054 ZI Islamic Finance Booklet R1 21oct10
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Transcript of 054 ZI Islamic Finance Booklet R1 21oct10
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Demystiying Islamic FinanceCorrecting Misconceptions, Advancing Value Propositions
A U S T R A L I A | D U B A I | I N D O N E S I A | M A L A Y S I A | S I N G A P O R E | T H A I L A N D
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About this PublicationTh prps this picti is
t ris pic rss Ismic
c t prmt pprtitis
r Ismic c gry. It
s t cstitt g pii
s t s t xmi i
ti ptti g, Shrih r tx
isss rtig t Ismic ciprcts r Ismic c siss
prctics. Rrs r vis t s
prssi vic r trig
r sscriig it y ci
ctrcts.
AcknowledgementZi Irhim & C ishs t
cg th spprt y th
Mysi Itrti Ismic FiciCtr (MIFC) cmmity trs this
picti.
CopyrightThis picti is cpyright y
Zi Irhim & C my t
pht-cpi r rprc i y
rm, i h r i prts, itht
th xprss prmissi Zi Irhim
& C.
FoRewoRd
PReFaCe
InTRoduCTIon
15 MoST FRequenT MISConCePTIonSabouT ISlaMIC FInanCe1. Trrrism Fic 2. Fr Msims oy
3. Rpic Cvti Fic 4. Primitiv
Mths dig Fic 5. n Stristi
bst Prctics 6. Mr/(lss) Risy th
Cvti Fic7.
lr/Highr Cst Fs 8. wr Fic 9. n Grt
10. driv Pry y oi bm
11. Imm rm ay uthic Prctic
ctt
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12. Imm rm th G Fici Crisis 13. Gvr y y Shrih
14. Rirs Miim Chgs t lg & Rgtry Frmr 15. T Rpc
Cvti Systm, aim trs Isms wr dmiti
10 MaIn Value PRoPoSITIonS oF ISlaMIC FInanCe
1. ahrc t Shrih, Sscriig t Highr ethic Is 2. Prmtig Crss-
brr Tr F Fs 3. Fici Icsis th ursrv Sgmts
th Cmmity 4. expsi n asst Css 5. Mr divrsiicti Riss
6. ucig th Vs I assts 7. J Crti 8. S Ris Mgmt
9. Csr Spprt t R ecmy 10. Systmic Stiity
YouR lInk To ISlaMIC FInanCe1. Zi Irhim & C Ismic Fic Prctic Grp 2. ZI Shrih avisry Srvics
3. Th Mysi Itrti Ismic Fici Ctr (MIFC) Iititiv
GloSSaRY oF ISlaMIC FInanCe TeRMInoloGIeS
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Th rct g ci crisis sms t ssig i
isgis r Ismic c. ovisy its impcts
hs icrsig itrst r th r i th
sss rsiic th Ismic c m.
This is piy vic y, mg thrs, iititivs
rt y vc cmis sch s Frc
th Rpic kr t itrc s tht
ccmmt th issc S (Ismic trst
crticts). w hv s s h, tithstig th
iiity crch, Isi hs sccssy ris s
thrgh its igr svrig S. w ct hp
t srv tht t this tim h 216 cvtis hv i sic 2008 p t Mrch 2010 i th uS
(Src: Fr dpsit Isrc Crprti, uS),
Ismic s sms t mshrmig vryhr
icig i Chi kzhst.
as ig rm i th r Ismic c ith
vst xpric i th mst r itrti
Ismic ci ctrs, Zi Irhim & C is vry
psiti t r its xprtis shr its xpricith vry h is itrst i Ismic c. I i
ith r rct rgi xpsi, r t xt
r srvics t gvrmts, mrt pyrs thr
sthrs g th n Si R hich strtchs
s r s di i th Mi est t Syy
Mr i astri. bsi r spciist yrs hm
r highy rgr ithi th Ismic c rtrity,
s hv sscit Shrih visry tt, ZI Shrih
avisry Srvics, hich hs impcc crtis i
prviig Shrih vic stis.
rr
as prt r sm ctriti t th sct istry,
r pr t rig t y this picti tht
rsss sm th sic (t t ss tt)
stis rgrig Ismic c.
Mz Hssi, r prtr y prs hi this
iititiv, rticts my his mtics srvtis
th istry ithi this cmpct picti. as
thrghr Ismic c prctitir h hs srv
th Ismic c istry thrght his c-
prssi crr, icig svr yrs t th Ismic
Fici Srvics br (th itrti str-sttig
y r prti rmr i Ismic c), Mz
is -trv hs p rst-h xpric
i my pirig r r th istry, icig t
th itrti v. I m sr rrs th
15 mst rt misccptis 10 mi v
prpsitis Ismic c s highight y Mz
i this picti t prticry rrshig
isight.
I i t t this pprtity t th vry t
Zi Irhim & C h hs py thir prts i pttig
tgthr this picti. o h th rm, I
s i t xprss r hrtt ths t th MIFC
cmmity h hs vry spprtiv i r
Ismic c iititivs.
YBhg Dato Dr Nik Norzrul Thani
Chirm
Zi Irhim & C
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wh I rtr t Zi Irhim & C (ZICo) rcty t
ji its Ismic Fic Prctic Grp, it s iict
t m y th rship th rm tht my r i
, mg thrs, t rthr pths t ry
istris mgict tm; my t rst-css,
Hrvr-tri, highy-rgr prtrs Mgt Hizii
Hss dr ai othm. Primriy, I m xpct t
rig i my mst r itrti xpric gi
rig my 6-yr stit t th Ismic Fici Srvics
br (IFSb) t ciitt th rms miti s prmir
prvir g srvics i th r Ismic c
thrght th jrisictis hr th rm hs stish
prsc. Ths ic Isi, Mysi, Sigpr,
Thi, th uae, mst rcty astri.
I t py hr h I s giv th mt
t pt tgthr picti tht c s t pr
th rms crtis i Ismic c prctic, hi t
th sm tim prviig s vrvi gic
spciy t mrts tht r itrst t
t this yg t st-xpig istry.
atr ig sm rsrch ht c pttiy
sit ctt r sch picti, I tic tht
thr sti rmis vst mt misccptis t
thr t Ismic c, spciy rfct thrgh
pmics i sits, gs, ci pictis.
urtty, c hry y rrc tht pts
tgthr simp, ci, sy-t-th-y rsps
t mst th stis rty s t Ismic
c.
Frm my xpric, sm th cmm stis hv
ris t y y y sthrs th c
istry sch s rgtry sprvisry thritis,
mrt pyrs, ci ysts rprtrs, t
s yprss th csmrs mmrs th
pic. Fr m, it is imprtt tht ths stis
rss y misccptis t Ismic
c mysti, cs th g-trm viiity sstiiity th Ismic c istry i
vry mch pt h r it c cvic
vry (Msims -Msims i) tht Ismic
prc
c is gi thic siss thtic
v prpsiti im t simpy srvig th s
ms th mrts.
whi crtiy Msims csir sscri t Ismic
c s ri y thir ith i ccrc ith th
rs pricips st t i thir , th Shrih, it
sh pprcit y tht th spirit mts
si, Ismic c try hs tgi ts i trms
cmics sci vs r vry. I my
sggst simp gy, Ismic c c vi
jst i stig, r yg, r v my-Thi, hich hs
sm rms rits rigis mts cpstig
it. Hvr tithstig ths mts, i
rth thm, y rgrss his rc, ith
r ctr cgr, c cty r, prctic
t rm th xrciss. I, it is y y rig
thrgh sch rrir misrstig tht c
rmv y r r ccr t Ismic c.
This picti is my hm ttmpt t shrig ith th
rrs sm isights it Ismic c, i prticr
isss spcts tht mst t r s y ths
h r t Ismic c. It s y ith txt-
rrcs cmic iscssi, miimiss th
ss tchic jrgs, s gg sty tht
sh ctr r mst pp h t hv th tchic
g Ismic c.
nvrthss, it my tic tht sight mphsis is
giv t th g rgtry spcts i xpiig h
Ismic c rs, simpy cs this is th r tht
i Zi Irhim & C st.
It is r rvt hp tht this picti hps t
vit th gr rstig crrct th pic
prcpti this yg t scitig istry.
Madzlan Mohamad HussainPrtr
Zi Irhim & C
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itrcti
Ismic c hs jyig rpi grth r th
pst cs is trig phs its vpmt, hr th siss hs cm mr
itrtiis. Th siz th istry hs gr
it ssttiy t rch trii r thrsh. Th
istry i hs sh rmr rsiic mist
vsttig g ci crisis.
ntithstig icrsig ri itrst,
rss rstig Ismic c, grt
sti s t i rr t sr sch itrst,rss rstig r s s
ccrt irmti. qit t, itrtrs Ismic
c t t ithr prti r is cs th
thr is tryig t s (r ) th ccpt, r is s
schry s tht th yprs ct rst
r it. w hp this picti is ithr ths
t.
withi th imit spc this cmpct picti, smmris th vris ccrs tht hv ys
ris mgst sthrs th ci srvics
istry vis--vis Ismic c, shr r thghts
vr ths ccrs.
Hr, thrgh rsrch s r xpric
srvig th Ismic c istry, hv iti
15 mst rt misccptis 10 mi v
prpsitis tht iv vry sh t
Ismic c. Th rvt stis r rss
i simp, ci mr ith th prmt im
prviig sic rstig isss rmvig
y iccrt r prjic gist Ismic
c.
Fr xmp, this picti highights tht Ismic
cig is t trrrism cig, is t mr rpic
cvti c, t r c s it
cmmy miscciv y sm rtrs. It s gts
th ti tht Ismic c is sprir is ihrty
imm rm thic prctics r rm th impct th
g ci crisis. Ist, it mphsiss tht Ismic
c s rirs strtgic pig, ctiv itr
xtr rgtis, ctrs t sgr its itgrity,
cs it c xps t xcssiv ris-tig, r
r thr misccts i pprprit ris mgmt gvrc rmrs r t pt.
w s rtict tht th v prpsitis Ismic
c my vry c tir ccrig t th
irt s jctivs th sthrs
hthr thy r rgtry sprvisry thritis
tht ish t pth t thir ci systm, ci
istittis tht ish t i thir cstmr s
ivrsiy thir prct rig ris prs, r
ptti ivstrs r sisss tht ish t tp
v r ivstmt risig. It is rg t
ssm, r xmp, tht Ismic c is t
S jst cs thr is shc triggr y S
ts i th Mi est, th th rst th Ismic
c r is i im. I, Ismic c is mr
th ht mts th y.
w pry tht this hm picti ts its rrs.
