ISLAM

HISTORY OF SEMITIC RELIGIONS – JUDAISM, CHRISTIANITY & ISLAM

ABRAHAM

JACOB ADNAN

JEWS ARABS

PRESENT
DAY JEWS
 All the 3 religions – Judaism, Christianity &
Islam claim their descent from a common
ancestor – Prophet Abraham. Abraham’s
first son ( Ishmael)was born out of his wife
Hagar (who was earlier his slave) while Isaac
was born out of his wife Sarah. The
descendents of Isaac, through his son Jacob,
came to be known as Jews. As per the Bible
& Quran, the Jews were liberated by the
Prophet Moses, from the tyranny of the
Egyptian Pharaoh.
 The Bible mentions a long line of
Prophets that were sent to the Jews, most
of which are also acknowledged by Islam
--- David, Solomon, Joseph, Enoch, Ezra
etc. The Jews have the Torah as their
scripture, which contains the ‘Ten
Commandments’ as revealed to Moses by
God. They also have a body of laws and
traditions which is known as the Talmud.
 Christians were originally Jews, who believed
Jesus Christ to be the promised Messiah, who
was awaited by the Jews and was foretold in
their scriptures. However, most of the Jews
did not accept Jesus to be the Messiah (and
they cry to this day at the Wailing Wall for
their promised Messiah). Thus, the Christians
became a separate sect, who came to consider
Jesus to be the Son of God
 Islam on the other hand, respects Jesus as
a great Prophet and Messenger of God.
However, they do not believe in his
Divinity. Christians are further sub-
divided broadly into Catholics, Orthodox
and Protestants. Christians have the Old
Testament as well as the New Testament,
together constituting the holy Bible as
their scripture
Islamic scripture
 The Muslims have the holy Quran as their
scripture. A secondary source of religious wisdom
is the Sunnah (or way of the Prophet, his life) and
the Hadith (narrations, rulings and traditions
approved by the Prophet recorded by his
companions). Together, these constitute the Islamic
Shariah.
Denominations within Islam
 Sunni Islam and Shia Islam are the two major denominations of Islam.
Approximately 85% of the world's Muslims are Sunni, whilst the remaining 15%
are Shi'a
 The historic background of the Sunni-Shia split lies when Prophet Muhammad died
in the year 632, leading to a dispute over succession to Muhammad as a caliph of
the Islamic community spread across various parts of the world

Death of Muhammad

Abu Bakr, Ahl al-Bayt,

Rashidun his family –
righteously daughter,
guided
son-in-law,
Caliphs
grandsons

Sunni Shia
 Muslims are broadly divided into Sunnis and Shias,
based on their support for different people as
Caliphs after the death of Prophet Muhammad, as
his successor. The Sunnis supported Abu Bakr, the
Prophet’s uncle, while the Shias supported Ali, the
Prophet’s son-in-law. Eventually, Abu Bakr went
on to be the first Caliph of Islam, while Ali became
the fourth Caliph. Thus, the division was initially
political in nature.
Sharia
Arabic word meaning “ way” or “ path to water source” .Legal
framework within which different aspects of life are regulated
 Based on
1. Qur’an (the religious text of Islam)
2. Hadith (the sayings and doings of
Muhammad)
3. Ijma (Consensus)
4. Qiyas (Reasoning by analogy)

 Deals with Day-to-day Life,Politics, Economics, Banking,Business law,

Contract Law ,Sexual and Social issues
Five Pillars of Islam
 Islam means submission to the will of God
1. recite the creed (shahadah) “There is no God
but Allah, and Muhammad is the prophet of
Allah” ;
2. pray (salat) five times each day;
3. give alms (zakat) to the poor;
4. fast (sawm) from dawn to sunset during the
month of Ramadan; and
5. go on pilgrimage (hajj) to Mecca once during
your lifetime if you are physically and
financially able.
Sharia
 All possible actions ( Ethics) of a Muslim are
divided into five categories:

 Obligatory
 Meritorious
 Permissible
 Reprehensible
 Forbidden
Human interaction, or Al-
Mu'amalat
 Financial transactions
 Endowments
 Laws of inheritance
 Marriage, divorce, and child care
 Foods and drinks (including ritual
slaughtering and hunting)
 Penal punishments
 Warfare and peace
 Judicial matters (including witnesses and
forms of evidence)
Crimes under Sharia
 Hadd [plural Hudud] Crimes (most
serious)

 Tazir Crimes (least serious)

 Qesas Crimes (revenge crimes

restitution)
Freedom of Enterprise
 Each individual in an Islamic society enjoys
complete freedom in the earning of his livelihood.
He can start, manage and organize any kind of
business enterprise within the limits set by the
Islamic Shari‘ah.

