ABOUT THE COURSE

2
ISLAMIC LAW OF
BANKING AND FINANCE • CLO:
• 1. Understand theories, principles and
LLB 31103 governing laws on Islamic banking and
finance;.
• 2. Apply the principles and laws of Islamic
Dr. Abdul Majid Tahir Bin banking and finance in solving practical legal
Mohamed issues.
• 3. Analyse the products and their operation in
Islamic banking and finance.

ABOUT THE COURSE Expectations

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• Assessment: Formative and Summative

• Dress Code
• Continuous Assessment – 50%
• Punctuality:
Ø Test (15%)
• SUN (BA105: 2-4 pm)
Ø Quiz (5%)
• TUE (BA104: 2-4 pm)
Ø Assignment (20%)
Ø Presentation (10%)
• Attendance:
• Absence 10% - warning;
• Final Examination – 50%
• >20% - barred from final exam
 TOPIC 1 Islamic economy
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• Contents • MEANING
1. Concept of Islamic economy, Allah is the • S.M. Hasanuz Zaman in his book “Economic
Creator, Sustainer and Controller Functions of an Islamic State (1984)”
2. Concept of profit sharing in Islam • The knowledge and application of injunctions
and rules of the Shariah that prevent injustice
3. The obligation of zakat and waqf practice in the acquisition and disposal of material
4. Balance between capitalism and socialism resources in order to provide satisfaction to
human beings and enable them to perform
their obligations to Allah and society.

Islamic economy Islamic economy

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• Sources
u MEANING
1. The primary sources
• Yusuf Qaradawi:
2. The secondary sources
• It is based on the divine economy. This system starts
u Basis
from God, aims to end in God, and use the means
that cannot be separated from the Shari'ah of God. 1. Tauhid : Oneness of Allah who is the Creator of
• M.A. Mannan: all creations, including man. Man is only the
vicegerent who is responsible to all aspects of
• A social science that studies the economic problems
human life are subject to the will of Allah.
of the people who were inspired by Islamic values.
(verses)
 Islamic economy Allah is the Creator, Sustainer and Controller
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u Basis
? ‫ﱠﺎم ُﺛ ﱠم‬
‫?ﺳ َﺗ َو?ى َﻋﻠَﻰ‬ َ ?‫ت َو‬
َ ‫?ﻷَ?ر‬ ِ ?‫? ﱠ ُ?ﻟﱠذِى َﺧﻠَقَ ?ﻟ ﱠﺳ َﻣ?ـ َو‬
1. Tauhid :
• ٍ ??‫? َﻣﺎ ﻓِﻰ ﺳِ ﱠﺗ ِﺔ أ‬
ُ ‫ض َو َﻣﺎ َﺑ?? َﻧ‬
? ?
?ٍ ‫? َﻣﺎ ﻟَ ُﻛم ﻣﱢن ُدو ِﻧ?ِ? ﻣِن َوﻟِﻰﱟ َو َﻻ َﺷ ِﻔ‬
‫?ﻊ‬ ِ ‫?ﻟ َﻌ?ر‬.
‫ش‬
2. Risalah: The Shariah which was revealed to
َ ‫أَ َﻓ َﻼ َﺗ َﺗ َذ ﱠﻛ‬
• ‫رُون‬
mankind by the Messengers of Allah (PBUH).
Man need to uphold the risalah / Shariah. • It is Allah Who has created the heavens and the earth, and all
(verses). i.e. all human activities, ritual or socio- between them, in six Days, and then He established Himself on
the Throne (of authority): ye have none besides Him, to protect or
economic affairs must always be subject to the
intercede (for you): will ye not then receive admonition? (32:4)
Shariah.
• Since He is al-Khaliq, Ar-Razzaq and Al-Waliyy,
3. Akhirah: The life of a man in the world is
Allah is the Absolute Owner who owns everything.
temporary for man to prepare himself the life in
the Hereafter. (verses)

Allah is the Creator, Sustainer and Controller

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Dr AMTM

Dr AMTM
• Though the absolute ownership belongs to
Allah SWT, Islam recognises private
property, market forces and profit motive
for man
• This right is limited by obligations (zakat,
sadaqah & waqf) to others and subject to
moral boundaries (riba, gharar, maysir,
ghabn, ihtikar etc) governed by the
Sharia.
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16

Dr AMTM Dr AMTM
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15
Dr AMTM Dr AMTM
 Profit sharing concept in Islam
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• Islam enjoins an economic system that
promotes the concept of participation in a
transaction backed by real assets, utilising
the funds at risk on a profit-and-loss-sharing
basis.
• Such a system must be free from riba.
• Such participatory modes used by Islamic
banks are known as Musharakah and
Mudarabah.
Profit sharing concept in Islam
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• Under the two principles, a capital provider
contributes money which is bound to be
converted into assets having intrinsic utility.
Profits are generated from the sale of these
assets.
• The sharing of profits is based on ratio.
• For conventional setup, income for the capital
provider is based on rate of interest which is
riba.

Profit sharing concept in Islam Obligation of Zakat and Waqf

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• For an enterprise, this concept, as a basis of
financial transactions is a progressive one as it • Zakat is very important, and is a pillar of Islam.
distinguishes good performance from the bad
َ ُ‫ﺻﻠَ?و َة َو ِﻣﻣﱠﺎ َر َز?ﻗ َﻧ?ـ??ُم?ُﻧﻔِﻘ‬ ?‫ون ﺑ‬ َ ‫?ﻟﱠ ِذ‬
and the mediocre. • ‫ون‬ ‫ُون?ﻟ ﱠ‬
َ ‫?ﻘِ?ﻣ‬ ِ ??‫?ﻟ َﻐ‬
ُ ‫ب َو‬ ِ َ ‫?ن??ُؤ ِﻣ ُﻧ‬
• This concept encourages better resource • Who believe in the Unseen, are steadfast in
management. prayer, and spend out of what We have provided
• E.g. The Islamic sukuk system is similar to for them. (2:3)
bonds of capitalist system, but in sukuk,
money is invested concrete projects and
profit share is distributed to clients instead of
interest earned.
 ISLAM – A COMPLETE WAY OF LIFE
21 Capitalism V SOCIALISM 22

ISLAMIC APPROACH: THE BALANCE 23 24

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27 CONCLUSION 28