Quite oten, literatures on
Islamic nance tend to be
either partial or biased because
the author is trying to sell (or
debunk) the concept, or is so
scholarly and dense that the
layperson cannot understand
a word o it. We hope this
publication is neither o
these two.
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t Ismic Fic
It is mst rtt tht smtims i sm
ctris, Ismic c is simpy csir a political
hot potato. It s t srv t underrated and
undermined; Ismic c sh t r th
g cmmity t i rigs, t rrirs. It ght
t instrument o inclusion, not discrimination.
emrcig it c hp promote goodwill and
compassion; gctig it y spr rthr
misrstig prjics.
ntithstig its mst r cs vpmt,
th ct rmis tht cmpr t its cvti csi,
Islamic fnance is still an inant. a t mr rtrig
s t , pty mr ptic prsvrc
sh r.
Cti criticism r rrt cm,
t sh cstrctiv t ctrit psitivy t
th istrys -ig, rthr th gig
iiscrimity. Itct ts th ircti
th istry sh crri t i rspct mr,
i i ith ihti (rspctig ircs
piis). The ocus o any debate should be on
churning out easible solutions, rather than
fnger-pointing and ault-fnding.
whi th sthrs th Ismic c istry shr
th cmm im strig it t its tr pttis
chiv th highr is s ci
systm, sh s striv t rmv th rtt
misccptis t th istry.
15
Mst Frt Misccptis
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TeRRoRISM FInanCe
Misccpti 1
The Shariah considers illegal use o violence
especially against innocent victims as a heinous
crime, and hence categorically condemns terrorism.
This ms tht, s mttr pricip, Ismic
ci istitti is stricty prhiit y th Shrih rm
igy ssistig, ht mr ctivy prticiptig, i
trrr-rt ctivitis.
urtty, sic 9/11, itrti pitics hv
s prjic imsity gist Ism sct t
hights. amist this cimt r sspici
i th wst gist ythig tht crris th r Ism
r Shrih, Ismic c hs iry rish
y crti rtrs s rt r trrrism c. ev
th scr igti Zt (ms) hs g s
trs trrrist rgistis.
whi th cmpx p tr itrti
c my xps v Ismic ci istittis t
riy cm t r ths ith crimi itt, it is
s t sy tht s r, tithstig th cspircy
thris g-i cctis ris t i Ismic
c ith trrrism, thr is hry scit vic
prc t jstiy sch gtis.
Vris sits sctis hv iitit gist
sm ci istittis y Ismic c grs
r g ivvmt ith trrr ctivitis, t mst hv
strc t. Ths ic, mg thrs mst
ty, sits i th uS gist Shih Sh km dh a-br Pric Mhmm i Fis a-S
dr -M -Ismi, th hm r csir
pirs thght-rs mr Ismic c.
Irrti phi gist Ism i gr Ismic c
i prticr ctis g tr 9/11, ith th uS Trsry
rcty s gttig tg i sit h G wr
vtr chg i crt th viity its cti t i-
t aIG rig th g ci crisis, simpy cs aIG
hs ivv i Ismic isrc (t) siss.
Th rity is, Islamic fnancial institutions just like any
other fnancial institutions in any jurisdictions are
subject to and bound by strict law and regulations,
including anti-terrorism and anti-money laundering
laws. I thr is y pr tht y Ismic ci
istittis r ivv i r r spprtig trrr
ctivitis, th prcss th sh t
t its crs i rr t sr th rspctiv cprits r
rght t jstic.
Trrrism vic r p htvr pitic,
rigis r cmm cs g t th
th y sti ifict hrm gist th i ig
ict victims; Msims -Msims i. Ismic
c hs thig t ith trrrism cig. It is
gi gitimt siss tht hs rgt
sprvis i my jrisictis, simpy s siss tht
rs Shrih cmpit ci prcts s trtiv
t xistig ci prcts.
TERRORISM
HAS NO
RELIGION
Terrorism and violence branded upon
whatever political, religious or communal
cause and agenda at the end o the day still
infict harm against the lie and well being o
innocent victims; Muslims and non-Muslims
alike. Islamic nance has nothing to do with
terrorism nancing.
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There is no prohibition against non-Muslims rom
using Islamic nancial products or own institutions
oering Islamic nancial services. It is sy t srv
tht mg th rgst istittis rig Ismic ci
srvics r cvti ig grps sch s Citigrp,
HSbC, Str Chrtr, tc. This prvs tht th vs
sps y Ismic c r t r Msims y t
my shr y -Msims.
Frthrmr, it sh t tht prhiiti gist
sry is t y imps y Ism t s thr mjr
r rigis sch s Christiity, Jism, bhism
Hiism. Th thic prmtrs Ismic ivstmts
tht ri crti sctrs sch s ch, gmig,
prgrphy, tc. c simiry sscri t y sm
-Msim ivstrs s .
Islamic fnance is a value proposition; it rs y
cctig ci trsctis ccrig t crti
thic vs prmtrs irt rm ht
is prvt i cvti c. I t cs this
v prpsiti i Ismic c s t m
cmmrci ss, it iy r y -Msim
iivis r tity t prticipt i it. It is rth tig
tht th rst crprti t iss Ismic t scritis r
S is Sh MdS, mtiti cmpy, i 1992.
Sic th, thr mtitis sch s aeon, Ge, nst,
tc. hv simir tstp. whi th Ismic
dvpmt b (Idb) is crs t hv
ris s thrgh S, thr mtitr rgistis
sch s th asi dvpmt b (adb) th
Itrti Fic Crprti, mmr Th wr
b Grp hv s th sm. Th Fr Stt
Sxy-aht i Grmy is th rst i erp t hv
iss S.
Even the Vaticans ofcial newspaper Osservatore
Romano has some nice words to say about Islamic
fnance. Th thic pricips hich Ismic c
is s my rig s csr t thir cits t
th tr spirit hich sh mr vry ci srvic,
thrs lrtt npi ax Sp x icm
strtgist, Ci Sgr, si i th rtic. wstr s
c s ts sch s th Ismic s, s S,
s ctr. S my s t th cr istry
r th xt oympic Gms i l, thy si.
FoR MuSlIMS onlY
Misccpti 2
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RePlICa oF ConVenTIonal FInanCe
Misccpti 3
Most critics o modern Islamic nance argue that
Islamic nance is nothing but a mirror o conventional
nance, oten due to the similarities between the two,
especially in terms o the economic objectives o their
users. I ct, it strgy, th st sch criticisms
sy cm rm mgst Msims thmsvs.
argmts tht Ismic c mry mphsiss rm vr
sstc is t cmm. ev mgst Shrih schrs
thr ppr t ht isgrmts
vr crti prcts, hich hv
pprv y sm schrs hi hrr
y thrs. as rst, hrsh gtis
sm Ismic ci istittis
prctisig Shrih ritrg r t
shppig t ti Shrih pprvs
hv sh t, spit c
mpiric vic sch prctics.
whi th critics my hv thir
sis r thir gtis, th ct
rmis tht Ismic c is gvr
y sm mt pricips tht r
ctrry t cvti c, sch s
prhiitis gist ri (sry/itrst),
misir (ttig/gmig)
ghrr (is migity). Hc, Ismic c prcts
r cscisy sig t rmv ths mts, hi
t th sm tim rtiig sm cmpts tht my
m it sy t rst h cmpr t cvti
ci prcts, hich r thir irct cmptitrs.
Jst i my t t y pprcit th
irc t Mcds rgr tht is
s h ith hich s t cs thy r sti
s Mcds hv simir tst (i t th
sm) yy smtims pp t t rmi th
irc t Ismic cvti ci
prct cs th isticti is t vry vis.
Hvr, i it mr tis s t th sig
cmic hvir sch prcts, th vty thisticti i cm pprt. Fr xmp, i Ismic
c is jst rpic cvti c, h c
it mr rsiit th its ctrprt rig th g
ci crisis? Simiry, v prir t th crisis, Shrih
cmpit stc iics hv prrm irty rm
-Shrih cmpit stc iics. Sry ths xmps
iict tht thr mst ircs t th t.
Hence, it is very important to realise that the Islamic
sense o proftable trade or tijaratun rabihah is a
business that brings blessings to those who conduct
it. ovisy, prts r imprtt s s, t th ms
y hich ths prts r r
r v mr imprtt. whthr
it is vis t s r t, sh
rst tht it is this ths hich
Ismic ci istittis sscri t
striv t trst it thir siss
m. whthr thir ttmpts r
sccss r t, ch s my h
r piis t t ir, sch
cs srvs spprt
crgmt, rthr th scr riic.
Annual Investment Return
2000-80
-60
-40
-20
0
20
40
60
(%)
2001 2002 2003 2004 2005 2006 2007 2008
Traditional unds
Islamic unds
Obviously, prots
are important as ends, but
the means by which those
prots are earned are even
more important. Whether
it is obvious to us or not,
we should understand
that it is this ethos which
Islamic nancial institutionssubscribe to and strive to
translate into their
business model.
Source: Korea Capital Market Institute
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PRIMITIVe MeTHodS oF doInG FInanCe
Misccpti 4
While Sukuk probably is the most well-known Shariah
compliant product, it must be emphasised that Islamic
nance is more than just Sukuk.
ev h t t S, thr pprs t
misrstig tht S y cms i rm,
thgh i rity thr r mr th z ys
thrgh hich S c strctr.
urtty, simpy cs sm S issrs i
th Mi est rcty t, his hv
spsh crss mjr spprs s i S r t
ris. uir irrspsi rmrs hv spr,
stiig th itgrity S s ivstmt
istrmt. Th ct is, v cvti c is t
mch ttr h it cms t ig ith ts
ths sm trs. This is cs th prm is
mty ith th crity i th jici prcss th
isvcy rmr i th rspctiv jrisictis, t th
S strctr.
