Billah Islamic Financial Products

Principles, Instruments and Structures
1. Auflage 2019
ISBN: 978-3-030-17624-2
Verlag: Springer Nature Switzerland
Format: PDF
Kopierschutz: 1 - PDF Watermark

E-Book, Englisch, 443 Seiten

Reihe: Progress in Mathematics

Islamic finance has grown exponentially since 1963 and has reached more than 70 countries around the world with the asset size of about $2.5 trillion. The Islamic financial system today comprises a sizable asset base and there is evidence of sustained demand for Islamic financial products and services in the global market, with demand outstripping supply. This book provides a new source of understanding of the Islamic financial products in view of facilitating academia, industrialists, professionals, product designers, students and policymakers globally. There is a mass of literature on Islamic finance available to the market, but very little research is found in the form of book exclusively on Islamic financial products and their structures. Thus, this book is a timely contribution to the global market with Islamic financial product solutions.

Mohd Ma'Sum Billah is Professor of Finance and Insurance at the Islamic Economics Institute, King Abdulaziz University, Saudi Arabia. He is a member of various organizations and groups, including the working group of the Shari'ah Compliance functions, the AAIOFI Governance & Ethics Board (AGEB), AAIOFI, Bahrain and the Audit Committee, ACIG, Saudi Arabia alongside being an advisor to ICMIF, London. He is an author of 31 books and chapters in several books in the areas of Islamic and comparative finance, insurance, investment, capital markets, business, asset management and e-Commerce. He has also published more than 150 articles in Islamic and comparative finance, banking, capital markets, insurance, business and social finance and completed nine funded research projects successfully on different issues of Islamic and comparative finance and commerce funded by the Malaysian government and the Central Bank. He has presented more than 200 papers and lectures at conferences, summits, conventions, seminars, executive workshops and forums in the specialized issues of Islamic finance, insurance, capital market, investment, business, social finance and cryptocurrency.

Autoren/Hrsg.

Billah, Mohd Ma'Sum

Inhaltsverzeichnis

1;Foreword;6
2;Preface;8
3;Acknowledgements;11
4;Introduction;13
5;Contents;15
6;About the Author;18
7;List of Figures;20
8;List of Tables;23
9;Part I An Overview of Islamic Financial System;25
10;Chapter 1 The Islamic Financial System;26
10.1;1 Introduction;26
10.1.1;1.1 Sources of the Islamic Legal System;27
10.1.2;1.2 Al-Qur’an;27
10.1.3;1.3 Al-Sunnah;27
10.1.4;1.4 Al-Ijma’;28
10.1.5;1.5 Al-Qiyas;28
10.1.6;1.6 Al-Ijtihad;29
10.2;2 The Islamic Financial System;29
10.3;3 Governing Laws and Policies;30
10.4;4 The Central Bank of Malaysia Act (1958) (Revised 1994) (Direct Art Company, 1999);31
10.4.1;4.1 The Banking and Financial Institutions Act (1989) (BAFIA) (Repealed by the Islamic Financial Services Act, 2013);31
10.4.2;4.2 The Exchange Control Act (1953) (Kuala Lumpur: Direct Art Company, 1999);32
10.4.3;4.3 The Islamic Banking Act (1983) (Repealed by the Islamic Financial Services Act, 2013);32
10.4.4;4.4 The Insurance Act (1996) (Direct Art Company, 1999);33
10.4.5;4.5 The Takaful Act (1984) (Repealed by the Islamic Financial Services Act, 2013);33
10.4.6;4.6 Essential (Protection of Depositors) Regulations (1986) (Direct Art Company, 1999);33
10.4.7;4.7 The Loan (Local) Ordinance (1959);34
10.4.8;4.8 The Treasury Bills (Local) Act (1946) (Revised 1977);34
10.4.9;4.9 The Government Investment Act (1983);34
10.5;5 Conclusion;34
10.6;Reference;34
11;Chapter 2 Role of the OIC and Other International Organizations in the Sustainable Development of Islamic Finance;35
11.1;1 Introduction;35
11.2;2 Background;36
11.3;3 Objectives;36
11.3.1;3.1 Strengthen the Islamic Community;36
11.3.2;3.2 Coordinate Action for the Islamic Community;37
11.3.3;3.3 Work for the Islamic Community;37
11.4;4 Principles;37
11.5;5 The Organization of the OIC;37