 Provided he respects the code of conduct

prescribed for the profession, which broadly means
 choosing things lawful and
 shunning matters unlawful.
The limits to contract under Islamic law
are:

 that contracts must be voluntary;

 they must be entered into by informed consent;
 they must be among real persons;
 they must not impose costs on persons who
have not entered the contract ( harm the
environment or non consuming stakeholders )
 and no agreement to commit an
unconscionable act is binding.
Islamic Business Ethics
1.Legitimate (Halal) Earnings
 Riba (interest), by definition, is the extra sum the
moneylender charges from the borrower for deferred
payment. Islam has forbidden all forms of Riba. The
islam forbids any earning ( Riba) in which the lender is
not part of risk.

 Holy Qur’an says: 

 Allah has permitted trading and forbidden Riba (usury). (2:275)
 Devour not Riba doubled and re-doubled. (3:130)
 O you who believe! fear Allah and give up what remains of your demand for usury if
you are indeed believers. If you do it not, take notice of war from Allah and his
Apostle: but if you turn back you shall have your capital sums; deal not unjustly and
you shall not be dealt with unjustly. (2:278)
2.Trade through Mutual Consent
 A sale under coercion is not acceptable in Islam
 Taking advantage of someone’s plight and charging
high price is also a form of pecuniary exploitation
and as such forbidden in Islam. The Holy Qur’an
says:
 O you who believe! eat not up your property among
yourselves in vanities: but let there be amongst you
traffic and trade by mutual goodwill: nor kill [or
destroy] yourselves: for verily Allah has been to you
Most Merciful. (4:29)
3.Truthfulness in Business
Transactions
 The seller and the buyer have the right to keep or
return the goods as long as they have not parted or till
they part; and if both the parties spoke the truth and
described the defects and qualities [of the goods], then
they would be blessed in their transaction, and if they
told lies or hid something, then the blessings of their
transaction would be lost. (Bukhari, No: 1937)
4.Trustworthiness in Business Transactions

 It demands sincerity in work and purity of intention

from every believer. A true Muslim trader will not,
therefore, barter his Akhirah (hereafter) for worldly
gains.
 The sense of mutual trust demands that the pros
and cons of commodity be revealed to the buyer so
that he purchases the commodity in full
satisfaction. Says the Holy Qur’an:
 O you believers! Do not betray Allah and the
Messenger, nor knowingly, betray your trusts. (8:27)
5.Generosity & Leniency in
Business
 May Allah’s mercy be on him who is lenient in his
buying, selling, and in demanding back his money [or
debts]. (Bukhari, No: 1934)
 The Prophet’s exhortation to Muslims means that a
creditor should be easy and generous in demanding
back his money. The debtor, in turn, should also
give back the debt to the creditor on time with due
thanks and politeness.
6.Honoring & Fulfilling Business
Obligations
 Islam attaches great importance to the fulfilment of
contract and promises.The Holy Qur’an
emphasizes the moral obligation to fulfil one’s
contracts and undertakings. A verse states thus:
 O you who believe! Fulfil [your] obligations. (5:1)
7.Fair Treatment of workers
 It is the religious and moral responsibility of the employer
to take care of the overall welfare and betterment of his
employees. Fair wages, good working conditions, suitable
work and excellent brotherly treatment should be provided
to the workers. The last Prophet of Allah (sws) has
explained this principle in the following words:
 Those are your brothers [workers under you] who are around
you, Allah has placed them under you. So, if anyone of you has
someone under him, he should feed him out of what he himself
eats, clothe him like what he himself puts on, and let him not put
so much burden on him that he is not able to bear, [and if that be
the case], then lend your help to him. (Bukhari, No: 2359)
Prohibitions In Business
Dealing in Prohibited (Haram)
Items
 Dealing in unlawful items such as carrion (dead
meat), pigs and idols is strongly prohibited in
Islam.Dead meat would mean the flesh of any bird
or animal dead from natural causes, without being
properly slaughtered in an Islamic way.

