Introduction to Islamic Banking and Finance [Paperback]by Brian Kettell
In stock, usually dispatched within 24 hours Description of Introduction to Islamic Banking and FinanceThis book highlights the key characteristics of Islamic banking which differentiate it from conventional banking.This detailed book highlights how Islamic banking is consistent with the Sharia'a and, as such, an important part of the system is the prohibition on collecting interest. This central religious precept appears to rule out most aspects of modern finance but it does allow money to be used for trading tangible assets and business, which can then generate a profit. Brian Kettell's book looks at all aspects of Islamic banking, including detailed chapters on its creation through to explanations of Murabaha and Musharaka contracts, Ijara and Istisna'a financing methods, as well as Salam and Takaful insurance. Finally the book takes a look at Sharia'a law and Sharia'a boards, indicating the roles and responsibilities that come with membership. Islamic banks have been operating in places such as Bahrain, Saudi Arabia, Malaysia and Dubai for some time. Conventional bankers have traditionally viewed the sector as a small, exotic niche, but in the past five years it has seen a surge in popularity. Several Western investment banks, including HSBC, Lloyds Bank and Citigroup, have started working with Muslim clerics to create new ranges of financial products designed for devout Muslims, due not only to the growing Muslim population in Europe but also higher oil prices. Although estimates of the size of the Islamic finance industry vary greatly, everyone agrees that it is expanding rapidly and this is the perfect book for anyone looking to understand the industry. Title Information
Press and Industry Reviews"This book is direct and concise, with the result that readers will easily comprehend the whys and wherefores if this somewhat different, challenging, and ultimately rewarding approach to finance."- Shaykh Yusuf Talal De Lorenzo, Chief Sharia's Officer and Board Member at Sharia'ah Capital "A valuable resource for all those who wish to be initiated into the emerging domain of Islamic Banking and Finance." - Adnan Ahmed Yousif, President and Chief Exectutive, Al Baraka Banking Group, Bahrain "An invaluable book for those seeking to know more about Islamic banking. Comprehensive and detailed, the book is an excellent first-read for banking professionals and others to understand where Islamic banking comes from, what philosophies underlie it and the major components of Sharia'a compliant banking and finance." - Joseph DiVanna, Managing Director, Maris Strategies Limited "Brian Kettell deserves the thanks of every practitioner of Islamic finance for he has brought his uears of experience, in conventional finance and Islamic finance, to help explain the fundamental points of convergence and divergence between Sharia'ah compliant finance and mainstream, interest-based finance." - Shaykh Yusuf Talal DeLorenzo, Chief Sharia'a Officer and Board Member at Sharia'ah Capital Write a review of this book About Brian KettellBrian Kettell has a wealth of experience in the area of Islamic finance. He worked for several years as an Economic Advisor for the Central Bank of Bahrain where he had numerous banking responsibilities.Subsequently, Brian taught courses on Islamic banking and finance at a range of financial institutions including National Commercial Bank (Saudi Arabia), Global Investment House (Kuwait), Noor Islamic Bank (UAE), the UK Treasury, the Central Bank of Iran, the Central Bank of Syria, the Securities Investment Institute and the Institute for Financial Services. Brian's vast academic expertise in Islamic finance is highlighted by his role as Joint Editor of the Islamic Finance Qualification Handbook and his past teaching work at a number of top financial universities worldwide including the London School of Economics, the City University of Hong Kong and London Metropolitan University Business School. Brian's impressive list of publications include over 100 articles in journals, business magazines and the financial press including Islamic Business and Finance, the Central Banking Journal, Euromoney, the Securities Journal and the International Currency Review. He has also published 14 books on banking and financial markets. Brian is currently based in London and