Mhi, thgh th Shrih rs pricips tht
ri ths ci prcts my hv vp
vr th crs 1400 yrs, this s t m tht
mictis pttis hv m i
ccrc ith th vt tchgy, g
srs s. Islamic fnance has developed and
currently oers a whole range o fnancial products
to cater or dierent users, whether in banking,
insurance, capital market or wealth management
segments o the fnance industry.
Today, Islamic fnancial institutions, just like their
conventional counterparts, are capable o oering
e-banking services including mobile banking, using
electronic trading platorms, taking advantage o
sophisticated sotwares and hi-tech solutions to
increase efciency in their operations.
I ct, Ismic c hs cm g y rm ig
t r y sm sic spig ccts cig
ciitis, t syict cig, tr scritis
v my mrt hgig istrmts. Ismic
c hs s i r rg s-sctrs, rm
micr-cig (t rict pvrty spprt c
trprrs) t pic irstrctr cig (icig
ms, prts, irprts, riys highys).
I trms riss, Ismic c prcts rm sst
css hc pths t th ivrsicti ris
r srs. Simpy cs smtims th xistig g
rgtry rmr, s s xistig ris mgmt
ts, my hv yt t rst pt t th
spcicitis Ismic c, Ismic c sh t
m th scpgt.
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Concerns over the lack o standardisation, while
may be justied in view o the inancy o the Islamic
nance industry, is sometimes blown out o proportion
and over-exaggerated. Th rity is mjrity th
prcts srvics r y Ismic ci istittis
r ry vi r th r ith prtty mch
str pprch h thigs r . T ir
t Ismic c, cvti ig prctics r t
tiry stris crss th g ithr. Vritis ivrgc sti xist rm ctry t thr.
Fr xmp, i is t g t Ismic hthr i
Mysi, th GCC r i th uk ts t pt my
it svigs cct, h i s tht th ctrct r
svigs r ivrs; it is c wih (spig) r
Mrh (prt shrig) cct s thr r cty
irm sts ctrcts ccpt r th r. I
is t ti cig r xmp, h c gt it s
ithr Mrh (prt shrig), Ijrh (s--s
c), r Mrhh (s--y-c) sis.
Frthrmr, thr r itrti mchisms tht
r rig trs grtr chsi irmity i
sm rs Ismic c. Fr xmp, i th rs
prct stristi, cctig trtmt ci
rprtig, thr is th aitig acctig orgisti
r Ismic Fici Istittis (aaoIFI) tht st strs
ths. with rspct t prti rgti, sch s
cpit cy rirmt ris mgmt, ry
sm iititivs r rt y th Ismic Fici
Srvics br (IFSb). Mst rcty, th ItrtiIsmic Fici Mrts (IIFM) Itrti Sps
& drivtivs assciti (ISda) hv crt i
prcig str Mstr THt (Hgig)
agrmt, hich rthr rfct rpi prgrss trs
strisig st prctics i Ismic c.
athr crci r hich is prtty irm is th
Shrih itrprtti, t i s t th t r
th prcmts hich hv m vr th st
c i Ismic c, mr th 95% thm hv
i cmpt ccr crss th schs, ith y
t 5% hr thr r ircs piis.
It is s rity tht, th ci ctrcts si, my
prctics i Ismic c prtis r cpi rm r
chmr gist its cvti ctrprts. This
is spciy it strgy vic y th cctig
strs iss y aaoIFI, hich im t cmpmt
th Itrti Fici Rprtig Strs, th
prti strs iss y IFSb, hich r it
miy rm th strs iss y th bs Cmmitt
r big Sprvisi (bCbS), Itrti orgisti
Scritis Cmmissis (IoSCo) Itrti
assciti Isrc Sprvisrs (IaIS).
Thrr, th prciv c stristi r
ctrstig vriti prctics i Ismic c is
rgy mispc. o th h, it sh vi
s rm r y istry tht is sti i icy t -t
its st prctics, r ivtis t frish. o th
thr h, it sh rcgis tht th Ismic c
istry (spciy thrgh aaoIFI, IFSb IIFM, s
s thrgh xistig itrti strs tht t
ctrv th Shrih), is stiy mig g prgrss i
this r. I it is vry mch p t ithi th prs
th rvt rgtry sprvisry thritis i
vry jrisicti t t pr-ctiv stp i srig thtthir Ismic c istry hrs t high str
itrti st prctics.
no STandaRdISaTIon oF beST PRaCTICeS
Misccpti 5
ISLAMIC FINANCIAL
SERVICES BOARD
Accounting and Auditing Organization
for Islamic Financial Institutions
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The maxims al-kharaj bil
dhaman and al-ghunm
bil ghurm, which basically
propagate the principle o
no risk no gain, very much
underline the recognition
o risk elements in
Islamic nance.
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MORE/(LESS) RISKYTHAN CONVENTIONAL FINANCE
Islamic nance is usury-ree, but not risk-ree. as
Ismic ci ctrcts r sig t ctr r
irt ris pptit th srs, th trth is, it is
rrs tt gristi t
sy tht Ismic c is ithr mr r ss risy th
cvti c.
The maxims al-kharaj bil dhaman and al-ghunm
bil ghurm, which basically propagate the principle
o no risk no gain, very much underline the
recognition o risk elements in Islamic fnance.
Thrr, irt ci ctrcts, ivstmt
strtgis ris mgmt ts i ppic
t ccmmt th irt ris pptits srs
Ismic c, vry mch simir t its cvti
ctrprt. Hvr, rgy t strict Shrih
prhiiti gist misir (ttig/gmig), y
xcssiv spcti s zr-sm gm
ir ts pprch t ci trsctis isprhiit. This hs th ct iscipiig mrt
pyrs rm xpsig thmsvs t riss tht r y
thir cpcitis.
a sty rt y th Itrti Mtry F
(Cih Hss, 2008) prvis mpiric vics
hich vriy tht Ismic c is t cssriy mr
r ss risy th cvti c. Th sty pits
t, r xmp, tht y hvig prt-ss shrig
cig, this shits th irct crit ris rm s t
thir ivstmt psitrs. Hvr, it s icrss thvr gr ris th sst si s c
shts, cs it ms Ismic s vr t riss
rmy r y ity ivstrs rthr th hrs
t.
It s s pit t tht, cs thir cmpic
ith th Shrih, Ismic s c s r ris-
hgig tchis istrmts (sch s rivtivs
sps) th cvti s. Hvr, it is
itrstig t t tht cs this prhiiti
gist th s rivtiv prcts shrt-sig ctivitis i th rm s y its cvti
ctrprts, Ismic c r rgy shi rm
y xpsr t txic ssts sch s ths risig rm
ctris t igtis (Cdo) crit t
sps (CdS).
a t mr stis i t t y
rst th ris pr Ismic c prcts
prtis, vp th pprprit ris mgmt
ts t mg ths riss. Sprvisry thritis
spciy t ry th it
cscs ci prcts, hich my smtims
t gr pri t ris. Th IFSb Giig
Pricips Ris Mgmt hich s iss i 2005
prvis s rmr i itiyig rssig
th spcic riss i Ismic c, sh
primry rrc r y itrst th sjct.
Misccpti 6
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Misccpti 7
loweR/HIGHeR CoST oF FundS
Islamic nance may be interest-ree, but certainly not
for-ree. Simpy cs itrst c imps r
Ismic c ctrct, this s t m tht th
cir is t itht y rights rig pprprit
prt rm his s. Simiry, simpy cs th Shrih
gry prhiits th impsiti pty r y
pymts, this s t m tht Ismic c s t
rcgis tim v my.
Pricig, rt cig r rt rtrs r Ismic c
prcts, jst i its cvti ctrprt, is csy
sscit ith th ris xpsrs ivv. whi r
bs II cvti s r m t xps t
crit ris, mrt ris prti ris, Ismic ci
istittis, t thir siss m, hv t s t
it csirtis thr riss tp crit, mrt
prti riss. Ths ic, r xmp, Shrih
cmpic ris; ispc cmmrci ris; ciry
ris risig rm prt-shrig ivstmt ccts. Hc,
Ismic ci istittis t ct cpit tcvr r ths riss, my t cssriy it chpr
t prt cmpr t thir cvti ctrprts.
as mti rir, Ismic c prcts c
tir ccrig t th ris-rtr pr hich mts
th s th srs. accrigy, i prcts hich th
cir hs t r mr ris, h xpct t ti
highr rt rtr, hi i prcts hr th ris
xpsr is r, th pricig my i vr th
c prty.
Hence, it goes without saying that Islamic fnance
can be a cheaper source o unds through design and
negotiation; but it is not automatic.
It is r xmp, rth tig tht i Mysi, risig s
thrgh S c sv th issrs t 1020 sis
pits, mg thrs t th ttrctiv tx ictivs
giv y th gvrmt t crg S issc
th cmptitiv pricig r y Ismic ci
istittis. Th cmprhsiv g, rgtry Shrih
rmr, s s th pth cicy its mrt
irstrctr, s ms Mysi ttrctiv jrisictir S issc rigs th cst risig s
thrgh S rtivy chpr cmpr t shr.
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The Quran does recommend that one should give
orbearance to a debtor that is acing genuine
diculty to meet his obligations. However, this does
not mean Islamic nance is welare or charitable
nance.
Thr is s xpicit rig i th Sunnah th
Prpht s... tht y h irty ts
pymt his t itht y gi cs is tyrt.
Ismic ci istittis r prt-rit titis
hich r sr t thir shrhrs, ivstmt
cct hrs thr sthrs i trms mig
sr tht thy ivr rs rtrs i ccrc
ith th prmtrs st t r th Shrih. Th ty
hr is tht thr is ihrt mchism t crg
th Ismic ci istittis thir sthrs
t rt crprt sci rspsiiity, s i Ism
thr r istittis mtry Zt (ms); vtry
sh (ti) i (gits); s s him(rrc); tht c s r th Ismic ci
istittis thir sthr t ctrit t th sci
-ig th cmmity.