 Forbidden to you [for food] are: dead meat, the blood,

the flesh of swine and that on which name of other
than Allah has been mentioned. (5:1)
Sale of Al – Gharar (Uncertainty,
Risk)
 Sale of a commodity or good
 which is not present at hand;
 the consequences or outcome of which is not yet known;
 involving risks or hazards where one does not know
whether at all the commodity will later come into existence.
 quality, whether good or bad, is not known to the buyer at
the time of the deal and there is every possibility that the
contract may give rise to disputes and disagreements
between the concerned parties
 Acceptable if the element of Gharar does not exist and the
quality and the quantity of the goods are pretty well known
and predictable.
Arbitrary Price Fixing
 Islam grants absolute freedom to traders provided
they adhere to the code of lawfulness.
 It does not, therefore, encourage the practice of
price–fixing and leaves the traders to earn the
profits from each other within the lawful limits.
 However, the role of public authorities comes into
play if it becomes absolutely essential to do so,
especially in order to prevent exploitation and other
unjust practices in the market.
Hoarding of Foodstuff
 The Arabic word for hoarding is Ihtikar. It means
storing foodstuffs or withholding them in
expectation of rise in their prices
 The Prophet (sws) is reported to have condemned
the hoarders when he said:
 No one hoards but the traitors (i.e. the sinners). (Abu
Da’ud, No. 2990)
 Exploiting Ignorance of Market
Conditions
 Sometimes it may happen that a buyer arrives in a
town with objects of prime and general necessity
for selling them in the market. A local trader may
persuade the new-comer to transfer all of the goods
to him so that he will sell them on his behalf in the
market.
 A tradition reads: 
 A town dweller should not sell the goods of a desert
dweller. (Bukhari, No: 2006)
Al – Najsh (Trickery)
 The term Al-Najsh means an action in which a
person offers a high price for something, without
intending to buy it, but just to cheat or defraud
another person who really means to buy it.
 Do not harbour envy against one another; do not
outbid one another [with a view to raising the price];
do not bear aversion against one another; do not bear
enmity against one another; one of you should not
enter into a transaction when the other has already
entered into it; and be fellow brothers and true servants
of Allah. (Muslim, No: 4650)
Cheating & Fraud in Business
 Cheating & Fraud is prohibited

 The seller and the buyer have the right to keep the
goods or return them as long as they have not parted.
He also said that if both the parties have spoken the
truth and described the defects as well as the merits
thereof (the goods), they would be blessed in their
deal. If they have told lies or concealed something,
then blessings of their transaction would be lost.
(Bukhari, No: 1937)
Swearing
 Trying to persuade the buyers to purchase their
commodity by invoking Allah’s name.

 Swearing [by the seller] may persuade the customer to

purchase the goods but the deal will be deprived of
Allah’s blessing. (Bukhari, No: 1945)
Giving short measures
 A form of deceit is to manipulate weights and
measures. One of the verses says:
 And give full measure when you measure, and weigh
with a just balance. That is good and better in the end.
(17:35)
Dealing in Stolen Goods
 Almighty Allah has declared thievery unlawful and
warned of severe punishment such as cutting the hand
of the thief from the wrist joint if the necessary legal
conditions for the award of punishment are met.
 Even if the thief escapes worldly punishment and gets
away with stolen goods, it is not permissible for a
Muslim to knowingly purchase or sell these items.
 The stolen items are neither to be bought nor sold by
those who know the reality.
 The one who knowingly purchases a stolen good, is a
partner to the act of sin and the shame. (Kanz Al-‘Ammal,
No: 9258)
Islamic Finance
 KHALIFAH

It is the status of man kind’s responsibilities to themselves

Khilafah are the relationship between man and Allah, man

Role of and fellow man, man and other elements of creatures of
human beings the universe man and his innermost self

We should be The person himself is responsible for what ever deeds he

thankful to does with regards to the resources that Allah has given
Him all the
time. We
should also
show our
gratitude by
doing good to In the view of the corporation
others, by
helping the In governing the corporation, man is the central element for
poor and by the system to be effectively working in the right route
spending in His
Man is the shareholder, creditor, auditor, regulator,
cause
manager as well as the directors

It manifest that man plays the paramount roles in managing

and lead to the attainment of company’s vision and mission
 Corporate Governance
The Quran :-
In the view of corporate governance is concerned, the
company directors management as well as the auditors
should perform their professional duties with the objectives
of satisfying the needs of the shareholders and Allah as
well. Corporate governance is aimed of enhancing
accountability, transparency and trustworthy. The values
are paramount in ISLAM