11.5.1;5.1 The General Secretary;37
11.5.2;5.2 Responsibilities of the Department of Al-Quds Al-Sharif and Palestine;38
11.5.3;5.3 Bureau for the Islamic Boycott of Israel;39
11.5.4;5.4 Islamic Bureau for Military Coordination with Palestine;39
11.5.5;5.5 Department of Political Affairs;39
11.5.6;5.6 Department of Muslim Communities and Minorities;39
11.5.7;5.7 Department of Legal Affairs;40
11.5.8;5.8 Department of Economic Affairs;40
11.5.9;5.9 Department of Science and Technology;40
11.5.10;5.10 Information Department;41
11.5.11;5.11 Cultural and Social Affairs Department;41
11.5.12;5.12 Administration and Finance Department;41
11.5.13;5.13 Conference Department;41
11.5.14;5.14 Protocol and Public Relations Department;42
11.5.15;5.15 Department of Coordination for Subsidiary Bodies, Specialized and Affiliated Institutions;42
11.5.16;5.16 Department of Da’wah;42
11.5.16.1;5.16.1 The Islamic Summit Conference;42
11.5.16.2;5.16.2 The Islamic Conference of Foreign Ministers (ICFM);42
11.5.16.3;5.16.3 The General Secretariat;42
11.5.16.4;5.16.4 The International Islamic Court of Justice;43
11.5.16.5;5.16.5 Subsidiary Bodies;43
11.5.16.6;5.16.6 Specialized Institutions;43
11.5.16.7;5.16.7 Affiliated Institutions;43
11.6;6 International Organizations Contributing to the Development of Islamic Finance;44
11.6.1;6.1 Islamic Development Bank (IDB);44
11.6.1.1;6.1.1 Purpose;45
11.6.1.2;6.1.2 Functions;45
11.6.1.3;6.1.3 Membership;45
11.6.1.4;6.1.4 Organization and Administration;45
11.6.1.4.1;Board of Governors;45
11.6.1.4.2;Board of Executive Directors;46
11.6.1.4.3;The President;46
11.6.1.4.4;Capital;46
11.6.1.4.5;Development;46
11.6.2;6.2 Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC);48
11.6.2.1;6.2.1 Objective;48
11.6.2.2;6.2.2 Capital;49
11.6.2.3;6.2.3 Organization and Management;49
11.6.2.3.1;Board of Governors;50
11.6.2.3.2;Board of Directors;50
11.6.2.3.3;The President;51
11.6.3;6.3 Islamic Financial Services Board (IFSB);51
11.6.3.1;6.3.1 Purpose;51
11.6.3.2;6.3.2 Functions;51
11.6.4;6.4 Affiliated Institutions;52
11.6.4.1;6.4.1 Idea Groups;52
11.6.4.2;6.4.2 Islamic Chamber of Commerce and Industry (ICCI);52
11.6.4.2.1;Establishment;52
11.6.4.2.2;Objectives;53
11.6.4.3;6.4.3 Organization of Islamic Capital Activities;53
11.6.4.3.1;Establishment;53
11.6.4.3.2;Objectives;53
12;Chapter 3 Evolution of Islamic Financial Products and Services;54
12.1;1 Introduction;54
12.2;2 Resurgence of Islamic Financial Products and Services;55
12.3;3 Rational Outlook of the Sustainable Growth of Islamic Financial Products;56
12.3.1;3.1 Mutual Cooperation with a Risk-sharing Culture;57
12.3.2;3.2 Green Financing Platform;57
12.3.3;3.3 Shari’ah Compliant Products;57
12.3.4;3.4 Fast and Steady Growth;57
12.3.5;3.5 Attracts Non-Muslim Investors;57
12.3.6;3.6 Global Indexing;58
12.3.7;3.7 Oil-rich Countries Adopt Islamic Finance;58
12.3.8;3.8 Effective Decision-making;58
12.3.9;3.9 Streamlined and Simpler;58
12.3.10;3.10 ‘No Crisis’ Zone;58
12.3.11;3.11 Humanitarian Concerns;59
12.3.12;3.12 Industrial Catching Up;59
12.4;4 Literature Initiative to Support the Growth of the Industry;59
12.4.1;4.1 Islamic Trade Finance;59
12.4.2;4.2 Takaful and Re-takaful Products;60
12.4.3;4.3 E-Commerce Products;61
12.4.4;4.4 Strategies Ahead;62
13;Part II Governing Principles and Strategies of Islamic Products and Services;63
14;Chapter 4 Islamic Financial Policies;64
14.1;1 Introduction;64
14.2;2 Central Concept;65
14.3;3 Application of Islamic Financing in Islamic Banking;66
14.3.1;3.1 Debt Financing;66
14.3.1.1;3.1.1 Al-Rahn (Rahnu);66
14.4;4 Shari’ah Ruling;66
14.5;5 Application of al-rahnu;66
14.5.1;5.1 Al-Ijarah;67
14.5.1.1;5.1.1 Shari’ah Ruling;68
14.5.1.2;5.1.2 Hadith;68
14.5.1.3;5.1.3 Application of Ijarah;68
14.5.2;5.2 Al-Qard (Loan Contract);69
14.5.2.1;5.2.1 Shari’ah Ruling;69
14.5.2.2;5.2.2 Application of Qard in Modern Islamic Banking;70
14.5.3;5.3 Al-Murabahah (Mark-Up Lump Payment Sale);70
14.5.3.1;5.3.1 Application of Al-Murabahah;71
14.5.3.1.1;Vehicle Financing;71
14.5.3.2;5.3.2 Application of Al-Bai-Bithaman Ajil;74
14.5.3.2.1;House Financing (al-baiti);74
