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CONFIDENTIALBA/JULY2021/FIN546

FACULTY OF BUSINESS AND MANAGEMENT

FINAL ASSESSMENT

COURSE : ISLAMIC FINANCE

COURSE CODE : FIN546
EXAMINATION : JULY 2021
TIME : 3 HOURS

INSTRUCTIONS TO CANDIDATES

1. This question paper consists of 2 parts: PART A (30 Questions)

PART B (4 Questions)
2. Please make sure you have a stable internet connection and well-functioning devices
before attempting to take the examination to avoid any unwanted disruptions.
3. Use any suitable PLATFORM
4. No resources including digital notebooks, external websites, notes stored within local
storage, other software applications or hard-copy resources are permitted during the
final assessment. All other web browser windows must be closed during the
examination.
5. Mobile phones and other electronic devices must be switched off during final
assessment unless it is used to take the assessment.
6. Students are strictly prohibited from interacting with others during the final
assessment by any means of communication other than with the respective
lecturer/invigilator for technical support or any issues considered appropriate and
important.
7. Please keep an eye on the clock. You may want to set the alarm to remind you of the
remaining time in your exam (e.g., 30 minutes).
8. Students must click the submit button before the time off to allow the system to
record the answers. You can only submit your answers ​ONCE​.
9. Please contact your lecturer for any technical difficulties experienced or any error
messages shown during the examination. It would be useful to take a screenshot or
video of the problem so that improvements can be enforced.
10. Disciplinary action will be taken against the student who violates any of the general
final assessment guidelines or additional instructions in place from time to time.
11. ALL answer must be HANDWRITTEN, CLEAR and READABLE.
12. Answer ALL questions in English.
13. Scan or take picture and converted to PDF form.

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO

This examination paper consists of 8 written pages

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PART A

1. Islamic banks rely on the following two (2) major sources of funds:
A) Transaction deposits and accounts receivables.
B) Investment deposits and current accounts.
C) Transaction deposits and investment deposits.
D) Accounts payable and investment accounts.
(2 marks)

2. A muslim can continue earning rewards even after death. Waqf is the best instrument
for facilitating this through the followings, EXCEPT:
A) Property waqf involves physical assets such as mosques, plots of land,
houses, hospitals, offices, buildings, and other properties.
B) Corporate waqf in the form of corporate shares are issued and managed by a
corporate body.
C) Cash waqf differs from the ordinary property of waqf in its original capital
consisting of purely or partially cash.
D) Revenue waqf created for a limited or fixed period such as from the
agricultural project selling and buying crops under the contract of Bai’ As-
Salam.
(2 marks)

3. Religious Supervisory Board of Islamic banks play an important role in;

A) Determination of the ratio of profit-sharing according to Islamic principles.
B) Raising capital for the banks according to Islamic principles.
C) Introduction of new product and services that comply with Islamic principles.
D) Mobilization of funds according to Islamic principles.
(2 marks)

4. The followings are the issues of Islamic money market on a global perspective,
EXCEPT:
A) There is limited availability of Shari’ah compliant money market instruments.
B) There is variability of the instruments among member countries.
C) In some countries, money market participants tend to buy and hold these
securities until the maturity rather than trade them.
D) Determining the prices of these securities is not a problem.
(2 marks)

5. All of the statements below concerning Government Investment Issues (Gll) are
correct EXCEPT;
A) The government is obliged to return the principal amount to the providers on
funds at maturity.
B) To provide Islamic banks a Shari’ah compliant avenue to meet the statutory
liquidity requirements.
C) The successful bidders will pay cash to the government at par based on credit
term.
D) It is governed by Government Investment Act (Malaysia) 1983.
(2 marks)

6. Islamic credit cards use which Shariah concepts?

A) Qard and Murabahah
B) Ujrah and Tawarruq
C) BBA and Bai Al-Inah
D) Musyarakah and Ijarah

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(2 marks)

7. Islamic Bank Guarantee and Islamic Shipping Guarantee are based on the same
Shariah principles. They are;
A) Murabahah and Kafalah
B) Kafalah and Wakalah
C) Mudharabah and Kafalah
D) Kafalah and Bai Al-Inah
(2 marks)

8. Which of the following statement about Islamic interbank money market is NOT
TRUE?
A) The overnight market is where the Islamic Financial Institutions trade their
reserve balances among themselves to meet their day-to-day liquidity
requirements.
B) Islamic Interbank money market is a place where banks trade money market
instruments among themselves.
C) A short-term market rate, in particular the interbank overnight rate, may be
used to serve as an operational guide for monetary operations of central
banks.
D) The Shari’ah contracts typically used in the Islamic interbank market are
Mudharabah, Murabahah, Bay’ al-dayn, Bay’ al-Inah and Wakalah.
(2 marks)

