Professional Documents
Culture Documents
Clarification on Nomenclature
Islamic Banking is known by several names:
Interest free banking (Iran) PLS Banking (Pakistan) Islamic Banking (Gulf) Special Finance Houses (Turkey)
banks has shown that financial intermediation is possible even without interest.
FINANCIAL INTERMEDIATION
Goods Real Flow SURPLUS HOUSEHOLDS
DEFICIT HOUSEHOLDS
[Firms}
FINANCIAL INTERMEDIATION
FINANCIAL INTERMEDIARIES
Financial Flow
FINANCIAL MARKET
THE FIRM
INDIVIDUALS
Indirect financing
FINANCIAL INTERMEDIARIES
Indirect financing
DIRECT FINANCING
Financial Flow Businesses Flow of Real goods Households
Indirect Financing
Return on Investment
Business
Financial Institutions
Goods
Financial Resources
Financial Resources
goods
Goods
Bonds
Equities
Primary Markets
Secondary Markets
Investment Banks
Stock Exchanges
Over-the-Counter Exchange
Finance Companies
Theoretical considerations
Gharar
AVOIDANCE OF GHARAR
Definition of Gharar Uncertainty / Ambiguity Ambiguity of Quantity [Gharar fil Miqdar] Ambiguity of Attributes [Gharar fis sifah] such as
Ambiguity in time or place of delivery Ambiguity in price etc.
PRESENT SCENE
Islamic Banks in the Government Sector Pakistan, Sudan, Iran Islamic Banks in the Mixed Sector - Malaysia Islamic Banks in the Private Sector Gulf Non Banking Financial Institutions Al Ameen [ Bangalore, India] Islamic Financing by standard Commercial Banks in the Domestic Sector Saudi British, NCB, Saudi American, Misr Bank Islamic financing by Commercial banks in the foreign sector. Islamic Banks established by multinational Banks Citibank, HSBC Amanah Bank,
Predominantly social banks such as Nasser Social Bank Predominantly international development banks such as Islamic Development Bank Predominantly financial investment bank such as Kuwait Finance House Completely government owned banks such as Nasser Social Bank Banks owned by several Islamic governments such as Islamic Development Bank Multipurpose non government banks such as Dubai Islamic Bank[1]
[1] Al Hawary, Ma Mana Bunk Islami ( Arabic) Cairo: International Association of Islamic Banks, 1982 p. 49
Other Classifications
Islamic Banks in the Government Sector Pakistan, Sudan, Iran Islamic Banks in the Mixed Sector Malaysia Islamic Banks in the Private Sector Gulf Non Banking Financial Institutions Islamic Financing by standard Commercial Banks
Elementary Observations
EMERGENCE O F ISLAMIC BANKS WHAT IS AN ISLAMIC BANK? THE DIFFERENCE BETWEEN AN ISLAMIC BANK AND AN ISLAMIC FINANCIAL INSTITUTION. EVOLUTION OF ISLAMIC BANKING.
Uses of Funds
Investment Accounts
General Investment accounts Limited Period Investment accounts Specified Investment accounts
USES OF FUNDS
MUDARABAH MUSHARAKAH MURABAHAH IJARAH (Leasing) IJARAH WA IQTINA (Lease Purchase) MUSHARAKAH MUTANAQISAH LOAN ON SERVICE CHARGE INTEREST FREE LOANS.
TYPES OF CONTRCTS
Contracts
Muawadat
Musharakat Contracts of Partnerships Tabarruat Contracts of Charity
TYPES OF CONTRCTS
Contracts of Sale / Lease are Muawadat. Gharar is not allowed in such contracts. Mudarabah and Musharakah are contracts of Partnerships. Some amount of gharar may be tolerated in such contracts. Sadaqat and Hadaya are Tabarruat. No objection to Gharar in these type of contracts.
Financing Techniques
These techniques were devised in classical period for the commodity trade Their application to financial sector is an innovation of the modern era. The application of these techniques requires new documentation which was not required in the early period.
the
MAIN QUESTIONS
How Islamic Banks use these techniques? What is the incidence of their use? Are some techniques more amenable to certain sectors? Which techniques are easier to use? Which techniques have lesser
Modes
Mode
3.87
3.18
Sector Wise Distribution of Finance 1984 Name Agricult Mfg. SSI Real Trade
Of the Bank Jordan Islamic Bank Qatar Islamic Bank Islamic Bank Banglad esh ure estate 25.67 0.53 39.79 1.00 32.79
9.35
90.34
0.83
26.10
73.01
Sector Trade
Real Estate
Other
12.9
19.1
14.8
19.4
Modes
Mode
3.87
3.18
Sector Wise Distribution of Finance 1984 Name Agricult Mfg. SSI Real Trade
Of the Bank Jordan Islamic Bank Qatar Islamic Bank Islamic Bank Banglad esh ure estate 25.67 0.53 39.79 1.00 32.79
9.35
90.34
0.83
26.10
73.01
Sector Trade
Real Estate
Other
12.9
19.1
14.8
19.4
SOME MISCONCEPTIONS
ISLAMIC BANKING IS RELIGION BASED. ISLAMIC BANKING IS FOR A SPECIFIC COMMUNITY ISLAMIC BANKING REPLACES INTEREST RATE WITH PROFIT AND THAT IS ALL.