14.5.4;5.4 Equity Financing;74
14.5.4.1;5.4.1 Al-Mudharabah;74
14.5.4.1.1;Shari’ah Rulings;74
14.5.4.1.2;Application of Al-Mudharabah in Islamic Banking;75
14.5.4.2;5.4.2 Musharakah;77
14.5.4.2.1;Causes of the Failure of Islamic Banks to Adopt Musharakah;78
14.5.4.3;5.4.3 Al-Wadiah;79
14.5.4.3.1;Application of Al-Wadiah;79
14.6;6 Recommendations;79
14.7;7 Conclusion;80
15;Chapter 5 Islamic Financial Services Board and Its Regulatory Functions in the Islamic Financial Industry;82
15.1;1 Introduction;82
15.2;2 Background of the IFSB;83
15.2.1;2.1 Objectives and Functions of the IFSB;84
15.2.2;2.2 The Structure of the IFSB;85
15.2.3;2.3 The General Assembly;85
15.2.4;2.4 The Council;86
15.2.5;2.5 The Technical Committee;87
15.2.6;2.6 The Secretariat;88
15.2.7;2.7 Shari’ah Rulings;88
15.2.8;2.8 Expected Contribution to the Development of Takaful Globally;90
15.3;3 Recommendation;92
15.4;4 Conclusion;92
15.5;References;93
16;Chapter 6 Bay’ Al-Inah (Buy Back Sale) and Its Position in Modern Islamic Finance;94
16.1;1 Definition;95
16.2;2 Legal Evaluation;95
16.3;3 Application;97
17;Chapter 7 Instruments that Facilitate Islamic Financing;99
17.1;1 Introduction;99
17.2;2 Al-Murabaha (Cost Plus Mark-up);100
17.2.1;2.1 Conditions of Al-Murabaha;100
17.2.2;2.2 Types of Al-Murabaha;100
17.2.2.1;2.2.1 Ordinary Al-Murabaha Sale;100
17.2.2.2;2.2.2 Murabaha Sale Linked to a Promise;100
17.2.2.3;2.2.3 The Practical Steps of the Murabaha Sale;101
17.3;3 Al-Mudhraba (Partnership in Profit-Sharing);102
17.3.1;3.1 The Mudharib;102
17.3.2;3.2 The Muwakkil: The Owner of the Property;102
17.3.3;3.3 Rules of Al-Mudharaba;103
17.4;4 Al-Ijarah;103
17.4.1;4.1 Definition;103
17.4.2;4.2 Modern Concept of Al-Ijarah;104
17.4.3;4.3 Application of Al-Ijarah;104
17.5;5 Al-Musharakah;105
17.5.1;5.1 Definition;105
17.5.2;5.2 Classification of Sharikah;105
17.5.3;5.3 Distribution of Profit and Loss;106
17.5.4;5.4 Application of Al-Musharakah;106
17.6;6 Al-Istisna’;107
17.6.1;6.1 Definition;107
17.6.2;6.2 Rules of Law;107
17.6.3;6.3 Application of Al-Istisna’;108
17.7;7 Advantages of the Islamic Financial System;109
17.8;8 Issues and Challenges Faced by the Islamic Financial System;109
17.8.1;8.1 No Regulatory and Legal Framework;110
17.8.2;8.2 No Single, Sizable, and Organized Financial Centre Operated in Accordance with Islamic Principles;110
17.8.3;8.3 The Pace of Innovation Is Slow;110
17.8.4;8.4 Lack of Uniformity in Accounting Standards and Procedures;110
17.8.4.1;8.4.1 Lack of Uniformity in Application of Religious Principles;111
17.9;9 Conclusion;111
17.10;References;112
18;Chapter 8 The Pricing Techniques of Islamic Financial Products;113
18.1;1 Regulatory Framework for Pricing of Islamic Products;114
18.2;2 Al-Murabahah (Mark-Up Pricing);115
18.2.1;2.1 Al-Murabahah Legal Framework of Pricing;116
18.2.2;2.2 Calculation of Cost in murabahah;116
18.2.3;2.3 Rescheduling of Payment;116
18.2.4;2.4 Discount on Early Payment;117
18.2.5;2.5 Other Features That Form Part of a murabahah Contract;118
18.3;3 Al-Mudarabah (Profit Sharing);118
18.3.1;3.1 The Legality of mudarabah from an Islamic Perspective;119
18.3.2;3.2 Distribution of Profit and Loss;119
18.3.3;3.3 Distribution of Profit and Loss in mudarabah takaful;119
18.3.4;3.4 Investment Amount of mudarabah;120
18.3.5;3.5 Features of Investment;120
18.3.6;3.6 Application of mudarabah Contract;120
18.3.6.1;3.6.1 Profit Distribution;120
18.3.6.2;3.6.2 Loss Venture;120
18.4;4 Qardh Al-Hasan (Benevolent Loan);121
18.4.1;4.1 Qardh Al-Hasan Legal Framework of Pricing;121
18.4.1.1;4.1.1 Al-Qardh Share Financing with Profit Sharing Fund Management;121
18.5;5 Al-Bai’ bithaman ajil (Deferred Payment): A Past Experience;122
18.5.1;5.1 BBA Legal Framework of Pricing;122
18.5.2;5.2 Determination of Selling Price;123
18.5.3;5.3 Calculation of Selling Price;123
18.6;6 Conclusion;123
18.7;References;124
19;Chapter 9 Remedies for Breach of Financial Contract Under Shari’ah;125
19.1;1 Introduction;125
19.2;2 Elements of a Contract;126
19.3;3 Remedies for Breach of Financial Contract Under Shari’ah;129
19.3.1;3.1 Self-Help Remedies;130
