STUDY GUIDE FOR ISLAMIC BANKING AND FINANCE WITH EASE OF UNDERSTANDING||BEST FOR UNDERSTANDING ISLAMIC BANKING||GRADED A+

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ISLAMIC
BANKING & FINANCE:
PRINCIPLES AND PRACTICES
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, Contents
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Introduction to Islamic Economics and Finance
1. INTRODUCTION 14
1.1 Quran 15
1.2 Sunnah 15
2. ISLAMIC ECONOMICS 17
2.1 Real Owner 17
2.2 Man and his Position 18
2.3 Wealth and Resources 18
2.4 Economic Trust and Relationship 19
2.5 Economic Activities 20
2.6 Trade and business 20
2.7 Role and Nature of Money 20
2.8 Debt in Islam 21
2.9 Zakat and Charity 22
2.10 Savings in Islam 22
2.11 Reward 24
3. ISLAMIC FINANCE 24
3.1 Shariah 25
3.2 Fiqh 25
3.3 Features of Islamic Finance 25
3.3.1 Prohibition of Riba 26
3.3.2 Prohibition of Gharar 27
3.3.3 Prohibition of Maysir 27
3.3.4 Unlawful Goods and Services 27
3.3.5 Justice and equity based 27
3.4 Sources of Law and Islamic Commercial Law 28
3.4.1 Primary sources 28
3.4.2 Secondary sources 28
3.5 Madhahib - Schools of Islamic Legal Thought 28
3.5.1 The Hanafi School of Law 28
3.5.2 The Maliki School of Law 29
3.5.3 The Shafi’i School of Law 29
3.5.4 The Hanbali School of Law 29
4. HISTORY AND DEVELOPMENT OF ISLAMIC FINANCE 29
4.1 During 650 AD - 750 AD 29
4.2 During 750 AD - 1900 AD 30
4.3 During 1900 AD - 2000 AD 30
4.3.1 Single versus Dual Banking Systems 32
4.4 2000 AD till date: 32
4.4.1 Islamic Banking in West 32

Islamic Finance Structures

1. INTRODUCTION 36
2. ISLAMIC CONTRACT 37
2.1 Prerequisites of Shariah contracts 37
3. TYPES OF CONTRACTS 39
3.1 BARTER TRADING (Bay al-Muqayada) 39
3.2 GENERAL SALE (Bay’ al-mutlaq) 40
3.3 EXCHANGE SALE (Bay’ al-Sarf) 40
3.4 MARKUP-SALE (Murabaha) 40
3.4.2 Important principles of a Murabaha 41
3.4.3 Structure of a Murabaha contract 42
3.4.4 Mechanism of a Murabaha Transaction 42
3.4.5 Applications of Murabaha Contract 42
3.5 DEFERRED PAYMENT SALE (Bay’ Bithaman Ajil - BBA) 43



Islamic Banking and Finance: Principles & Practices
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, Contents
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3.5.1 Important principles of BBA 43
3.5.2 Structure of a BBA contract 44
3.5.3 Mechanism of a BBA Transaction 44
3.5.4 Applications of BBA 44
3.6 Monetization (Tawarruq) 44
3.6.2 Important principles of Tawarruq 44
3.6.3 Structure of Tawarruq 45
3.6.4 Mechanism of Tawarruq Transaction 45
3.6.5 Applications of Tawrruq 46
3.7 ENA 46
3.7.1 Structure of Ena contract 46
3.8 SALAM SALE (Bai’ Salam) 46
3.8.1 Important principles of Salam 47
3.8.2 Structure of a Salam contract 48
3.8.3 Mechanism of Salam Transaction 48
3.8.4 Applications of Salam 48
3.9 MANUFACTURING FINANCE (Istisna) 48
3.9.1 Important principles of Istisna 49
3.9.2 Structure of an Istisna contract 50
3.9.3 Mechanism of an Istisna Transaction 50
3.9.4 Applications of Istisna 50
3.10 PARTNERSHIP (Musharaka) 50
3.10.1 Important principles of Musharaka 51
3.10.2 Different types of Partnership at a glance 52
3.10.3 Structure of Musharaka & Diminishing Musharaka contract 53
3.10.4 Mechanism of a Musharaka Transaction 53
3.10.5 Applications of Musharaka 53
3.11 VENTURE CAPITAL (Mudaraba) 54
3.11.1 Important principles of Mudaraba 54
3.11.2 Structure of Mudaraba contract 55
3.11.3 Mechanism of a Mudaraba Transaction 56
3.11.4 Applications of Mudaraba 56
3.12 ISLAMIC LEASE (Ijara) 56
3.12.1 Important principles of an Ijara 57
3.12.2 Structure of an Ijara contract 59
3.12.3 Mechanism of an Ijara Transaction 59
3.12.4 Applications of Ijara contract 59
3.13 PLEDGE (Rahn) 59
3.13.1 Important principles of Pledge 60
3.13.2 Structure of Rahn contract 61
3.13.3 Mechanism of a Rahn Transaction 61
3.13.4 Applications of Rahn 61
3.14 GUARANTEE (Kafala) 61
3.14.1 Important principles of Kafala 62
3.14.2 Structure of Kafala 63
3.14.3 Mechanism of a Kafala Transaction 63
3.14.4 Applications of Kafala 63
3.15 WAKALA 63
3.15.1 Important principles of Wakala 64
3.15.2 Structure of Wakala 64
3.15.3 Mechanism of a Wakala Transaction 64
3.15.4 Applications of Wakala 65
3.16 HAWALA 65
3.16.1 Important principles of Hawala 65
3.16.2 Structure of Hawala 66



4 Islamic Banking and Finance: Principles & Practices