Professional Documents
Culture Documents
Finance
Islamic finance refers to the means by which
corporations in the Muslim world, including banks and
other lending institutions, raise capital in accordance with
Sharia, or Islamic law. It also refers to the types of
investments that are permissible under this form of law. A
unique form of socially responsible investment, Islam
makes no division between the spiritual and the secular,
hence its reach into the domain of financial matters.
Because this sub-branch of finance is a burgeoning field,
in this article we will offer an overview to serve as the
basis of knowledge or for further study.
The Big Picture
Although they have been mandated since the beginnings
of Islam in the seventh century, Islamic banking and
finance have been formalized gradually since the late
1960s, coincident with and in response to tremendous oil
wealth which, fueled renewed interest in and demand for
Sharia-compliant products and practice.
b. Sukuk. In a typical ijara sukuk (leasing bondequivalent), the issuer will sell the financial
certificate to an investor group, who will own
them before renting them back to the issuer in
exchange for a predetermined rental return. Like
the interest rate on a conventional bond, the
rental return may be a fixed or floating rate
pegged to a benchmark, such as LIBOR. The
issuer makes a binding promise to buy back the
bonds at a future date at par value. Special
purpose vehicles (SPV) are often set up to act
as intermediaries in the transaction.
A sukuk may be a new borrowing, or it may be
the Sharia-compliant replacement of a
conventional bond issue. The issue may even
enjoy liquidity through listing on local, regional
or global exchanges according to an article in
CFA Magazine titled "Islamic Finance: How New
Practitioners of Islamic Finance are Mixing
Theology and Modern Investment Theory"
(2005).
Basic Insurance Vehicles
Traditional insurance is not permitted as a means of risk
2.1
Islamic Banking
Murabaha
Ijara
Ijarah-Wal-Iqtina
Istisna
Bai Muajjal
Mudarabah
Musharakah
8.
Bai Salam
RATIO OF PROFIT
[33]
banks
2.7
ROLE OF ISLAMIC BANKING IN THE DEVELOPMENT
OF THE COUNTRY
References
[1] Those who consume interest94 cannot stand [on the Day of Resurrection] except as one
stands that is being beaten by Satan into insanity. Holy Quran Albaqra Verse 275
The Islamic Golden Age, also sometimes known as the Islamic Renaissance, is traditionally
dated from the 7th to 13th centuries Common Era., but has been extended to the 15th and 16th
centuries by more recent scholarship. During this period, artists, engineers, scholars, poets,
philosophers, geographers and traders in the Islamic world contributed to the arts, agriculture,
economics, industry, law, literature, navigation, philosophy, sciences, sociology, and technology,
both by preserving and building upon earlier traditions and by adding inventions and innovations
of their own.
A free market is a term that economists use to describe a market which is free from
economic intervention and regulation by government, other than protection of property rights
(i.e. no regulation, no subsidization, no single monetary system and no governmental
monopolies).
Pakistanhttp://www.sbp.org.pk/departments/ibd/Survive.p
df
Rahul Dhumale and Amela Sapcanin (1998) An
Application of Islamic Banking Principles to Microfinance.
Regional Bureau for Arab States, United Nations
Development Programme, in cooperation with the Middle
East and North Africa Region, World Bank
[7]
[8]
Ibid
[9]
Ibid
[14],Ibid
[15]
Ibid
Ready, R.K., 198l. 'The march toward selfdetermination', paper presented at the First Advanced
Course on Islamic Banks, International Institute of Islamic
Banking and Economics, Cairo, 28 August l7 September.
[23]
[27]
Ibid
[38]
Ibid
[40]
Ibid
[41]
Ibid
[42]Accountant
Ibid P- 8
[45]
Ibid Page-2
[46]
Ibid