19.3.2;3.2 Judicial Remedies;131
19.4;4 Damages (daman);131
19.5;5 Rescission (iqalah);134
19.6;6 Specific Performance;136
19.7;7 Injunction;138
19.8;8 Current Phenomena;142
19.9;9 Case Analysis: Bank Islam Berhad v. Adnan bin Omar [1987] CLJ 396/[1987] 2 MLJ 192;146
19.9.1;9.1 Facts of the Case;146
19.9.2;9.2 Analysis of the Case;148
19.10;10 Recommendations;152
19.11;11 Conclusion;154
19.12;References;155
20;Part III Islamic Financial Products;156
21;Chapter 10 Islamic Equity Financing: Al-Musharakah, Al-Mudharabah, and Al-Qiradh;157
21.1;1 Introduction;157
21.2;2 Bank Islam Malaysia Berhad (Bimb);158
21.2.1;2.1 Interest–Free Banking Scheme;158
21.3;3 Equity Financing Instruments;159
21.3.1;3.1 Al-Mudharabah;159
21.3.2;3.2 Traditional Practise of Al-Mudharabah;159
21.3.3;3.3 Pillars of Al-Mudharabah;160
21.3.4;3.4 Modern Practice of Al-Mudharabah;162
21.3.4.1;3.4.1 Demand Deposits;162
21.3.4.2;3.4.2 Mutual Investment Deposits;163
21.3.4.3;3.4.3 Special Investment Deposits;163
21.3.5;3.5 Establishing an Al-Mudharabah Project;164
21.3.6;3.6 The Results of Al-Mudharabah;164
21.3.7;3.7 Payment of Al-Mudharabah Capital;164
21.3.8;3.8 Distribution of Wealth Resulting from Al-Mudharabah;165
21.4;4 Al-Qiradh;165
21.4.1;4.1 Positive Impact on the Concept Al-Mudharabah and Al-Qiradh;166
21.5;5 Al-Musharakah;167
21.5.1;5.1 Al-Inan;167
21.5.2;5.2 Al-Abdan;167
21.5.3;5.3 Al-Mutawadhah;168
21.5.4;5.4 Al-Wujuh;168
21.5.5;5.5 Traditional Practices of Al-Musharakah;168
21.5.6;5.6 Pillars of Al-Musharakah;168
21.5.7;5.7 Modern Practices of Al-Musharakah;169
21.5.8;5.8 Joint Venture Projects;169
21.6;References;170
22;Chapter 11 Islamic Debt Financing;171
22.1;1 Introduction;171
22.2;2 Central Idea;172
22.3;3 Shari’ah Rulings;172
22.3.1;3.1 Islamic and Interest-Free Financing;172
22.3.2;3.2 Rules of BBA and Murabahah;173
22.3.3;3.3 Legality of BBA and Murabahah;174
22.3.4;3.4 Practical Scenario and Applications;174
22.3.4.1;3.4.1 Bai’ Bithaman Ajil (BBA) Financing;174
22.3.4.1.1;Scope;174
22.3.4.1.2;Features;175
22.4;4 Murabahah Overdraft;175
22.4.1;4.1 Concept;175
22.4.2;4.2 Eligibility;176
22.4.3;4.3 Scope;176
22.4.4;4.4 Features;176
22.5;5 The Application of Al-Murabahah in Modern Islamic Banking;176
22.5.1;5.1 Letter of Credit Under Contract of Al-Murabahah (Deferred Lump-Sum Sale or Cost Plus);176
22.6;6 Working Capital Financing Under the Principle of Al-Murabahah;177
22.6.1;6.1 Issue on Islamic Debt Financing;177
22.7;7 Conclusion;180
22.8;References;181
23;Chapter 12 Islamic Trade Financing Instruments and Mechanisms;182
23.1;1 Introduction;182
23.2;2 Central Idea;182
23.3;3 Debt Financing;183
23.3.1;3.1 Deferred Contracts of Exchange (Al-Bai, Al-Tijarahand Al-Dayn);183
23.3.2;3.2 Interest-Based Lending (Riba Al-Nasiah);184
23.4;4 Debt Financing in Pre-islamic Arab Society;184
23.4.1;4.1 Al-Murabahah (Deferred Lump Sum Sale or Cost Plus);184
23.4.1.1;4.1.1 Shari’ah Rulings;184
23.4.1.2;4.1.2 Al-Qur’an;185
23.4.1.3;4.1.3 Al-Sunnah;185
23.4.1.4;4.1.4 Real Practice by BIMB of Al-Murabahah (Letter of Credit);185
23.4.1.5;4.1.5 Working Capital Financing Under the Principle of Al-Murabahah;185
23.4.2;4.2 Al-Kafalah Bank Guarantee (KBG);186
23.4.2.1;4.2.1 Shari’ah Rulings;186
23.4.2.1.1;Al-Qur’an;186
23.4.2.1.2;Al-Sunnah;186
23.4.2.2;4.2.2 The Application of al-Kafalah in BIMB;186
23.4.2.3;4.2.3 Al-Kafalah Shipping Guarantee;187
23.4.2.4;4.2.4 How Does It Work?;187
23.4.3;4.3 Al-Wakalah (Letter of Credit);187
23.4.3.1;4.3.1 Shari’ah Ruling;187
23.4.3.1.1;Al-Qur’an;187
23.4.3.2;4.3.2 How Does It Work?;188
23.4.4;4.4 Bai Al-Salam (Sale by Deferred Delivery);188
23.4.4.1;4.4.1 Shari’ah Ruling;188
23.4.4.1.1;Al-Qur’an;188
23.4.4.1.2;Al-Sunnah;188
23.4.4.2;4.4.2 How Does Salam Work?;189
23.4.5;4.5 Bai’ al-Istisna’ (Manufacturing Contract);190
23.4.5.1;4.5.1 Shari’ah Ruling;190
23.4.5.2;4.5.2 Al-Qur’an;190
23.4.5.3;4.5.3 Istisna as a Method of Financing;190
23.4.6;4.6 Al-Musharakah (Letter of Credit): Trustee Profit Sharing;192
23.4.6.1;4.6.1 Shari’ah Ruling;192
23.4.6.1.1;Al-Qur’an;192
23.4.6.2;4.6.2 Modern Application by BIMB;192
23.4.6.3;4.6.3 How Does It Work?;192