9. The following are the steps of Islamic personal financing based on Tawarruq,
EXCEPT;
A) Bank sells commodity to customer at Murabahah.
B) Bank buys commodity from commodity broker once bank receives customer
request.
C) Instruct agent to dispose commodity for immediate settlement.
D) Bank pays purchase price of commodity to customers.
(2 marks)

10. The following are the roles of Bursa Malaysia in Islamic Capital Market development
EXCEPT;
A) Regulatory and risk management duties.
B) Explore for potential growth and develop infrastructures of Islamic Capital
Market.
C) Develop dual market systems.
D) Encourage companies to be Shari’ah compliant.
(2 marks)

11. Which of the following is CORRECT on Malaysian approach in regulating Islamic

Capital Market?
A) Islamic instruments must fulfill the specific requirement for Shariah compliant
first, before fulfilling the general regulatory requirement.
B) Guidelines on offering Islamic securities are the example of General
Regulatory Requirement.
C) The specific requirement for Shariah compliant involve the appointment of
Shariah advisor and approval by Shariah advisory council.
D) Conventional instrument must not fulfill the General Regulatory Requirement
only.
(2 marks)

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12. Mulia and Milia are interested to venture in a business and they are agreed to
contribute the capital of RM15,000 and RM35,000 respectively. They were also
agreed to have predetermined profit sharing at ratio of 40:60 (Mulia:Milia). However,
if the business suffered losses of RM6,000, calculate the difference of total losses to
be borne by them.
A) RM2,571.43
B) RM2,400.00
C) RM2,000.00
D) RM1,800.00
(2 marks)

13. Purification in Islamic mutual fund can be done in two (2) ways;
A) Capital gain and loss purification.
B) Non-halal and cleansing purification.
C) Dividend and impermissible income purification.
D) Management and earning purification.
(2 marks)

14. Miss Rina approaches an Islamic bank and applies for financing under the concept of
BBA. The purchase price of the house is RM800,000 and the profit rate offered is 7
percent. The financing period is 15 years and she has to pay the selling price in 180
equal monthly installments. Please calculate the total profit of the bank given the
annuity factor based on 0.008988.
A) RM7,190.40
B) RMM1,294,272
C) RM56,000
D) RM494,272
(2 marks)

15. The following are the reasons for the needs of regulation of Islamic Financial
Institution
EXCEPT;
A) To protect the interest of depositors and investment account holders of
Islamic Financial Institutions.
B) To ensure the products offered are comply with Shariah.
C) To facilitate development and national financial markets by delineating
relative investment or credit risk.
D) To support the integration of Islamic Financial Institutions in the International
Financial System.
(2 marks)

16. Which of the following is FALSE about Islamic savings deposit?

A) The bank can offer incentives to attract new depositors in the form of gift,
promotional item and etc.
B) The banks need to offer competent and solid money and capital market.
C) To be founded upon an established and secure payment system.
D) To help in the reduction of information and provisional costs.
(2 marks)

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17. Which of the following is CORRECT about the role of an efficient Islamic financial
intermediary.
A) To serve as One Stop Islamic Finance Reference Centre for the Islamic
Finance industry.
B) To provide with the understanding and support, necessary to succeed in the
implementation and offering of Islamic financial products and services.
C) To prepare accounting, auditing, governance, ethics and Shariah standards
for Islamic Financial Institutions and the industry.
D) To have a well-developed market for risk trading to protect economic agents
from both event risks and financial risks.
(2 marks)

18. An entrepreneur was offered Musharakah financing contract with the following
details:
Principal = RM100,000
Rate of return = 8% p.a.
Profit sharing ratio = 70:30 (Bank: Entrepreneur)
Term = 6 months
Calculate the entrepreneur’s gain from this contract.
A) RM2,800
B) RM1,200
C) RM33,600
D) RM14,400
(2 marks)

19. The following are the features of Qard based deposit EXCEPT;
A) It will be returned by the borrower to the lender at the end of the agreed
period at full amount, without incurring any extra amount.
B) It is based on Tawarruq which requires the customers to appoint the Islamic
bank as an authorized agent.
C) The bank is entitled to use these deposited funds at its own risk without any
authorization from the depositor.
D) The principal amount is guaranteed by the bank to the depositor even if there
is negligence or loss from the side of the bank.
(2 marks)

20. Mudharabah Muqayyadah is;

A) a form of contract where the capital provider restricts manager to a particular
type of business or to a particular location.
B) is a form of contract whereby two (2) or more parties into a contract to exploit
their labor and capital jointly and to share the profits & losses of the
partnership.
C) is a form of contract where the capital provider does not restrict manager and
give him full freedom in terms of capital administration.
D) is a form of contract of participation, whereby the funding party agrees to
deliver a commodity or an asset at a pre-determined future time at an agreed
pre-determined future time at an agreed price.
(2 marks)