Ismic ci istittis sh t xpct t
ssiis th cmmity hi givig ccss t cig. It
is s ir r cstmrs t t vtg s
th -mig gstr Ismic ci istittis
y irty tig ci igtis
t thm. a ci istitti hich is prt c
ctrit ttr t th cmmity; hc Ismic ci
istittis sh t st ccr ith pprprit
mr spprt ccssi r it t cm prt,
sciy rspsi siss.
Most Islamic fnancial institutions, besides actively
perorming their corporate social responsibilities, also
accommodate customers that have genuine difculty
to repay debts and exercise restraints in undertaking
legal recourse or recovering debts. They also aord
qard al-hassan (benevolent loans) as part o their
service to the society.
I smmry, Ismic ci istittis striv t stri
c t rig prts srvig th rr
sci cmic s th cmmity. Sch rspsi thic crprt ctr sh ,
pprcit mrc y .
welFaRe FInanCe
Misccpti 8
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rirs strg trst mg th prtrs, trsprcy
i iscsrs pprprit gvrc strctr, i
rr t rmv irmti symmtry thr mr
hzr prms. as rst, mjrity Ismic c
trsctis hv rrg s s r sig ctrcts,
ths miimisig th mr hzrs th high mitrig
cst. Oten, a charge or caveat will be registered on
the subject matter o the sale or lease, as a collateral
to saeguard payments. To this extent, Islamic fnanceprovides the same protection to the fnancier just like
in conventional fnance.
Thrr, simpy cs Ismic c ppis sm
irt tchis t prsrv th rights th cir
cmpr t cvti c, this s t m tht
Ismic c is risir tty p t s.
no GuaRanTee
Misccpti 9
It is true that there is a general rule in Shariah that
prohibits the nanced party rom providing to the
nancier a guarantee o capital or returns. This is t
y t sr tht thr is mt ri (sry) tht
c pprssiv t th c prty. Rmmr s
tht th mxims -hrj i hm -ghm i
ghrm hich sicy ri tht rrs/gis c y
jsti y th riss t, gi mphsis th prhiiti
prsig y gi thrgh ctrct grt.
However, the Shariah does permit or a guarantee to
be provided by a third party to the transaction, i given
at no consideration. This is th r r th pricip
h (grt r srty). This is s i i ith th
pricip t (mt ssistc r sirity mg
Msims) hich is vry mch crg y th rigi.
I, it is t th pricips h t tht
th ccpt t (Ismic isrc) is riv. Hc,
it is t cmm i y ci trscti tht th rissr mitigt thrgh th istrmt t.
It is rcgis i Ismic c prctic tht prt-
shrig rrgmts sch s Mrh Mshrh
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While it is true that the petro-dollars have been a
catalyst or the growth o Islamic nance especially in
recent years, it has to be acknowledged that it is not
the only driver o the industrys success. ev r th
r ptr pric s sy-rctig, th Ismic ci
srvics istry hs jyig sty 1520%
grth sic its rst icpti i th 1970s.
Vris rprts, sch s y Str & Prs, ths
cmmissi y th gvrmt thritis i astri,
Frc, th uk, mg thrs iti tht th rpi
grth Ismic c is riv y th ig ctrs:
anincreasingawarenessamongsttheMuslim
ppti th viiity siiity Ismic
ci prcts tht hr t th Shrih itht
cmprmisig cit th grti ris
mgmt
developmentofinnovativeShariahcompliantinstruments icsig mrt pyrs tht pths
chics t ctr r irt sgmts th mrt
taxandscalincentivesfromthegovernment,that
s cmptitiv pricig r Shrih cmpit
cig ivstmt strctrs
intensiverestructuringanddiversicationofthe
cmy, hry ctris strt mrig
mssiv irstrctr prjcts tht r c thrgh
Shrih cmpit ms
globalisationcontributedtoIslamicnancialinstitutionsxpig thir prtis y thir triti
rrs
resilienceofIslamicnanceinsurvivingthenancial
tsmi, thgh t tiry scth, hs ttrct
itrst i its mt pricips siss
ms
by ryig ss th i m, Ismic c c cs
tppig thr srcs s ivstmts, spciy
i thr grig istris sch s hspitity srvics,cmmity mirs, mctrig vc
tchgy, tc. This ivrsicti grr ttr
stiity it its rmr.
dRIVen PuRelY bY oIl booM
Misccpti 10
The Islamic nancial
services industry
has been enjoying
a steady 15-20%
annual growth since
its rst inception in
the 1970s.
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Simply because a nancial product, a nancial
institution or a banker wears the label or brand
Islamic does not automatically ensure that such
product, institution or banker will be pristinely pious
and incorruptible. Th pic mst ys rmmr tht
s mch s it hs prv tht no fnancial institution
is too big to ail, similarly there is no institution
that is too pious or too virtuous to ail. Th pic
mst ys iigt gist cit chrctrs scrps prtis hm might missig sig
th r r Ism jst r ic gi y pryig
vr th gi pic. Sch chrctrs t cr i
thrs sr rm thir crim r th rptti th
istry is mg y thir gr.
Sthrs th Ismic c istry, spciy th
sprvisry thritis ivstrs, mst vigit t
r rm vris css rs, rch trst
mismgmt tht hv ccrr, mst rtty, i
th m Ismic c. amg thrs:
1987Al-Rayyan,anIslamicInvestmentCompany
stish y rthrs Fthi T a-Ryy, s
t pyrmi schm, csig rprt ss
e 1 ii t mr th 400,000 ivstrs. Th icit
rght thr simir cmpis sch
s -Shri, -S,
H Misr, br -Hi, rc th ctmt
gisti t rstrict t -m (rcivig
s). Th cs rmis ims mg th pic i
egypt, t th xtt tht rct simir rs hv
Ryy
a-qyi (2007) Ryy nsr City (2008).
1997TheBankofCredit&CommerceInternational
(bCCI), hich is cvti , ccpt srm sm ivstrs thrgh its Ismic big uit
s i l. a mr Ismic s pc
s ith bCCI ith th rstig tht th my
i ivst it cmmity ctrcts i ccrc
ith Shrih. wh bCCI tr cps, th itrs
rprt rv tht bCCI i t m sch Shrih
cmpit ivstmts h its cits.
2001IhlasFinans,thenthelargestIslamicbankin
Try ith vr 40% th sctr psits, s
iit y th Trish big Rgti Sprvisi agcy cs it s t hv igy
pprprit mst $1ii, virty th tir v
th psit s, thrgh cct ig t
shrhrs.
Mhi, di Ismic b hs tic sr rm t
mjr mzzmt css, c i 1997 th rcty
i 2008.
Th vpmt vris gvrc strs y th
th aaoIFI th IFSb r cty i rcgiti thtIsmic c is t ihrty imm rm thic
prctics gvrc irs. Besides adhering to the
highest standards o governance and risk management
best practices, Islamic fnancial institutions must
particularly adopt a stringent recruitment
and training requirement to
ensure that their sta continue
to uphold integrity and observe
their fduciary duties.
IMMune FRoM anY uneTHICal PRaCTICe
Misccpti 11
No nancial institution is too big to ail,
similarly there is no institution that is too pious
or too virtuous to ail.
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A lot has been said about Islamic nance being
resilient in the wake o the global nancial crisis,
but once the dust o the nancial crisis has settled, it
becomes clear that not necessarily everything is well in
Islamic nance.
Fr xmp, mr r pyrs i th
mgmt Ismic s, sch s Th Ivstmt dr
(TId) G Ivstmt Hs (GIH), th s i
kit, hv sr mjr sss rig th crisis
hv cm tchicy isvt. Thy hv t rt
pi rstrctrig prcss th g tts r sti
t ght. Th g S mrt is sig smr
issc icrsig ts, y th rptcy
th uS-s S issr est Cmr Gs,
y th shr vhic i t a-S Grp Si
ari, tr s TId GIH. as mr Ismic
ci istittis rs thir tst ci rprts,
mr thm prv t sr hg sss, it sti
ssr cmpr t ths r y thir cvtictrprts.
Ismic ci istittis sh thrr sr tht
thy t vr th sss t rt rm th
ci crisis. Sic th g cmy is sti rcvrig
grth rt is mch sr, thy sh t this
pprtity t c p th hs tight p th
s s, hrvr cssry. Fr xmp, th tcy
y sm Ismic ci istittis t iy rpict
rpcg sm xtic prcts cvti
c thrgh csmtic chgs t m thm Shrih-cmpit sh prticry cr. It is rrism
t t tht iititivs t sig sm rms Shrih-
cmpit sprim istrmt hv rt
r th crisis hpp rtty thr r gh
ism mg gtprs th istry tht ths
istrmts i t ry s th ight th y.
w sh s rmmr tht this is t th rst tim
Ismic ci istittis r tst ith systmic crisis.
Th xprics kit Fic Hs i srvivig th
kit S -Mh crisis i 1982, b Ism i
vigtig thrgh th asi ci crisis i 19971998,
Trish prticipti s i cmig t th
cmic crisis (20002001), sh cvy cr
mssg tht Ismic c s hv sm ihrt
itis tht ctrit t its rsiic. nvrthss, it
sh s cg tht ths ihrt
itis mst spprt y s gvrc, prt
ris mgmt, ctiv rgtry rmr
strtgic rship. a ths trs mst icct
rtr vr tim ith cmmitmt icti
mg y sthrs th istry, spciy th
shrhrs th sprvisry thritis.
I, th Prpht s... hs strgy rmi s t ti
p th cm r c t r t trmi y
ah, th qr s r s tht ah i t hp
y h s t hp hims. Jst i tr isstrs
sch s rths, fs vc rpti my stri
y m rgrss his ith r rigi, simiry ci
cmic criss t chs its victims hthr
Ismic r cvti istittis. oy ths h rmi
prt, stst -prpr r mr iy t
srviv y sch tsts.
