FI530E - Islamic Finance

2 ECTS Credits. 18 Hours

Assignment Nb 3

Assignment Nb 3

Exercise 1
The principle of ownership is very important according to IF perspectives.
Q1. Cite two contracts that make an exception to this Principle?
Q2. Explain the rationale behind their compliance with IF principles.
Q3. Explain the diffrence between Musharakah and Mudarabah
Q4. Is it possible to buy and sell debt instrumenst according to IF principles such as T-bills or
Bonds or Sukuk?
– Explain why

Exercise 2
Q1. Explain the relationship between Zakat system end entrepreneurship ?
Q2. Explain the relationship between WAQF System end a good education system (like the
funding of Oxford University)?
Q3. Discuss the link between the tax shield and WACC ? In which way the tax shield can
enhance investment in equity investment rather than debt or bonds?
Q4. Explain how can QARD Hasan (benevolent loan) contract support the liquidity of SMEs
in comparison to the conventional banking system
Q5. While Zakat is considered as compulsory for Muslim, explain why QARD Hasan has to
be considered better in the eyes of Muslim investors?
Q6. Discuss how Islamic crowdfunding can enhance the economic growth in your country?

Exercise 3
If you have an extra money to invest in the capital stock market. What will be for you the best
option as per the Shariah perspectives?
a- You apply only the conventional theory of finance
b- You apply the conventional theory of finance then the Sharia’ah stock screening
c- You apply Sharia’ah stock screening because at least the investment is permissible
d- No one of the previous choices is valid.
Exercise 4
Q1a. Below you find how Major Four Islamic Indices providers apply the qualitative Shari’ah
screening process by filtering out some specific sectors.

(˟˟) Means: The firm is Excluded if it has some involvement in the sector
(•) Means: The firm is Excluded if it Implies core business.
Question: Which player will allow you to end up with a bigger set of firms in the Islamic
compliant universe?
Q1b. The threshold related to the level of debt as per Islamic stock screening applied by big
players in the capital market is as follows:

Question: What catches your attention most about the application of IF principles regarding
the leverage filter (in terms of the stability of the portfolio of Islamic compliant firms?

Exercise 5
Q1. Below you find the AAOIFI standard No. (21-3/4/2) regarding Financial papers
(Shares and bonds) issued by AAOIFI in 2010:

Question: What catches your attention most about the application of IF principles regarding the
debt and its level?
Q2.a- Explain the rationale behind the fact that only a certain percentage of « receivables to
total assets » is allowed in the Shariah Stock Screening?
Q2.b- Discuss its impact on the Factotring industry.
Q3. Suppose that an investor has bought a share at 1000 DH (per share) of a firm that is
Shariah compliant. If it happens that after a certain time, the firm turns out to be not Shariah
compilant.
What you can recommend to this investor? (to short the share immediately or to hold it and
wait)

Exercise 6
Q1. Provide a critical thinking on the link between stock Sharia’ah Screening and Social &
Environmental concerns. Support your answer by an exqample.
Q2. When buying a Shari’ah compliant share in the capital market, what would be allowed in
Islamic Finance?:
a- Pay it immediately and have it delivered later?
b- Or the opposite, ie have it delivered immediately and pay for it later?
c- Report both

- Justify your answer ?

Q3. Vedanta Resources (a diversified metals and mining company) which is listed in LSE
(London stock exchange) and a constituent of the FTSE100 index has been divested from the
Norway Government Pension Fund (NGPF) because the Council on Ethics of the fund found a
serious violation of human rights and environment damage associated with its subsidiary in
India.
- According to your understanding of the current Shari’’ah Stock screening process, explain if
Vedanta Resources should be screened out or be kept as a constituent of the FTSE Sharīʿah
index UK).