23.4.7;4.7 Bay’ Al-Dayn;193
23.4.7.1;4.7.1 Bay’ Al-Dayn as Practised in BIMB;193
23.4.8;4.8 Al-Bai-Bithamin Ajil;194
23.4.8.1;4.8.1 Shari’ah Ruling;194
23.4.8.1.1;Al-Quran;195
23.5;5 Recommendations;195
23.6;6 Conclusion;196
23.7;References;197
24;Chapter 13 Islamic Trade Financing Frameworks;198
24.1;1 Introduction;198
24.2;2 Islamic Banking;199
24.3;3 Status of Islamic Banking;201
24.4;4 Islamic Trade Finance;202
24.5;5 E-banking;202
24.6;6 Recommendation;203
24.7;7 Islamic Bank;203
24.7.1;7.1 Products and Services;203
24.7.1.1;7.1.1 Al-Kafalah;203
24.7.1.2;7.1.2 Al-Wakalah;203
24.7.1.3;7.1.3 Al-Murabaha;203
24.7.1.4;7.1.4 Bay Al-Dyan;204
24.7.1.5;7.1.5 Bay’ Bithaman Ajil;204
24.7.1.6;7.1.6 Al-Mudaraba;204
24.7.1.7;7.1.7 Al-Musharakah;204
24.7.1.8;7.1.8 Al-Ijara;205
24.7.2;7.2 Other Services;205
24.7.2.1;7.2.1 Money Transfer;205
24.7.2.2;7.2.2 Collection of Proceeds of Trade Transactions;206
24.7.2.3;7.2.3 Imports/Purchases;206
24.7.2.4;7.2.4 Trade Information;206
24.8;8 Conventional Bank;207
24.8.1;8.1 Products and Services;207
24.9;9 Shari’ah Standard;207
24.9.1;9.1 Overview;207
24.10;10 The Need for Islamic Accounting Standards;207
24.10.1;10.1 Objective;208
24.10.2;10.2 Accounting Treatment: Al-Murabaha;208
24.10.2.1;10.2.1 Measurement of Asset Value at Acquisition by an Islamic Bank;208
24.10.2.2;10.2.2 Measurement of Asset Valued After Acquisition by an Islamic Bank;208
24.10.2.3;10.2.3 Potential Discount to Be Obtained After Acquisition of an Asset;209
24.10.2.4;10.2.4 Al-Murabaha Receivables;209
24.10.3;10.3 Accounting Treatment: Al-Mudaraba;210
24.10.3.1;10.3.1 Recognition of Mudaraba Capital;210
24.10.3.2;10.3.2 Measurement of Al-Mudaraba;210
24.10.3.3;10.3.3 Disclosure Requirements;210
24.10.4;10.4 Accounting Treatment: Al-Musharakah;210
24.10.4.1;10.4.1 Recognition of Musharakah Capital;210
24.10.4.2;10.4.2 Measurement of Musharakah Capital;211
24.11;11 Conclusion;211
25;Chapter 14 Shari’ah Model of International Trade Financing;212
25.1;1 Introduction;212
25.2;2 Basic Principles of Islamic Finance;213
25.3;3 Emergence of Islamic Banks;214
25.4;4 Salient Characteristics of Islamic Finance;215
25.5;5 Relationship with Depositors;215
25.6;6 Closing the Financing Gap;216
25.7;7 Ethics and Banking;216
25.8;8 Modes of International Trade Financing;217
25.8.1;8.1 Leasing Methods;220
25.9;9 Conclusion;221
25.10;References;222
26;Chapter 15 Islamic Model of International Trade and Shipping;223
26.1;1 Introduction;223
26.2;2 General Concern;224
26.3;3 Islamic Accepted Bills: Import;224
26.4;4 Islamic Accepted Bills: Export;225
26.5;5 Letter of Credit: Murabahah;226
26.6;6 Letter of Credit Financing: Musharakah;226
26.7;7 Letter of Credit Financing: Wakalah;227
26.8;8 Islamic Export Credit Refinancing;227
26.9;9 Multilateral Trade Using the Islamic Gold Dinar;228
26.10;10 Conclusion;229
26.11;References;230
27;Chapter 16 Islamic Accepted Bills;231
27.1;1 Introduction;231
27.2;2 Understanding IABs;232
27.2.1;2.1 IAB: Imports (Al-Murabahah/Bai’ Al-Dayn);233
27.2.2;2.2 IAB: Exports or Sales (Bai’ Al-Dayn);233
27.3;3 Determining the Price of an IAB;234
27.4;4 Features of an IAB;234
27.5;5 Guidelines and Regulations on IABs;235
27.6;6 Application of IABs;236
27.6.1;6.1 Imports and Local Purchases;236
27.6.1.1;6.1.1 Al-Murabahah Working Capital Financing;237
27.6.2;6.2 Export and Local Sales;237
27.7;7 Shari’ah Perspective on IABs;238
27.7.1;7.1 The Nature of Bay’ Al-Dayn;238
27.7.1.1;7.1.1 Sale of Al-Dayn to a Third Party;238
27.8;8 Conclusion;240
27.9;References;240
28;Chapter 17 Islamic Lease Financing (Al-Ijarah);241
28.1;1 Introduction;241
28.2;2 Shari’ah and Legal Basis of Ijarah;242
28.3;3 Elements of an Al-Ijarah Contract (Islamic Financing: Ijarah);243
28.4;4 Conditions of Al-Ijarah;244
28.5;5 Determination of Rental;244
28.6;6 Types of Al-Ijarah;245
28.7;7 Application of Al-Ijarah Financing;246
28.7.1;7.1 Procedure;246
28.8;8 Al-Ijarah Thumma Al-Bai (Aitab): Car Financing;247
28.8.1;8.1 Procedure;247
28.9;9 Al-Ijarah Financing in the Modern Islamic Banking System;248
28.9.1;9.1 Operating Ijarah Versus Financing Ijarah;248