IMMune FRoM THe Global FInanCIal CRISIS
Misccpti 12
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A number o recent court decisions have proven that
when it comes to resolving disputes arising rom
Islamic nance contracts, Shariah rules and principles
do not necessarily apply.
This is simpy cs, mst t, th isss i ispt
r t Shrih i tr, t rthr spcic t th
civi cmmrci rights igtis s ctrct
y th prtis. Fr xmp, t rc chrg vr
th ctris sst/prprty, try th rmy
vi sght is rmy prvi r s.
Simiry, prcigs sch s r itrim ijcti, Mrv
ijcti, at Pir rr, grish, tc. r prcigs
stish r civi ircty rt t rcmt
ctrct rights igtis. Smtims th g
th ispts my ris rm tx, isvcy r ihritc
prspctivs, i hich cfictig prtis t ris y
Shrih-rt stis.
Sic egish hs iy chs s th gvrig r my itrti Ismic c s icig
S, svr css sch s Shmi b v bximc
Phrmctic, Ismic Ivstmt Cmpy th G
(bhms) v Symphy Gm, TId v bm dvpmt
b, hv rrr t egish crts. Mhi th
rptcy est Cmr Gs is tri i uS crt i
lsi, rigig its S hrs t cim r thir
rights thr. I Mysi, th cstitti spcicy ists
ig mrcti mttrs s ithi th jrisicti
th civi crts t Shrih crts; ths
rstig i mrs Ismic cispts t ci y jgs tri
r cmm t prticry
r Ismic jrisprc. Ths
vpmts, mg thrs, prv
tht th itrc t Shrih
civi r cmm systms
r t hpp spciy
i itrti s, ths
ririg itrict g sis.
a icrsig mr Ismic c ts
ispts ig th rct g ci crisis sh
prst th istry ith pprtity t hv grtr
crity crtity i its ispt rsti prcss. Jgs
yrs hv crci r t py, i rr t
sr tht th rgmts pt rr cisis rriv
t timty isti pic cc i th systm.
Cti hs t thr i tht ssssig th cmptiiity
rciity Ismic c ctrcts ithi g
systm hich is t primriy s Shrih c
tig chg r th crt. Th crt my hv t
ssitiv, t y t th mrits th cs, t s th
rr pic itrsts. amg thrs, th crt sh
cr t sr tht its cisi t rig t
it cscs tht riv pic i th ci
systm r ris ir prjic gist Ismic c.
Hc, th rvt thritis t sr tht th
crt is spprt ipp ith th cssryxprtis g irstrctr t prc vr Ismic
c ispts. bsis t triig xpsrs
t vp th rvt sis, th crt sh hv ccss
t xprt piis sch s rm mg Shrih schrs
r ci sprvisrs. othris, th sss th
cisis, hthr i crt r thr trtiv ispt
rsti rm, might py sti.
I virmt hry th cmy is sti rgy
vr vry Ismic c ispt i
pc r micrscpic scrtiyt s hich ircti it gs, th
istry c ry t rm
ispt rsti mchism tht c
ctivy rirc pic cc.
GoVeRned onlY bY SHaRIaH
Misccpti 13
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RequIReS MInIMal CHanGeS To leGal &
ReGulaToRY FRaMewoRk
Misccpti 14
Islamic nance does not exist in a vacuum; it rirs
igmt ith spprt rm th h g
rgtry rmr. This ms, hi it is imprtt r
th ig ci s ctry t rcgis
ccmmt Ismic c, r xmp, thrgh
spcic gisti, this is r rm scit i srig tht
th Ismic ci ctrcts i ctivy rc.
at th miimm, thr rs tht my hv t
m t ccmmt Ismic c ic
tax laws (r trity tx trtmt), property laws
(r iity t rt trsctis ivvig r stts
crt vi ctrs thm), insolvency laws (t
Ismic ci istittis t rc its cims
gist trs its gist critrs s my
), securities laws (r th Ismic ci
istittis t t r r tr istrmts tht r
Shrih-cmpit).
as Ismic c trsctis cms mr
itrtiis, prpr s t pt i
pc t stish reciprocal enorcement o oreign
judgments rm crss irt jrisictis. Crity i th
ctrit immsy i trms istiig pic
cc i th ci systm, rmv crtity
s t hthr Ismic ci ctrct i vty
rc i crt i cs thr is ispt.
Frthrmr, it mst y rcgis tht th rm r
rsvig ispts risig rm Ismic c ctrcts,
hthr crt jictr r crt ritrti, mst
ty ipp ith cmptt prs s
s cmprhsiv g irstrctrs t it t
prc vr sch css smthy city. Th jgs,
ritrtrs, ttrys, tc. hig sch ispts mst
vry -tri i rr t sr t cmptc
prssiism.
It mst r i mi tht th r tst th
ctivss is i its rcmt. Thrr, sis
ctig mig s, thritis sh giv t
ttti i building capacity or law enorcement.
Hc, it is icrrct t ssm tht Ismic c rirs
y miim chgs t th ci s rgtis,
s i this is y th rst stp i ht sh g
jry. at mst, Ismic big act r Ismic Fic
l c csir s th impts r ctrys Ismic
c istry, t i th h rmr c y
si i igmt ith spprt rm th rst
th g systm r s stitch tgthr.
I ctris hr cmprhsiv rvi rrm
th h g rgtry rmr is t
rt, thy i thir Ismic c istry t
rmi srr y g mis.
It must be borne in mind that the
real test o the eectiveness o law
is in its enorcement. Thereore,
besides enacting and amending
laws, authorities shall giveadequate attention in building
capacity or law enorcement.
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Some Islamophobic websites are so earul o Islamic
nance; it has been described as a th generation
warare aimed towards replacing the conventional
nancial system and pursuing world domination by
Islam. H this pssi h th h Ismic
ci systm ccts r ss th 1% th g
ci systm, Msim tis rmi rgy th
prst r-vp? Ths rgmts r it
mi-ggig. I rity, th 56-mmr ctris th
orgisti Ismic Crc (oIC) cctiv grss
mstic prct is ss th 5% tht th r,
its itr-tr vm (t t uS$800 ii) is y
67% th tt g tr. as mch s Msims
vry mch i t s Ismic c ris t grtr hights,
th hrsh rity is tht th h mmh is jst t
ivi t v rm prsig sch rms
g.
My Ismic ctris cti t rgy sgrgt
sr rm prg pitic rst, smtims
v t th xtt ggig i civi rs. ur sch
circmstcs, mst Msim tis t gg
y isss hich r csr t thir hrts hms,
sch s ti ity, cmic srviv miy
ivih. Svr Msim tis rmi hviy it
t th itrti cmmity, v p
itrti i r ti scrity. I, h
c pc r miti i th vcry mjrity Msims, hi th rigi its tchs tht this
r is tmprry th Hrtr is ht is prmt.
I iih, mst Msims jst grt
ctt ith ht thy hv, s ss y ah.
Th sm mirity Msims h hv s
prcimig tht Ism is sti r r miti
Ismic c sh th vhic r ci jih,
hsty, r t i th mistrm. Thy t sp r
th rst Msims.
There are more than 1.57 billion Muslims living on
this planet, according to a 2009 study undertaken by
Forum on Religion and Public Lie, a unit o US-based
think tank Pew Research Centre. As such they are too
heterogeneous to speak in one voice and agree on a
common agenda, despite sharing the same aith.
dr. Rph briti, emrits Prssr Pitic Scic
t d uivrsity ty scri i Th ntr
Strctr th Ismic wr (2000) tht Th
ii pp h prss Ism r t cctrt i
sig, r mss. This irs rm th i i
Chis r th r-ii cctrti ppti
th sctit Ii. ay imgry grt gr
hr, ctr y sig gvrmt, cp risig
rms rmis, is cis.
Thr is g histric s s ctmprry vics
t spprt this, ths prhps it is s t sy tht th cts
sp r thmsvs. o sh prhps pr, it
h hs r thrght th 1400 yrs
histry Ism is ty vi vryhr icig
i -Msim ctris; hs vr si tht this i
mr th mis -h th strt Isms
r miti. Hc, simiry h c sh
vr s s thrt.
To RePlaCe ConVenTIonal SYSTeM, aIMedTowaRdS ISlaMS woRld doMInaTIon
Misccpti 15
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10o Islamic Finance
Main Value Propositions
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Iitiy, mr Ismic c s chmpi y
pitic Ism s prt th Ismic rvivism tht
th ipc Msim tis rm ci prs.
Gry, th h ccpt cm mr ppig t
sm sgmts th scity spciy ths h iv
tht th cpitist sciist systms r gr
ith fs. My i prticr hr th xcssiv gr
i rich-pr ivi tht r prciv s ihrt
trs cpitism. at th sm tim, thy isi th
tpi i sciism hry tis th is
tiis th gvrmt ictts h it sh
istrit, ith rights r privt rship. Ismic
c sicy rs mi gr t th t.
Privt trpris is crg, t ith
hvy mphsis mr thic ys prsig
th.
Cmpsry zt (ms) r xmp, hs t pi
y ths csir t hv mt th miimm th
rct, hich ctivy srs thr i sm
it istriti th, spciy t ths i
. bsiss ctivitis m t t rm thr
pps mr ci my hrm pic mrity,
sch s ir, prgrphy gmig r prhiit.
lig t itrst, hich systmticy crg
vr-ig vr-rrig th i tht my
rs my iity, is ri. Th cr v
Ismic c ms r gi prctiv
cmic ctivitis thrgh trs ivstmts.
Sic mst gr tht th mr thic vs
sps y Ismic c c ivrsy pprcit
y y, rgrss his ith, th sry it is rth
highightig th mjr v prpsitis i Ismic c.