works as a specialist Trainer and Consultant in Islamic Banking and Finance. Visit www.islamicbankingcourses.com for further details of his training courses and publications. Contents of Introduction to Islamic Banking and FinanceChapter 1. Muslim beliefsFive pillars of faith 1. Profession of Faith 2. Five Daily Prayers 3. Zakat or almsgiving 4. Sawm or fasting 5. Pilgrimage to Mecca Six Islamic Creeds Definition of Iman Iman as basis of righteous deeds 1. Belief in Allah and his attributes 2. Belief in Destiny (Qada’ar) 3. Belief in angels 4. Belief in apostles 5. Belief in the Revealed Books 6. Belief in the Hereafter Chapter 2. Sources of Sharia'a law: legal basis for Islamic banking Definition of the Sharia’a Allah is the law giver Sources of the Sharia’a Qur’an: the primary source of the Sharia’a Sunnah: the second primary source of Sharia’a Chapter 3. Definition of Islamic banking Conventional bankers and Islamic banking Six key Islamic banking principles 1. Predetermined payments are prohibited 2. Profit and loss sharing 3. Making money out of money is not acceptable 4. Uncertainty is prohibited 5. Only Sharia’a approved contracts are acceptable 6. Sanctity of contract Definition of asymmetric information Adverse selection Moral hazard Origins of asymmetric risk within Islamic banking Riba in the Qur’an and Sunnah or hadith Textual evidence for the ban on interest Source of the ban on interest Islamic rationale for banning interest (riba) Five reasons for the prohibition of riba 1. Interest is unjust 2. Interest corrupts society 4. Interest-based systems result in negative growth 5. Interest demeans and diminishes human personality Chapter 4. Murabaha as a mode of Islamic finance Murabaha transactions Definition of Musawama Some terminological issues What makes Murabaha Sharia’a compliant? Islam treats money and commodities differently Commodity transactions with credit can involve an excess Murabaha and the Sharia’a Practicalities of implementing Murabaha Sharia’a rules concerning Murabaha Reasoning behind Sharia’a rules Important exceptions to Sharia’a rules Practical examples of the application of Murabaha 1. Mortgages 2. Provides working capital 3. Murabaha and syndicated credits 4. Financing of GSM licences 5. Murabaha used with letters of credit 6. Murabaha used for car and house purchase Key issues associated with Murabaha 1. Use of interest rate as a benchmark 2. Gharar issues 3. Collateral provisions against the Murabaha payment 4. Guaranteeing the Murabaha 5. Penalty of default 6. No roll-over in Murabaha 7. Rebate on earlier payment 8. Subject matter of Murabaha 9. Rescheduling of the payments in Murabaha 10. Securitisation of Murabaha Comparison of Murabaha with interest-based finance Murabaha differences from the other Islamic financing techniques 1. Islamically permissible deferred sales 2. Profit and loss share (PLS) contracts Summary Chapter 5. Mudaraba as a mode of Islamic finance Definition of Mudaraba Types of Mudaraba Two-tier Mudaraba and the asset and liability structure of an Islamic bank Sources of finance for an Islamic bank Mudaraba as limited recourse debt finance What makes Mudaraba Sharia’a compliant? Origin of the term Mudaraba Practicalities of implementing Mudaraba Sharia’a rules concerning Mudaraba Practical examples of Mudaraba Target profit rates and Mudaraba Key issues associated with Mudaraba Comparison of Mudaraba with the conventional banking equivalent Mudaraba: differences from the other Islamic financing techniques 1. Profit and loss share (PLS) contracts 2. Islamically permissible deferred sales Summary References Chapter 6. Musharaka as a mode of Islamic finance Definition of Musharaka What makes Musharaka Sharia’a compliant? Practicalities of implementing Musharaka Sharia’a rules concerning Musharaka Practical examples of Musharaka Application of diminishing Musharaka Application of Musharaka in domestic trade Application of Musharaka for the import of goods Letters of credit on a Musharaka basis Application of Musharaka in agriculture Securitisation of Musharaka: Musharaka Sukuk Problems associated with Musharaka 1. Confidence of depositors 2. Dishonesty: asymmetric risk 3. Secrecy of the business Comparison of Musharaka with the conventional banking equivalent 1. Profit and loss share (PLS) contracts 2. Islamically permissible deferred sales Summary References Chapter 7. Ijara