28.9.2;9.2 Accounting Treatment and Taxation Implication;249
28.9.3;9.3 Valuation and Residual Value of the Leased Asset in Property Financing;249
28.9.4;9.4 Expenses of Maintenance Costs, Takaful Premium;250
28.9.5;9.5 Termination of Lease;251
28.10;10 Recommendations;251
28.10.1;10.1 Operating Ijarah Versus Financing Ijarah;251
28.10.2;10.2 Accounting Treatment Together with Taxation and Zakat Implication;252
28.10.3;10.3 System Maintenance;252
28.10.4;10.4 Valuation and Residual Value of the Leased Asset of the Property Financed;253
28.10.5;10.5 Expenses of Maintenance Costs: Takaful Premium;253
28.10.6;10.6 Termination of Lease;254
28.11;11 Conclusion;254
28.12;References;255
29;Chapter 18 Islamic Leasing Leading to Ownership (Al-Ijarah Tantahi Bi Al-Tamleek);256
29.1;1 Introduction;256
29.2;2 Al-Ijara wa Al-Iqtina’ (Leasing Leading to Ownership);256
29.3;3 Implications of Al-Ijarah wa Al-Iqtina’;257
29.3.1;3.1 Implications for Economics;257
29.3.2;3.2 Implications for Society;258
29.4;4 Shari’ah Recognition of Al-Ijara wa Al-Iqtina’;258
29.4.1;4.1 Free from Gharar;258
29.4.2;4.2 Free from Riba;259
29.4.3;4.3 Based on Trading;259
29.4.4;4.4 Avoid Prohibited Investments;259
29.5;5 Why Profits from Al-Ijara wa Al-Iqtina’ Are Acceptable Under Shari’ah;259
29.5.1;5.1 Ownership Risk (Ghurmi);259
29.5.2;5.2 Effort (Kasb);260
29.5.3;5.3 Liability (Damn);260
29.6;6 Leasing Leading to Ownership in Relation to Takaful;260
29.7;7 Terms and Conditions of a Hire Purchase Agreement;260
29.8;8 Rational Outlook of the Concepts of Hire Purchase and Takaful;262
29.9;9 Different Practices of Hire-Purchase;265
29.10;10 Ambank Group;265
29.11;11 Conclusion;267
30;Chapter 19 Islamic Hire Purchase (Al-Ijarah Thumma Al-Bay’);268
30.1;1 Introduction;268
30.2;2 Central Idea;269
30.3;3 Corporate Understanding;270
30.4;4 Practical Scenario and Application;272
30.5;5 AITAB Procedure;273
30.6;6 Recommendations;274
30.7;7 Shari’ah Rulings;274
30.8;8 Conclusion;275
30.8.1;8.1 Purpose of Financing;275
30.8.2;8.2 Total Lease Rentals;275
30.8.3;8.3 Guarantee;275
30.8.4;8.4 Security or Collateral;276
30.8.5;8.5 Early Termination of Al-Ijarah (Lease Financing);276
30.9;References;276
31;Chapter 20 Islamic Manufacture Financing (Al-Istisna’);277
31.1;1 Introduction;277
31.2;2 Central Idea;278
31.3;3 Characteristics of Al-Istisna’ (Manufacturing);279
31.4;4 Rules of Al-Istisna’;281
31.5;5 Conditions Relating to Al-Istisna’;281
31.6;6 Application of Al-Istisna’;282
31.7;7 Procedure of Al-Istisna’;283
31.8;8 Application of the Al-Istisna’ Financing Facility in Islamic Countries;283
31.9;9 Scholars’ Views on Al-Istisna’;286
31.10;10 Recommendations;287
31.11;11 Conclusion;288
31.12;References;288
32;Chapter 21 Islamic Manufacture Financing Contract (Aqd al-Istisna’);290
32.1;1 Introduction;290
32.2;2 Central Idea;290
32.3;3 Terms and Concepts;291
32.4;4 Terms and Conditions of the Islamic Development Bank;291
32.5;5 Legality of Al-Istisna’;293
32.6;6 Current Scenario;294
32.6.1;6.1 Application;294
32.6.2;6.2 Al-Istisna’ Sale;295
32.7;7 Payment Methods;295
32.8;8 Empirical Illustration;296
32.9;9 Issues in Al-Istisna’;296
32.9.1;9.1 Al-Istisna’ and Economic Development;296
32.9.2;9.2 Foreign Exchange Risk;297
32.10;10 Findings and Recommendations;297
32.11;11 Conclusion;298
32.11.1;11.1 Procedure for Al-Istisna’ Financing;298
32.12;References;300
33;Chapter 22 Islamic Venture Capital;301
33.1;1 Introduction;301
33.2;2 Al-Musharakah;302
33.2.1;2.1 Rules of Al-Musharakah;302
33.2.2;2.2 Distribution of Profit;302
33.2.3;2.3 Sharing in Loss;303
33.2.4;2.4 The Nature of Capital;303
33.2.5;2.5 Management of Al-Musharakah;304
33.2.6;2.6 Termination;304
33.2.7;2.7 Modern Operation of Musharakah Model;305
33.2.8;2.8 The Practical Scenario;305
33.3;3 Conclusion;306
34;Chapter 23 Sukuk Paradigm and Structure;308
34.1;1 Introduction;308
34.2;2 Phenomena;308
34.3;3 Modern Bond Market;310
34.4;4 Market Participants;311
34.4.1;4.1 Dealers;311
34.4.2;4.2 Brokers;312
34.4.3;4.3 Investors;312
34.5;5 Types of Bond;312
34.5.1;5.1 Convertible Bonds;312
34.5.2;5.2 Extendable or Retractable Bonds;313