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1Value
Proposition
adHeRenCe To SHaRIaH, SubSCRIbInGTo HIGHeR eTHICal IdealS
All moral and ethical value systems would naturally
promote higher ideals such as airness and justice or
all mankind. However, it is ascinating to note that the
primary source or Shariah rules and principles, namely
Quran (the Holy Book) and Sunnah (the acts and
sayings) o Prophet Muhammad s.a.w, more than 1400
years ago have explicitly ordained in a comprehensive
and concise manner certain code o ethics that canbe universally applied even in the modern day,
undeterred by time, space or race.
Fr xmp, thr r spcic qric ijctis tht cs
r hst mt ctrcts (a-Mih: 1); prhiits
th try y trst (a-a: 27); ris th rig
icm rm chtig, pric mipti, ishsty
r r (a-nis: 29); shs th s riry t riv
vtg (a-brh: 188); s s prmts
crity i ctrcts t miimis mipti rm is
migity (a-brh: 282).
Th qr pty rticts tht sh t
jsty i h s t t t t ith jsty
(a-brh:279).
by hrig t Shrih rs pricips, th ci
systm i hrss ith strgr cscic
itgrity, hich it s .
This s t sggst tht th v systm i cvti
c is sss tht Ismic c is tright prct,
t th rity rmis tht m rmirs,
ictivs mtivti, smtims i th rm
spirit gic spirti. Th Shrih prvis
xcty tht. Sic thr r 1.57 ii Msims hm
r y th Shrih v systm, its sigicc
imprtc thrr ct vrmphsis.
I smmry, th Shrih prvis rmr tht c hp
strgth th cscic itgrity i th mrt pc.
whrvr th gvrc systm, rgti, s
s mrt iscipi, my t rch r i r rst
st i c gist misccts hs t s-
rstrit hm cscic.
The Quran aptly articulates that one should not deal
unjustly i he does not want to be dealt with unjustly
(Al-Baqarah:279). By adhering to Shariah rules and
principles, the nancial system will be harnessed with
stronger conscience and integrity, which it does need.
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H.E. the Governor o Bank Negara Malaysia, Tan Sri
Dr Zeti Akhtar Aziz has lucidly expressed that Islamic
nance has the potential to become the New Silk
Road that will enhance economic and nancial
linkages not only between Asia and the Middle East
but also the rest o the world. Sh rst m rrc t
th n Si R t th 2 wr Ismic ecmic Frm
(wIeF) i nvmr 2006, hs rthr highight this
tr i sm hr sst spchs.
Sh visis tht Ismic c c ctrit trs th
cit miisti cti s crss rgis
hry rgis ith srps svigs my ch s t
rgis ith cit svigs, t rig t g ci
itgrti. Sigs tht n Si R is frishig r
t th cmic ci igs t
asi th Mi est r grig. whi th r
tr hs th vrg xp y 10% vr th pri
20012005, asis tr ith th Mi est hs icrs
th vrg y 24%. Mr th h th xprts rm
th G stts g t asi, mr th -th its
imprts r rm asi. Th G is th mjr sppir
t asi, hi asi i tr sppis mctr gs
t th G.
Rct trs i ivstmt ctivitis hv y
sigict. Ivstmt prjcts mtig t mr th
uS$160 ii t c y th G stts i asi hv
c sic 2005. I 2006 , mg-sivvig crprt cisitis r stt prchss
rm th G t asi, r stimt t tt mr th
uS$18 ii, icig mti-ii r IPo prchss i
ci istittis i Chi, rg i rris tcm
cmpis. Th v ivstmts s stimt t hv
rch r uS$30 ii i 2007.
Ismic c hs mstrt its viiity
cmptitivss i mr iris gis ci
virmt hs cm imprtt i strgthig
th igs t th t rgis. whi th siz
Msim pptis i th rgis hv ttrct t
th i trs Ismic c, it hs s ttrct
itrst prticipti rm -Msims ithi ths
rgis.
b Simprr scris i Th n Si R (2009)
tht th rct ris th ar r hich is mtch y
mrgig Chi is t jst cicic, sic th t
r histric prs c cct y th rs
grtst tr crrirs.
Th icrsig mr ctris xprig
itrcig s tht ccmmt Ismic c,
spciy ctris hich r prmity -Msim
sch s Chi, Jp kr i th Fr est, astri
i th Sth, s s Frc, lxmrg th uk
i erp, rthr prvs th v prpsiti Ismic
c i prmtig crss-rr tr f s.
2Value
Proposition
PRoMoTInG CRoSS-boRdeR TRade
and Flow oF FundS
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In countries where Islamic nance does not have a
presence, it is common to observe that a substantial
segment o the Muslim population would rerain rom
using the conventional banking acilities in order to
avoid dealing with interest, and as a result they are
isolated, albeit by their own choice, rom participating
in the nancial system. Th Msim miritis scttr
r erp r istc, is pttiy vst rsrv
mrt itig t c, s my thm r
prssis sissm ith rs icm
strm sry i ccss t ci prcts
srvics t mt thir s.
I sm prts th r, th stishmt Ismic
s is prt th pc prcss i ccmmtig
Msim mirity isrgts, sch s i Thi th
Phiippis.
I th uk, th t rmr Gvrr th b eg,
Sir er Grg, is rmmr r his spprtiv
picy Ismic c s ms r ci icsi,
s h h ris sic th ry 90s tht rg scti
th Msim cmmity thr r xc rm th
ci systm t thir rigis pricips hich
prvt thm rm y sig th ci srvics, i
prticr hs mrtggs. Ty th uk hs rti Ismic
r Ismic ivstmt s, psitiig its s
ig h r Ismic c i erp.
Simir t th uk, ctris i Sigpr, Sri l
Sth aric hv g rgtry rmr tht
ccmmts Ismic c, ig thir Msim
mirity t t.
It is rth tig tht sm ctris sch s Chi, Ii,
Grmy, Frc, Rssi th uit Stts hv
mirity Msim ppti siz hich is rtivy iggr
th my Msim-mjrity ctris. I ch thm
pts mr icsiv ci rmr y ig
Ismic c t r i thir mrts, hg
sgmt th cmmity hich crrty is mst iy
t rsrv c prticipt i th ci systm.
Chi cry hs mr prt i xprig this
pprtity rthr y th pprv th rst Ismic
t prt i nigxi. Hvr, it i mst xcitig t
srv i Ii, ith its 160 mii Msim ppti
ig th thir rgst i th r tr Isi (202
mii) Pist (174 mii), is t p p t th i.
This is spciy sic it is mmr th bRIC (brzi-
Rssi-Ii-Chi) grp prict t cm tr r
ig cmis.
3Value
Proposition
FInanCIal InCluSIonS oF THe
undeRSeRVed SeGMenTS oF THeCoMMunITY
It is worth noting that some countries such
as China, India, Germany, France, Russia and
the United States have a minority Muslim
population size which is relatively bigger
than many Muslim-majority countries. I each
o them adopts a more inclusive nancial
ramework by allowing Islamic nance to be
oered in their markets, a huge segment o
the community which currently is most likely
to be underserved can participate in the
nancial system.
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The innovation brought about by Shariah-
compliant nancial engineering has contributed
to the introduction o a new asset class, that is
now raising the appetite o investors. Fctrs tht
istigish Ismic ci prcts s irt sst
css rm th cvti ic, mg thrs, th
ig:
asahalalproduct,itcanbeofferedtoandusedby
y, s pps t cvti prcts hich
r hrm r Msims t s ths rgy, is p
t iggr ivstr/cstmr s
itoftencarriesadifferentrisk-returnprolecompared
t its cvti ctrprt. Th IFSb Giig
Pricips Ris Mgmt (2005) xpi i
ti th ircs t th riss i typic
Ismic ci istitti cvti
asIslamicnanceproductsusuallyareunderlined
y sst, prjct r siss vtr, ivstrs i
tig mr xpsrs t prtis sch s r
stt, cmmity, irstrctrs (i m, prt,
irprt, pr pt, tc.), thr trtiv
ivstmts
instrumentslikeSukukforinstance,canbe
strctr i mr th z ys, ith pr
ity r si-ity/si-t ris trs. It
ps p pprtity t rt xpsrs
t stricty Shrih-cmpit titis i th Ismic
dvpmt b thr Ismic ci
istittis
thepricingmechanismmaydepartfrominterest-
s chmrs sch s lIboR
Th xpsi this sst css mr
pth ith it th ci systm, spciy
s ris ivrsicti cms icrsigy imprtt
ig th ci crisis.
4Va
lue
Proposition
eXPanSIon oF a new aSSeT ClaSS
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5As aorementioned, Islamic nance oers a new asset
class, thus allowing more diversication o risks. It is
itrstig t srv h Ismic c hs cm g
y sic its ry icpti, t t r i
rg ci prcts t ctr r vris s.
Fr xmp, rig th ry ys Ismic c, mst
Ismic ci istittis y miis s s
Mrh, wih r qr Hss pricips, t
ty icrsig mr thm r t r simir
prcts r Mrhh r wh pricips. Simiry,
th rist typs S r miy strctr r
qr, Mrhh r by bithm aji pricips, t ty
s mr S Ijrh, Mrh, Mshrh,
Sm, Istis, Istithmr, tc. Hm-cig prcts
hich strt ith Mrhh by bithm
aji c ry Mshrh Mtish. a thsiict h th istry is st vpig mtrig
ith mir ssitivity t th cmic rity mrt
ms.
I th t (Ismic isrc) sctr, ivtis r s
tig pc ith th mvmt rm Mrh m
t th ry stg t wh w ms i rct
yrs. R-t cmpis hv icrs, ig mr
pths ttr cpcity r th Ismic c istry t
mg its riss.
I th cpit mrt, sis th ivti i vris
scritis istrmts, mr stc xchgs hv its
Shrih cmpit ixs, ijctig rthr trtivs
i trms ivstmt chics. Ivstrs r t tp
vst p Shrih cmpit prtis rm th d
Js i th uS t th nii i Jp.
witht t, Ismic c try rs v
prpsiti i th rm mr ris ivrsicti i th
mrt.
