industry 36

Functions of the SSB 36