34.5.3;5.3 Foreign Currency Bonds;313
34.5.4;5.4 Government Bonds;313
34.5.5;5.5 Corporate Bonds;313
34.5.6;5.6 High Yield or Junk Bonds;314
34.5.7;5.7 Inflation-Linked Bonds;314
34.5.8;5.8 Zero Coupon Bonds;314
34.6;6 Valuation of Bonds;315
34.6.1;6.1 Present Value;315
34.6.2;6.2 Yield to Maturity;315
34.6.3;6.3 Duration;315
34.6.4;6.4 Coupon Interest Rate;316
34.6.5;6.5 Market Interest Rate;316
34.7;7 Sukuk (Islamic Bond) Market;316
34.8;8 Three Main Steps of Bond Issuance;317
34.8.1;8.1 The Creation of an al-Tawarruq (Special Purpose Vehicle) Underlying Asset;317
34.8.2;8.2 Issuance of Islamic Debt Certificate (Shahdah al-Dayn);318
34.8.3;8.3 Trading of Debt Certificates: Discounted Bay’ al-Dayn;318
34.8.4;8.4 The Nature of Bay’ al-Dayn;320
34.8.5;8.5 Sale of Al-Dayn (Debt) to a Third Party;320
34.9;9 Types of Islamic Bonds (Sukuk);322
34.9.1;9.1 Sukuk Al-Ijarah (Lease Bonds);322
34.9.2;9.2 Sukuk Al-Istisna’ (Manufacturing Bonds);322
34.9.2.1;9.2.1 Sukuk Al-Musharakah (Partnership Bonds);323
34.9.2.2;9.2.2 The Difference Between an Al-Musharakah Certificate and a Conventional Bond;323
34.9.3;9.3 Sukuk al-Muqarada Is an Alternative to Sukuk al-Dayn (Debt Bonds/Debenture Certificates);323
34.10;10 Prospects for Sukuk in the Non-Muslim World;324
34.11;11 Process and Issuance of Sukuk (Tawreeq);325
34.12;12 Risk Factors in Sukuk;326
34.12.1;12.1 Market Risk;326
34.12.2;12.2 Credit Risk;327
34.12.3;12.3 Risk as to Shari’ah Compliant;327
34.12.4;12.4 Management and Operational Risk;328
34.12.5;12.5 Risk of Organizational Rigidity;328
34.13;13 Managing Sukuk Risks;328
34.13.1;13.1 Organizational Challenges;329
34.14;14 Sukuk and Its Rating Formula;331
34.14.1;14.1 Credit Rating;331
34.14.2;14.2 Appointment of Credit Rating Agency;331
34.14.3;14.3 Issuer’s Obligations;332
34.14.4;14.4 Non-application of Requirements;332
34.15;15 Conclusion;333
34.16;References;333
35;Chapter 24 Islamic Loan (Al-Qardh);335
35.1;1 Central Idea of al-Qard (Loan);335
35.2;2 Divine Rulings on al-Qardh (Loan);335
35.2.1;2.1 Al-Qur’an;335
35.2.2;2.2 Al-Sunnah;336
35.3;3 Objectives;337
35.3.1;3.1 Linguistic Approach;337
35.4;4 Pillars of a Loan;337
35.5;5 Loan Versus Sale Contract;337
35.6;6 Special Features in al-Qardh Contract;337
35.7;7 Practical Scenario;338
35.8;8 Borrowers Unable to Pay the Loan on Time;339
35.9;9 Defects Found in the Subject Matter;339
35.10;10 BBA Property Financing;340
35.11;11 Recommendations;340
36;Chapter 25 Islamic Financial Wealth Management;342
36.1;1 Introduction;342
36.2;2 Protection in Islam;345
36.2.1;2.1 Basis of Cooperation;346
36.2.2;2.2 Basis of Responsibility;346
36.2.3;2.3 Basis of Mutual Protection;346
36.2.4;2.4 Accumulation of Wealth in Islam;346
36.3;3 Wealth Preservation;348
36.4;4 Wealth Distribution;348
36.5;5 Financial Planning Process;349
36.5.1;5.1 Establishing a Financial Goal;349
36.5.2;5.2 Gathering Relevant Data;349
36.5.3;5.3 Analysis of the Data;349
36.5.4;5.4 Developing a Plan for Achieving the Goal;349
36.5.5;5.5 Implementing the Plan;350
36.5.6;5.6 Monitoring the Plan;350
36.6;6 Recommendations;350
36.6.1;6.1 Wasiyah;350
36.6.2;6.2 Waqf;352
36.6.2.1;6.2.1 Advantages of Waqf;353
36.6.3;6.3 Hibah;354
36.6.3.1;6.3.1 Advantages in Hibah;355
36.7;7 Conclusion;356
36.8;References;356
37;Chapter 26 Islamic Financial Planning;357
37.1;1 Introduction;357
37.2;2 Central Idea;358
37.3;3 Practical Scenario of Islamic Financial Planning;361
37.4;4 Islamic Unit Trusts;363
37.5;5 Islamic Bonds (Sukuk);366
37.6;6 Family Takaful Plans;367
37.7;7 Planning for Retirement;370
37.8;8 Shari’ah Ruling;371
37.9;9 Recommendations;372
37.9.1;9.1 Exposure;372
37.9.2;9.2 Attract More Non-Muslims;372
37.9.3;9.3 Islamic Teachings;373
37.9.4;9.4 Flexibility;373
37.10;10 Conclusion;373
37.11;Reference;373
38;Chapter 27 Islamic Unit Trust (Micro-Saving);374
38.1;1 Introduction;374
38.2;2 Overview of Unit Trust Industry;375
38.3;3 The Concept of Unit Trust;376
38.3.1;3.1 Central Idea;376
38.3.2;3.2 Mechanism of Unit Trusts;376
38.3.3;3.3 The Difference Between Unit Trusts and Mutual Funds;378
38.3.4;3.4 Types of Fund;378
38.3.5;3.5 Shari’ah Rulings;378