5Va
lue
Proposition
MoRe dIVeRSIFICaTIon oF RISkS
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6Value
Proposition
unloCkInG THe ValueS oF Idle aSSeTS
Th Shrih prhiiti gist itrst ms tht Ismic
ci istittis ct m my t my, t
rthr mr trs (i.. thrgh ss /r sig
ctrcts) r prticiptry cig (i.. thrgh jit
vtr r prt-shrig rrgmts) t xp th.
bth typs vtrs t rir sm ryig
ssts t ttch t th trscti.
Fr xmp, it is siy srv tht S issc,prticry i th GCC, h mit y r stt
vprs r rgi cstrcti m cm t
i 2008 s th crisis shc mrt cc
i prics smp. This is cs th S ry
rtrs rm tgi ssts sch s rts rm prprtis t
prc csh fs - t itrst - t py ivstrs.
Th ris Ismic c i gr th S mrt
i prticr, prvis v r cig th vs
sm i ssts simpy cs (i) thy my cmpy s
Shrih cmpit ssts; (ii) r stt s sy
sst css t strctr r cs its viiity
th pptit r it.
Th s r stt s ryig sst i cti t
py r i th sctr, thgh t th mmt tht my
hv t t shrt r, t th rst r stt
s i th uS, erp th GCC.
I th mtim, th istry c trtivs
icig ship cig, ship ircrt ss, s
ths ssts r vi thr r Ismic prcts
t thr tht r s sch ss. Thr c
cs ths ryig ssts gig rr. othr
ptis c ic th scritisti rcivs y
cmpis i th tcm, rgy srvics sctrs.
Cmmitis r thr typ sst tht ryris trsctis crri t i Ismic c.
Thrr cmmity sppirs cmmity mrts
c thr src m, i.. mgst Ismic
ci istittis tht hv th pptit r cmmity
t ri thir ci ctrcts.
Thr c thr typs i ssts tht c iy s
Shrih cmpit ths c t rm Ismic c
rirmts ryig ssts. It is p t th mrt t
itiy vrg ths ssts, s Ismic ci
istittis cm trtivs tht c pths
iths it th prct m sctis.
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It has been widely reported that the Islamic nancial
services industry suers rom a dire shortage o
proessionals specically trained and qualied or
this industry. whi it is vis tht Shrih visry
sprvisry sis r th rs tht hv th
highst m ithi th istry, thr is sti vst
scp pprtitis r thr js. ait sry r rm
xhstiv, th ig r mgst th typs srvics
rir s th istry ctis t gr:
Trust administration services
Trst miistrti stishs vris typs trsts ith
cc, s trsts c s r vrity prpss,
sch s pssig th t sccssiv grtis r
stishig chrit tis. Trsts c rprst
th mst tx-cit ys t prsrv th v
ssts. ectiv trst pig, mgmt
miistrti c xtrmy cmpx mttr, s
spciis visr is rir t p, impmt mg high-v trst s r yrs t cm. Th
ipt visr is s sigict phithrpic
trst i miistrti thrgh th g tis
sig t rss mjr sci ctr isss.
Business succession and corporate wealth
management
Fmiis csir t rth t miti rry
higs rm r stt siss ssts t trst
s thr ivstmts i my irt ctris.
Sprvisi ths ssts hs t gt t
prti mgrs is smtims mst s ivrs s
th ssts thmsvs.
Inheritance and estate planning
Ismic stt, ihritc git pig ims t s tht
iivi chrit ciris rciv ptimm
gcy, ccrig t Shrih ihritc . It rirs
cr pig vis--vis tx, crprti ci s
ppic i ch ctry.
Philanthropy and wealth with responsibility
Th Ismic ci istittis thy ivstrs t
ish t hv prgrmms t ctrit r th grtr
g, t stish ctr rspsiiity mg
th cits hirs sccssrs. Spciists tri ith
g Zt, hih, sh i thr
chrit istrmts rir.
Independent Financial Advisors (IFAs)
IFas my t hp rss cit s vr
vrity ctis, icig:
Selectinvestments
Mutualfunds
Foreignexchangeandcommodities
Hedginginstruments
Privateequity
Realestate
Financingfacilities
It is itrstig t t tht i th r Shrih vic
sprvisi i prticr, th Ismic ci srvics
istry hs ctrit i crtig hy ich
prssi c Shrih visrs. It hps t chg
th prigm Shrih cti triig rm
prcig imm mtis tht pryrs cct
mrrig crmis, t highy si Shrih xprts tht
r miir ith ci girig sphistict
cmic ysis, ths cmmig rspct jst i
thir ctrprts i thr prssis sch s yrs,
cctts rs.
Th Itrti Ismic uivrsity Mysi stimts tht
th mr prssis rir y th Ismic c
istry rch 2 mii pp y 2020. ev i
csrvtivy rc tht y 50%, thr is sti t js
t ticipt.
7Value
Proposition
Job CReaTIon
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A quick reerence to the IFSB Guiding Principles on
Risk Management (2005) will highlight that Islamic
nance has some specic risk components that
dier rom conventional nance, and additional risk
management structure and ramework would be
needed to manage these risks. Th iti yrs
ris mgmt strctr rmr stish
mr s ris mgmt ctr i Ismic ci
istittis.
Fr xmp, t ith Shrih cmpic riss, hich
is prt th prti rptti riss Ismic
ci istittis, pprprit Shrih gvrc
rmr i hv t pt i pc.
I thr xmp, i rr t rss th ispc
cmmrci ris (dCR) risig rm cmptitiv prssr t
istrit rt ivis tht is cmpr t ht
is pi i th mrt r its ivstmt cct hrs
(IaH), Ismic ci istittis sy stish prtisti rsrv (PeR) ivstmt ris rsrv
(IRR). Th PeR IRR sicy r it rm th grss
prts r rm th ivstmts m h th
IaH, i s t smth th priic ivi
istritis t th IaH, s tht thy mtch th rtrs
giv y th mrt.
as hv cg, th Ismic c
rsistc t cvti rivtivs thr simir
txic ssts hv mjr svir i miimisig th
impct th ci crisis Ismic ci istittis.
br th crisis, t this hs scri s th Ismic
cs achis h, cs it ct ry hg its
riss sig rivtivs istrmts. Ty, this tr hs
prv t try ssig i isgis.
ev i trms stc ix prrmcs, Ismic stc
ixs hv prrmig ttr t 34%
cmpr t thr stc ixs, simpy y viig th
itrst-s ci istittis tht sr hg sss
rig th crisis s thir stc prics pmmt.
Hc, Ismic c rs gi v prpsiti i
trms s ris mgmt.
8Value
Proposition
Sound RISk ManaGeMenT
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Shariah rules and principles require that an Islamic
nancial transaction be supported by an underlying
economic activity, thus ensuring that there is a close
link between nancial and productive fows. This
pricip mty rfcts th sic ig cti
prviig ci srvics tht s v t th rcmy. Fici fs i Ismic c r thrr
ccmpi y th xpsi gi prctiv
ctivity. ur this rrgmt it s vis vr-xpsr
t riss sscit ith xcssiv vrg.
whi th ppicti sst-c sst-s
s s ctrcts prvi ttr cmrt v
r ths h my hv mrt ris pptit, s thir
ris xpsrs r cshi y th ryig sst, th
prt-shrig jit-vtr rrgmts c s
y ths ith highr ris-trc. This sh vry mch
srv th s ths ith ivtiv trprisig
is, s thy c sti hv ccss t cpit ig spit
c ssts t pg s ctrs.
Th gr prhiiti imps y Shrih gist highy
spctiv ctivitis sch s sig t t iscts,
shrt-sig, hrig, tc., sis chig s/
rsrcs t tiis r prctiv vtrs, s hp
t prtct th cmy rm ss istrtis.
ovrvrgig, tht hv s sm ci systmstgrig th r cmy y svr hr prct,
t t hpp i Ismic c.
ecit cti cpit rsrcs spr
ivti trprrship, rr th isprity
t th rich th pr. This is miy cs
cmptiti r cpit rsrcs i s
viiity th siss/prjct rt t mch
s ssts vi s ctrs.
9Value
Proposition
CloSeR SuPPoRT To Real eConoMY
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The IDB-IFSB Task Force on Islamic Finance and Global
Financial Stability, chaired by H.E. Governor o Bank
Negara Malaysia, Tan Sri Zeti Akhtar Aziz, in its report
conrms that Islamic nance can contribute to global
nancial stability.
Th Ts Frc iti th ig ihrt trs
th Ismic ci m, hich is s cmpic
ith Shrih rs pricips, s y t its pttis i
ctritig t g ci cmic stiity:
10Value
Proposition
SYSTeMIC STabIlITY
P Fic c y xt t prjcts, tr,
cmic cmmrci trsctis. Fici
ssts c thrr y gr i prprti t
th grth i r cmic ctivitis , hc,
th pssiiity xcssiv vrg ts t
rmt.
P dt s ht y t hv is thmt pricips th mgmt i
Ism, hich rstricts th pssiiity hthy
xcssiv spcti.
P S t is iscrg rschig
t th sis rig itrst is prhiit.
Hc, th crti ivrt pyrmi
ts, hich is mjr src ci criss, is
vi.
P Ivstmts i pic privt itis hvt pss st scrig prcsss. This ms
sci thic rspsiiitis itgr prt
ivstmt cisis.
P Prsrvig gi iiity, rthr ig t th
stiity th IIFS.
P Prviig strg ictivs r Ismic ci
istittis t sr th sccss th prjcts
ctivitis tht thy c.
P emphsisig trsprcy, iscsr
cmtti ctrcts.
Th Ts Frc rcmms th stishmt Ismic
Fici Stiity Frm, hich ims t cmpmt th
G-20 iitit Fici Stiity br, i prmtig g
ci stiity.
I vi th 9 mjr v prpsitis highight rir
i this cmt, th igs th Ts Frc, it is
ivit t cc tht Ismic c is vit
s cmpt ithi y ci systm.