Corporate Governance refers to the set of mechanisms designed to maintain an

appropriate balance between the rights of shareholders and the need of the Board and
Management to direct and manage the corporation’s affairs and ensure the company
optimizes over time the returns to shareholders
 “ Corporate governance is the process and structure
used to direct and manage the business and affairs of
the company towards enhancing business prosperity
and corporate accountability with the ultimate
objective of realizing long-term shareholder value,
whilst taking into account the interest of other
stakeholders” .
 - Malaysian definition as per Finance Committee on Corporate Governance
 (Report On Corporate Governance, February 1999)
Fundamental pillars of Corporate
Governance
Each one of us is a
Honest , kind, fair, Integrity / Loyality guardian and each
respect, sincere, guardian is
not greedy, not accountable to
Munafiqs everything under
his care
Competency

Islam implants collective

decision – making, tolerance,
Accountability civil and
political liberty
Transparency

Fairness

Responsibility
 Aims should not strictly on monetary values but
social responsibility


 Corporation should disclose disclose information

regarding its policy, activities undertaken,
contribution to the community and the use of
resources and protection of environment
  Organization is required to subscribe the ethical conduct while
carrying their commercial activities.

 Leader should be judge by how well wealth is managed by using the

Islamic principle not by how big the wealth grown
 Impact of good Corporate
Governance

IMPACT OF GOOD
ON THE
CORPORATE ON THE ECONOMY
CORPORATION
GOVERNANCE

More economic activity = EVERYONE

Revitalizing market
benefits
Increasing firm economy
value Sustainable economic
Lowering cost of ON SOCIETY growth
Positive development
capital
Enhancing capital on capital market,
efficiency More open, more globally
Protection of
transparent society competitive
Corruption prevention Increasing
shareholders’ rights Rule of law : fair & competitiveness
orderly through fair
Promoting ethical competition
wealth creation
Islamic Financing
 Islamic Financing is a concept that emerged in
scientific manners in the second half of the past
century. ( 1963 in Egypt)
 With the expanding role that the banking system
and money handling, many Muslim communities
were faced with a problem over the concept of
INTEREST.
The main principles of Islamic finance
1. the prohibition of taking or receiving interest;
2. capital must have a social and ethical purpose beyond
pure, unfettered return;
3. investments in businesses dealing with alcohol,
gambling, drugs or anything else that the Shari’ah
considers unlawful are deemed undesirable and
prohibited;
4. a prohibition on transactions involving masir
(speculation or gambling);
5. and a prohibition on gharar, or uncertainty about the
subject-matter and terms of contracts – this includes a
prohibition on selling something that one does not own
 Because of the restriction on interest-earning
investments, Islamic banks must obtain their
earnings through profit-sharing investments or fee-
based returns.

 Islamic financial institutions also have the

flexibility to engage in leasing transactions,
including leasing transactions with purchase
Riba
 By definition, Riba is an Arabic word that literally
means “ extra” . In regards to Islamic Sharia, Riba
means the lending of money for a specific time
whereupon the lender receives his money with an
EXTRA amount agreed upon.
 When loans are given for business purposes, the
lender, if he wants to make a legitimate gain under
the Shari’ah, should take part in the risk. If a lender
does not take part in the risk, his receipt of any gain
over the amount loaned is classed as interest
Islamic Banks
 Traditionally an Islamic bank offers two kinds
of services:
 those for a fee or a fixed charge, such as safe

deposits, fund transfer, trade financing,

property sales and purchases or handling
investments; and
 those that involve partnerships in investments

and the sharing of profits and losses.

Shariah Board
 Shari’ah board monitors the workings of
the Islamic bank and every new
transaction that is doubtful from a
Shari’ah standpoint has to be cleared by
it. These boards include some of the most
respected contemporary scholars of Shari
’ah and the opinions of these boards are
expressed in the form of fatwas.
In addition, the International Association of
Islamic Bankers, an independent body,
supervises the workings of individual
Shari’ah boards while its Supreme
Religious Board studies the fatwas of the
Shari’ah boards of member banks to
determine whether they conform with
Shari’ah.
 Shari’ah law is open to interpretation and
Shari’ah boards often have divergent views
on key Shari’ah issues. In this regard, there is
no practical guide as to what constitutes an
acceptable Islamic financial instrument. A
document or structure may be accepted by one
Shari’ah board but rejected by a different
Shari’ah board.
 ISLAMIC PARTNER
BANK (CUSTOMER)

Mushrakah
x% Ownership (Partnership)
(100-x)% Ownership

y% Profit share (100-y)% Profit share

Three forms of Islamic Financing

 Modaraba (Participation Financing)