21. Yield on ___________ are typically higher than government securities. These flexible

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instruments may help issuers to meet their short-term funding needs in that the
issuers may roll over the debt by issuing new papers to redeem outstanding ones.
A) Commercial Paper
B) Negotiable Certificate of Deposit
C) Treasury Bills
D) Repurchase Agreement
(2 marks)
22. Islamic banks also provide automobile financing facilities similar to the conventional
hire purchase. The following information is an example of car financing provided by
Kuwait Islamic Bank;
Concept : Al-Ijarah Thumma Al-Bai
Tenure : 9 years
Bank’s profit rate : 3.3% per annum
Amount to be financed : RM150,000
Calculate the monthly payments due to Kuwait Islamic Bank.
A) RM4,550.00
B) RM1,388.90
C) RM1,945.00
D) RM1,801.40
(2 marks)

23. Which of the following is NOT the money market instrument?

A) Banker’s Acceptance
B) Factoring
C) Repurchase Agreement
D) Commercial Paper
(2 marks)

24. The benefits of Islamic Working Capital Financing are as follow EXCEPT;
A) Provide flexibility in utilization of customer’s credit facility.
B) Competitive pricing and margin of financing.
C) No commitment fee on unutilized limit.
D) Only national accepted Shariah concept used.
(2 marks)

25. Any of two (2) roles and functions of Securities Commission are;
i) To ensure speedy processing and approval of corporate transactions.
ii) To influence the credit situation to the advantage of Malaysia.
iii) To operate a fully integrated exchange, offering the complete range of
exchange related services.
iv) To execute regulatory and investigating powers with regard to compliance
under the Securities Industry Act 1983 and Securities Industry (Central
Depositories) Act 1991.
A) i, ii
B) i, iv
C) ii, iii
D) iii, iv
(2 marks)

26. The following statements are true for Banker Acceptance (BA) and Islamic Accepted
Bill (IAB), EXCEPT;
A) IAB is a bill that could be accepted by the bank (IAB/export) or customer
(IAB/import).
B) BA is a bill that is only accepted by the bank.
C) IAB-import/purchase is based on lending; hence interest penalty is imposed.

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D) There is no restriction on only halal goods to be transacted in BA.

(2 marks)

27. Initiative taken by Malaysian government in supporting Islamic Capital Market

EXCEPT;
A) Addressing regulatory and tax issues.
B) Issuance of Islamic Capital Market guidelines.
C) Establishment of dedicated Shariah court to sit in judgment on matters
relating to Islamic Capital Market.
D) Establishment of Shariah framework.
(2 marks)

28. The description of Islamic letter of credit musharakah is/are as below:

A) The Islamic bank requires the customer to deposit a certain percentage of
money prior to the importation of goods.
B) The Islamic bank will then issue an ILC and make the payment using both the
customer’s and its own funds.
C) The customer is responsible for selling the goods and returning the bank’s
portion of capital together with a predetermined portion of the profit.
D) All of the above.
(2 marks)

29. Which statement is CORRECT about Takaful.

A) Takaful operator makes a profit when there are underwriting surplus.
B) Contract of exchange (sale and purchase) between insurer and insured.
C) Participant’s duty to make contributions to the scheme and is expected to
mutual share the surplus.
D) There is no restriction in investment of funds.
(2 marks)

30. Islamic Bank Guarantee may fall into the following categories EXCEPT;
A) Tender Guarantee
B) Export Guarantee
C) Performance Guarantee
D) Guarantee of subcontracts
(2 marks)

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PART B

QUESTION 1

Islamic banks have face challenges in implementing Musyarakah as a mode of financing

although it was the most desired form of financing in the eyes of Shari’ah. Interpret four (4)
challenges in implementing Musyarakah financing.
(10 marks)

QUESTION 2

The objectives of Shari’ah are to promote the well-being of all mankind. Explain any five (5)
objectives of Shari’ah.
(10 marks)

QUESTION 3

Yuyu purchased one (1) lot of Tup Tang Berhad (a shariah-compliant stock) share on 2nd of
June 2020 at price of RM3.85 per share. However, on 29th of November 2020, Securities
Commission has announced that Tup Tang Berhad shares has been declassified from
Shariah compliant list.

The prices per unit share of Tup Tang Berhad are as follows:

Transaction Date Closing price per unit share

Oct 22nd, 2020 RM 6.10
Nov 29th, 2020 RM 6.60
Nov 30th, 2020 RM 6.65
January 10th, 2021 RM 4.50

Calculate the amount of capital gain per unit of share she received and she can keep based
on each date of transaction.
(10 marks)

QUESTION 4

Prepare the distinguish between the Islamic Letter of Credit and Islamic Bank Guarantee.
(10 marks)

END OF QUESTION PAPER

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