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Your Link to Islamic Finance
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ZICO has garnered a reputation or being a leading
regional legal rm in Islamic nancial services,
with its highly regarded credentials and depth o
expertise.
as th g rms ivv i pirig th
istry i Mysi, prmir itrti Ismic
c h, r miir ith r rg
mstic rgi Ismic c trsctis. w
s hv xtsiv xpric crss spcts Ismic
c, icig th g rgtry rmr,
cmpic, prct sig strctrig s s
cmtti prti. w r thrr vry
psiti t vis y i xprig rtirs
gtitig th cmpx g, ctr prctic
scps Ismic c crss asi, hthr y
r gvrmt thrity, ci istitti, ivstr
r cstmr ctmptig t prticipt i this thrivig
istry.
or cr strgth is i r itct cpit
pr isight it th istry, s r yrs
hv ivv i prpsig rgtry
rrms, cmpx trsctis, prct ivti
Shrih-cmpit stis r my jrisictis
istittis. w csir rsvs s gi
srvt prtr th istry, cmmitt t t
ZICO Islamic Finance Practice Group
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y t rm its xpsi t mr imprtty t
ctrit t its vpmt thrgh high ity g
srvics g schrship.
Th ci srvic sctr mst ri y thic
pricips srv t prmt prctivity vs i
th cmy, t stry thm. Th g ci crisis
prvs, mg thrs, th vstti tht c hpp i
ths mts r rmi.
I Ismic c, this is m s prt th
jctivs (msi) th Shrih. Zi Irhim &
C ts pri i srvig th istry ith thics
itgrity, t y y visig hpig t rig it
th mrt iis riggit rth ci prcts,
t srvig tht ivrs prctiv sctrs th
cmy icig rgy, irstrctr, ptti
mctrig t rm Ismic c. or r hs
hp cits i prtctig thmsvs rm cmpx
riss, icig g Shrih -cmpic
riss, ssist thritis i sgrig th istrys
sss rsiic.
w r vt t pyig r prt i ssistig cmis
i tig rm Ismic c th istry its t
ris its tr pttis. or spciis tm yrs
is cg s prmit prctitirs i th
Ismic ci srvics, ith th xpric tht
is rspct y prs cits i. with r xprtis
i th g rgtry rmr, Ismic strctrs,
trsctis prcts th sttig-p Ismic
ci istittis, r tm is ipp t rss
ris itrsts rm rgrig y sgmt
th istry.
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ZI Shariah Advisory Services
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ZI Shariah Advisory Sdn Bhd is a provider o Shariah
advisory services in Islamic banking and nance,takaul, Islamic unds, wealth management and
Islamic law in general.
w gi rgtry thritis, ci istittis
s iivis rm vris jrisictis r th
g cctig siss i ccrc ith Shrih
pricips. w prvi vic s thrittiv
strs, crtictis rgtis, hv ssist
cits i grspig cmpx Shrih isss i tm ithth rpi vti th Ismic c istry.
biig r tm mmrs ictis i Ismic
c g xpric i Ismic c,
r iy ipp t pprcit th cs th
Shrih visry scp. or ccss t th mst rit
ccmpish Shrih schrs rig i th
ty tgthr ith r strg cmmitmt t rsrch
schrship s t xp r g s
h r sis i th thry prctic. big
rst-i-mrt ith spciis Shrih-rt srvics,
hv prv r cpiitis r irm Shrih vic tiscrig cits. This hs r s th rcgiti rm
th Scritis Cmmissi Mysi s pprv
Shrih visr r S isscs, Ismic s
thr pprv Ismic cpit mrt prcts.
or tm mmrs hv cir prctic g
g isight gi rm rig cmpx
Shrih isss mjr crss rr trsctis. w
s hv ccss t istigish Shrih cstts rmth cmic siss rs. w r ths t
giv cits iv ipt rm th st mis i th
istry.
ZIShariahP r g r s s T h r g h k g
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The Malaysia International IslamicFinancial Centre (MIFC) Initiative
I agst 2006, th Mysi Itrti Ismic Fici Ctr (MIFC) iititiv s ch t
psiti Mysi s h r itrti Ismic c.
Th MIFC iititiv cmpriss cmmity tr th ctrys ci mrt rgtrs,
Gvrmt miistris gcis tgthr ith istry prticipti rm th ig, t,
cpit mrt istittis, hm cpit vpmt istittis prssi srvics cmpis
hich r prticiptig rig crtivy i th Ismic c.
Th MIFC iititiv is spprt y g g, rgtry Shrih st prctics tht s
istry prctitirs t cct itrti siss i Ismic c ctivitis yhr i Mysi
i th rs s rigiti, Ismic th mgmt, itrti Ismic ig,
itrti t hm cpit vpmt, hi jyig ttrctiv ictivs.
Mysi cms g tts, ig pyrs, issrs ivstrs t shp th tr Ismic
c tgthr thrgh th MIFC iititiv, vrgig tig rm Mysis mr th
30 yrs xpric i Ismic c i virmt ivti thght rship.
Fr mr irmti, g twww.mic.com
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Glossary o Islamic Finance Terminologies
Bay Bithaman Ajil (BBA) : a ctrct hich rrs t th s
prchs trscti r th cig ssts rr
istmt sis ith pr-gr pymt pri. Th s pric i
ic prt mrgi.
Bay al-Salam : a ctrct hry pymt is m i csh t
pit ctrct t ivry sst prchs is rr t pr-
trmi t.
Dhaman : a ctrct grt hry grtr rrits
y cim igti tht sh y th r
sst. This ccpt is s ppic t grt prvi
t trscti i th vt tr is t his t igti.
Gharar :Ghararis mt cpti ithr thrgh igrc
ssti mt th gs, th pric, r thrgh ty
scripti th gs, i hich r th prtis st t
civ. e.g. gmig is rm ghararcs th gmr isigrt th rst th gm.
Ghararis ivi it thr typs, mygharar fahish (xcssiv),
hich vitits th trscti,gharar yasir(mir) hich is trt
gharar mutawassit(mrt) hich s t th thr t
ctgris. ay trscti c cssi s ri ctivity
cs xcssivgharar.
Hibah : a git r t prs.
Hilm : Frrc r ivr.
Ijarah : a manfaah (srct) typ ctrct hry ssr
(r) ss t sst r ipmt t cit t gr
rt pr-trmi s pri p th aqd(ctrct).Th rship th s ipmt rmis i th hs
ssr.
Ijarah Thumma Bay : a ctrct hich gis ith ijarahctrct r th prps sig th ssrs sst t th ss.
Csty, t th th s pri, th ss i prchs
th sst t gr pric rm th ssr y xctig prchs
(y) ctrct.
Inaq : It hs th sm mig s hibah.
Istisna :a prchs rr ctrct ssts hry yr pcs
rr t prchs sst t ivr i th tr. Th yr
rirs th sr r ctrctr t cstrct th sst ivri th tr ccrig t th spcictis giv i th s
prchs ctrct. bth prtis ci th s prchs prics
th sttmt c y r rrg s sch
r cmpt.
Kaalah : It hs th sm mig s dhaman.
Maisir :ay ctivity tht ivvs ttig hry th ir ts
th t th sr ss his t. This is prhiit ccrig t th
Shrih.
Mudarabah : a ctrct m t t prtis t c siss vtr. Th prtis r rabb al-malr ivstr h
sy prvis th cpit mudarib r trprr h
sy mgs th prjct. I th vtr is prt, th prt i
istrit s pr-gr rti. I th siss is ss, it
i r sy y th prvir th cpit.
Murabahah : a ctrct rrrig t s prchs trsctir th cig sst hry th cst prt mrgi
(mr-p) r m gr t y prtis ivv. Th
pymt th prchs pric c stt ithr rrmp sm sis r istmt sis, is spci i th
grmt.
Musharakah : a prtrship rrgmt t t prtis r
mr t c siss vtr hry prtis ctrit
cpit ithr i th rm csh r i i. ay prt riv rm
th vtr is istrit s pr-gr prt shrig rti
ss is shr th sis cpit ctriti.
Qard Hasan : a ctrct t t prtis th sis sci r r t shrt-trm ci th rrr.
Th mt rpymt mst ivt t th mt
rr. It is, hvr gitimt r rrr t py mr th
th mt rr s g s it is t stt r gr t th pit ctrct.
Riba : a icrs, i trscti r i xchg
cmmity, ccr t th r (r) itht givig
ivt ctr v r rcmpsti i rtr t th thr
prty. It cvrs itrst th cmmrci csmr s,
is prhiit ccrig t th Shrih.
Sadaqah : dti.
Sukuk : a cmt r crtict, cmtig th ivi pr-
rt rship ryig ssts. Thsak(sigr sukuk) is
ry tr t pr, prmim r isct.
Shariah : Ismic , rigitig rm th Quran (th hy
Ism), its prctics xptis rr y th prpht
Mhmm (peace be upon him) ijtihad ulamak(prs
rt y i Shrih schrs t trmi th tr rig th
ivi mttrs hich rvtis r t xpicit).
Takaul :a rm Ismic isrc s th pricip
taawun r mt ssistc. It prvis mt prtcti ssts
prprty rs jit ris shrig i th vt ss icrr
y its mmrs. T is simir t mt isrc i tht
mmrs r th isrrs s s th isr.
Wakalah : a ctrct hich givs prs th pr t mit
sm t ct his h, s g s h is iv, s thgr trms citis.
Wadiah Yad Dhamanah : Gs r psits pt r spig
ith thr prs, h is t th r. as wadiah is trst, th
psitry cms th grtr grts rpymt th
h mt th psits, r y prt thr tstig i th
ccts th psitrs, h m. Th psitrs r t
tit t y shr th prts t th psitry my prvi
rtrs t th psitrs s t pprciti.
Zakat : a tx, hich is prscri y Ism prss hvigth v crti mt t rt x y th Shrih.
accrig t th Ismic i zt pris th ss. Th
jctiv is t t y prt th th th -t- tistrit mg ight ctgris pp stt i th qr.
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Ctct dtis
YBhg Dato Dr Nik Norzrul Thani
emi : [email protected]
Madzlan Hussain
emi : [email protected]
Megat Hizaini Hassan
emi : [email protected]
Dr Aida Othman
emi : [email protected]
Zaid Ibrahim & Co
lv 19 Mr Miim
Pst br dmsr
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