 Morabaha (Financing Resale of

Goods)
 Ijara (Lease financing)
 In all three methods a customer receives a
commodity/product or rights and benefits.
 When customers deposit money with a bank, they
receive it back with profit, depending upon the type
of relationship.
 Because the relationship is based on ‘profits’ it is
very common to hear Islamic Banks refer to their
“ investment”
Modaraba- Collaboration
 All these deposit transactions are based
an Islamic Sharia concept called
‘Modaraba’ (Participation Financing),
where one party (the depositor) provides
the cash and the other party (the Bank)
provides the experience and management
 CLIENT (Mudarib)
Investor of Capital

ISLAMIC BANK INVESTMENT / TRADING

Payment of ACTIVITIES
Capital Earning of Profits

CLIENT (Mudarib)
Distributor of Profits Earned
Morabaha
 Another form of a relationship
between a customer and an Islamic
bank is that of buyer and seller. This
contract is known as ‘Morabaha’
(Financing Resale of Goods).
 Transfer of title Transfer of title
to bank to customer

VENDOR ISLAMIC CUSTOMER

BANK

Payment of Payment of marked

purchase price (P) up price (P + X)
Ijara
 The third method, or ‘Ijara’ (leasing), requires an
Islamic bank to purchase equipment and lease them
to the customer for a specific period of time.
 At the end, in most cases, the Bank will transfer the
title to the customer either by executing a sale
agreement for a normal value or by way of
donations.
Difference between Islamic & Regular banking

 Money is earned  Through profit sharing

through interest or rent

 Deals with money &  Deals with assets

papers
 Actively participates
 Not involved in trade in trade , production
or business with and services through
clients contractual agreement
FREQUENTLY ASKED
QUESTIONS
The concept of Wadiah
(Deposits)
 Refers to a safekeeping instrument that allows a person to
keep the wealth or assets belonging to oneself with
another person or entity
 Custodian shall keep it as though it belongs to himself,
 The manner of care must ensure no loss or damage to the asset
 No liability unless negligent or wrong-doing
 No right to profit (no risk no gain)
 Right to let, pledge or use with permission of the depositor
 Returnable on demand – delivery expenses borne by depositor
 The profits generated on use belong to the bank
 Profits be given as a gift to the owner at the bank’s discretion
Advantages of Islamic Banking
 The underlying principle of Islamic
business model is that of justice and fairness
 Worthiness & profitability of projects is the

centre rather than credit worthiness of

consumers
 Development of relationships with

customers
 Reduction of greed since there is no concept

of earning interest
Challenges before Islamic Banking

Difficult to implement in regions which do not

follow Shariah
Profit sharing model in cases of long term
investments becomes too risky for banks
Absence of frameworks for the supervision of
Islamic banks
Selling the idea of an interest free system to
consumers and creating an entire range of
products
How can Muslims invest?
 Investment in listed companies that are approved by
the Shariat board is allowed.

 You cannot invest in companies that commit riba and

gharaar

 Fixed income investment are allowed

 Insurance is prohibited but cooperative insurance is

allowed
Is speculative day trading allowed?

 YES if intentions are long term and

strategic and not for the motive of
gambling
Can interest be charged?
 Interest on all types of loans are
forbidden
 Deposits with fixed interest forbidden

 If interest –excess and profits accumulate

, the moneys should be spent on public

services as atonement –purification. ( this
is not charity)
Can you lend in Islam ?
 Lending is halaal
 Lending should be based on exchange of

equivalent goods exchanged

 Loan can be asked back anytime

 In Islam you do not lend money for

making money ; nor do you borrow to

start business
Well known Brands that have ventured into Islamic
Banking:

 Citi Islamic Investment Bank (CIIB)

 Standard Chartered Saadiq (Saadiq means
truthful in Arabic)
 HSBC Amanah
 Barclay’s Islamic Bank
 RBS Islamic Banking Division
 UBS Dubai
 ANZ International Islamic Banking
 Alternative Approaches to Corporate Governance
70
Decision-making Managed Socially Islamic corporate
Basis corporation responsive governance
model corporation
Legal concept of CEO and senior Executive and Shuratic decision
firm: decision making management supervisory making
By whom? processes process:
consultation and
Consensus seeking
Economic Maximize profits Stakeholders Institution of
concept of firm: Maximize Hisba ( accountability )
decision-making shareholder
for whom? value Role of mustahib
( inspecter who
overseas)
Accounting Financial Corporate Shariah
concept of firm: governance by responsibility supervision
decision-making shareholders and Triple bottom process
with what suppliers of line: economic, Religious audit
resources and to finance social and
whom is environmental September 24, 2021
accountability accountability