as a mode of Islamic finance Definition of Ijara Definition of usufruct Ijara and Ijara wa Iqtina (Ijara Muntahia Bittamleek) Definition of an Ijara Muntahia Bittamleek Leasing as a mode of financing What makes Ijara Sharia’a compliant? Practicalities of implementing Ijara Sharia’a rules concerning Ijara Basic rules of Islamic leasing Benchmarking against LIBOR is permitted with Ijara Practical examples of Ijara Lease purchase transactions Key differences between an Ijara contract and a conventional lease 1. Rental payments based on interest 2. Penalty interest with a default 3. Insurance and maintenance issues 4. Sharia’a board issues Comparison of Ijara with the conventional banking equivalent Ijara: differences from the other Islamic financing techniques 1. Islamically permissible deferred sales 2. Profit and loss share (PLS) contracts Summary References Chapter 8. Istisna’a as a mode of Islamic finance Definition of Istisna’a Istisna’a and Parallel Istisna’a. What makes Istisna’a Sharia’a compliant? Practicalities of implementing Istisna’a Sharia’a rules concerning Istisna’a Practical examples of Istisna’a Key issues associated with Istisna’a Guarantees Other issues relating to Istisna’a 1. Delay in delivery 2. Insurance 3. Events of default Comparison of Istisna’a with the conventional banking equivalent Istisna’a: differences from the other Islamic financing techniques 1. Islamically permissible deferred sales 2. Profit and loss share (PLS) contracts Differences between Istisna’a and Salam Differences between Istisna’a and Ijara Summary References Chapter 9. Salam as a mode of Islamic finance Definition of Salam What makes Salam Sharia’a compliant? Practicalities of implementing Salam Sharia’a rules concerning Salam Sharia’a rules concerning parallel Salam Practical examples of Salam Benefits of the Salam contract Problems associated with Salam Comparison of Salam with the conventional banking equivalent Salam: differences from the other Islamic financing techniques 1. Islamically permissible deferred sales 2. Profit and loss share (PLS) contracts Differences between Salam and Istisna’a Summary References Chapter 10. Takaful: Islamic insurance Case for Islamic insurance Islamic issues with conventional insurance Issues in conventional insurance Definition and concept of Takaful How Tabarru’ eliminates the problems of conventional insurance Derivation of the term Takaful or Islamic insurance Islamic origins of Takaful Where insurance fits within Islam Definition of the parties to a Takaful Takaful in practice Takaful and conventional insurance Alternative models of Takaful 1. Ta’awun model 2. Non-profit model 3. Mudaraba model 4. Wakala model Applying the relevant model Sharia’a law as applied by Takaful companies 1. Principles of contract 2. Principles of liability 3. Principle of utmost good faith 4. Principles of Mirath and Wasiyah 5. Principles of Wakala (agency) 6. Principles of Dhaman (guarantee) 7. Principles of Mudaraba and Musharaka 8. Principles of rights and obligations 9. Principles of humanitarian law 10. Principles of mutual co-operation Takaful companies Definition of ReTakaful or reinsurance ReTakaful Role of the Sharia’a board in Takaful Legal basis for assigning the Sharia’a board Nature of Sharia’a board’s decisions Sharia’a board’s general duties Sharia’a board’s detailed duties Chapter 11. Sharia’a law and Sharia’a boards: roles, responsibility and membership Objectives of the Sharia’a Sharia’a: the framework of Islamic banking Compliance with the scheme of Sharia’a laws Sharia’a Islamic investment principles Conditions for investment in shares Sharia’a supervisory board (SSB) Function and responsibilities Sharia’a boards: roles and scope of responsibilities Dubai Islamic Bank (DIB) Sharia’a board scholar qualifications Dr Hussain Hamid Hassan Dr Ali AlQaradaghi Dr Mohamed Elgari Dr Mohd. Daud Bakar Sheikh Nizam M.S. Yaquby Sheikh Muhammed Taqi Usmani Sheikh Abdullah Bin Suleiman Al-Maniya Sheikh Dr Abdullah bin Abdulaziz Al Musleh Sheikh Dr Muhammad Al-Ali Al Qari bin Eid State Bank of Pakistan (SBP): proper criteria for appointment of Sharia’a advisors Solvency and financial integrity Integrity, honesty and reputation Appendix 1. World’s 100 largest Islamic banks Appendix 2. Top 500 Islamic Financial Institutions Glossary References and bibliography |
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