38.3.6;3.6 Examples of Islamic Unit Trusts;379
38.3.7;3.7 The Future of the Islamic Unit Trust Industry;381
38.4;References;382
39;Chapter 28 Islamic Financing for the Sustainable Development Goals;383
39.1;1 Introduction;383
39.1.1;1.1 Income Inequality Distribution;384
39.2;2 Low-Income Group;385
39.3;3 Determinants of the Low-Income Group;386
39.4;4 Poverty: An Islamic Perspective;386
39.5;5 Islamic Financial System;389
39.6;6 How Does Islamic Finance Help to Grow the Low-Income Group Towards Sustainable Development Goals?;389
39.6.1;6.1 Al-Musharakah (Venture Capital);389
39.6.2;6.2 Al-Mudharabah (Profit and Loss Sharing);391
39.6.3;6.3 Al-Murabahah (Cost Plus Financing);392
39.6.4;6.4 Al-Ijarah (Lease);393
39.6.5;6.5 Al-Qard (Loan);394
39.6.6;6.6 Method of Financing Through Baitul Mal;395
39.6.7;6.7 Distribution of Income;396
39.7;7 Conclusion;397
39.8;References;397
40;Chapter 29 Islamic Fin-Tech: Digital Financial Products;398
40.1;1 Introduction;398
40.2;2 Types of Digital Financial Product;399
40.3;3 Smart Authorization;399
40.3.1;3.1 Key Features;400
40.3.2;3.2 Key Benefits;400
40.4;4 Credit Card Processing;401
40.4.1;4.1 Key Features;401
40.4.2;4.2 Key Benefits;401
40.5;5 Electronic Cheque Processing;402
40.6;6 E-Dinars;403
40.7;7 Financial Risk Versus Exchange Risk;404
40.8;8 Benefits in Digital Financial Products;404
40.8.1;8.1 Availability;404
40.8.2;8.2 Convenience;405
40.8.3;8.3 Efficiency;405
40.9;9 Issues of Security in Digital Services;405
40.9.1;9.1 Confidentiality;405
40.9.2;9.2 Authenticity;406
40.9.3;9.3 Non-repudiation;406
40.10;10 Symmetric Key Encryption;406
40.11;11 Public Key Encryption;407
40.12;12 Using a Digital Signature to Validate Data Integrity;407
40.13;13 Digital Timestamping;408
40.14;14 Certificate;408
40.15;15 Certification Authorities;409
40.16;16 The Secure Sockets Layer Protocol;409
40.17;17 Secure Electronic Transmission;411
40.18;18 Secure HTTP;411
40.19;19 Shari’ah Issues with Digital Financial Products and Services;411
40.20;20 Reference to Al-Qur’an and Al-Sunnah;412
40.21;21 Al-Ijma’, Al-Qiyas, Al-Istehsan and Masaleh al-Mursalah;412
40.22;22 Al-Qur’an;413
40.22.1;22.1 The Choice of Infrastructure;413
40.22.2;22.2 Freedom of Contract;414
40.22.3;22.3 Protection of IP, Data Protection, Digital Signature and Certification;414
40.23;23 Al-Sunnah;414
40.23.1;23.1 Prevention from Violation, Computer Crimes and Privacy;414
40.23.2;23.2 Fraud in Business Dealings;414
40.24;24 Conclusion;414
41;Chapter 30 Islamic Cryptocurrency;415
41.1;1 Introduction;415
41.2;2 Objectives;419
41.3;3 Governing Principles;419
41.4;4 Ethical Principles;420
41.5;5 Model and Structure;420
41.6;6 Operational Mechanism;421
41.7;7 Technological Model;422
41.8;8 Scope and Limitations;422
41.9;9 Products and Services;423
41.10;10 Backing Assets;423
41.11;11 Decision-Makers;424
41.12;12 Shari’ah Advisory Board;424
41.13;13 Board of Advisors;425
41.14;14 The Management Company;425
41.15;15 The Road Map of a Shari’ah Cryptocurrency Operation;425
41.16;16 The Public Statement;425
41.17;17 The White Paper;429
41.17.1;17.1 Introduction to Shari’ah Coin;429
41.17.1.1;17.1.1 The Shari’ah Coin;429
41.17.1.2;17.1.2 Emerging of Block-Chain;430
41.17.1.3;17.1.3 Background of Shari’ah Coin;430
41.17.1.4;17.1.4 How Shari’ah Coin Could Help to Solve Some Problems;431
41.17.1.5;17.1.5 The Meaning of Shari’ah Coin;431
41.17.2;17.2 Shari’ah Coin Branding and Definition;431
41.17.2.1;17.2.1 Shari’ah Coin Structural Analysis;431
41.17.3;17.3 Application of a Shari’ah Cryptocurrency;432
41.17.3.1;17.3.1 Financial Assets Exchange (Backing Assets);432
41.17.4;17.4 Pass-Up Plan;433
41.17.4.1;17.4.1 Total Volume;433
41.17.4.2;17.4.2 Launch Time and Its Checklist;433
41.17.4.3;17.4.3 Digital Asset Ratio;433
41.17.4.4;17.4.4 Shari’ah Cryptocurrency Appreciation Logic;433
41.17.5;17.5 Project Progress and Team;434
41.17.6;17.6 Operation;434
41.17.7;17.7 Market;434
41.17.8;17.8 Accounts;434
41.17.9;17.9 Significant Results;435
41.17.10;17.10 Humanitarian Concern Through Tabarru’at;435
41.18;18 Conclusion;435
41.19;References;436
42;Index;437