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Transcript of HANDBOOK OF ISLAMIC FINANCE 2001-09-23¢  the Quran and hadith in traditional Islamic...

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    HANDBOOK OF ISLAMIC FINANCE
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    http://www.EthicaInstitute.com http://www.ethicainstitute.com http://www.ethicainstitute.com

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    © 2016-2020
 


    Published by

    Ethica Institute of Islamic Finance 
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    Emaar Boulevard, Downtown Dubai 
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    All rights reserved. Aside from fair use, meaning nonprofit educational purposes, review or academic citation, no part of this publication may be reproduced without the prior permission of the Copyright owner.

    Disclaimer: Content in this e-book and available at www.EthicaInstitute.com is provided for education and informational purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness, or fitness for any particular purpose. The information contained in or provided from or through all of Ethica’s content is general in nature and not specific to you or anyone else and is not intended to be and does not constitute financial, legal, investment, trading or any other advice. You understand that you are using any and all information available on or through this and other Ethica content at your own risk.

    If you are the owner of publishable content that you would like included in the next edition of Ethica’s Handbook of Islamic Finance, please contact us at contact@ethicainstitute.com.
 
 Cover photo: Copyright © Sohail Nakhooda

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    Ethica’s Handbook of Islamic Finance is a free e-book designed for you to keep on your desktop as a handy reference. And because an e-book is not an ordinary book - enjoyed from beginning to end - we want you to cut, copy, forward, translate, or store all or part of the book (for non-commercial use only) as you wish. Sample contracts, Q&As, speeches, petitions, not to mention an entire guidebook on Islamic finance, make this e-book a collection of the best that Ethica has to offer…completely free of charge. We ask that the words be left as they are and the source be attributed and acknowledged.

    Share it with your friends and colleagues by forwarding this link: http://bit.ly/ EthicaEbook.

    Click here to receive regular updates and next year’s edition of Ethica’s Handbook of Islamic Finance.

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    Corruption has appeared in the land and sea, for that men's own hands have earned, that He may let them taste some part

    of that which they have done, that haply they may return.

    Koran (30:41)

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    "All that we had borrowed up to 1985 or 1986 was around $5 billion and we have paid about $16 billion yet we are still being

    told that we owe about $28 billion. That $28 billion came about because of the injustice in the foreign creditors' interest rates. If you ask me what is the worst thing in the world, I will

    say it is compound interest."

    President Obasanjo of Nigeria, G8 summit, Okinawa, 2000

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    LETTER FROM A READER... I recently downloaded your Handbook of Islamic Finance and have just begun to read it. I am so

    pleased that my eyes have had the chance to read some of the words within it.

    I have for many decades been part of the Western finance system and over the years I have become

    more and more aware of the greed and corruption that exists within it. For many years I have

    thought of the damage this greed and corruption has done to the lives of millions of innocent

    people.

    Now I have started to educate myself on the fundamentals of Islamic finance and am quite excited to

    one day become part of the Islamic finance system that places the good of many above the greed

    and self interests of a few as Western finance has proven to do.

    I firmly believe that if the Western banking system had been operating under the ethical guidelines of

    Islamic finance, then there would never have been a global financial crisis.

    I am not a religious person, but I strongly believe in ethical outcomes, as my dear and now departed

    uncle Bert said to me not long before he died — "Whatever you do in life William — just do good,

    just do good." I believe I have now discovered a path that would have made my uncle Bert proud.

    Once again, thank you for allowing me to read Ethica's Handbook.

    William Lancaster
 Melbourne, Australia 


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    TABLE OF CONTENTS We Believe… Ethica’s manifesto.

    8

    Ethica Brochure 10

    Speech
 Use this speech or the accompanying video at your conference, training session, bank, or university.

    16

    Articles
 Inform yourself and others about the basics of Islamic finance.

    27

    Meezan Bank's Guide to Islamic Banking by Dr. Imran Usmani 
 A detailed description of the industry’s core products from one of its leading scholars.

    94

    Islamic Finance Contracts
 Sample contracts for you to use as the basis of transactions at your bank or in your community.

    297

    CIFE™ Study Notes
 These study notes help you prepare for Ethica’s award-winning Certified Islamic Finance Executive™ (CIFE™) program.

    405

    Recommended Reading for Practitioners Develop your understanding of finance within an ethical context.

    458

    Recommended Reading for Entrepreneurs 
 Launch your dreams with wisdom from some of the greatest entrepreneurial minds.

    468

    Change the Rules: Websites We Love Broaden your worldview in a changing social, economic, and environmental world.

    473

    Islamic Finance Questions and Answers 
 Use this database of 1,000+ scholar-approved answers to guide your commercial dealings.

    478

    Glossary of Commonly Used Terminology
 Use this section to understand the industry’s most commonly used terminology.

    757

    Press Releases 784

    Contact Ethica 800

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    WE BELIEVE… We believe that interest is the root cause of most of the world’s problems.

    If we did not have compound interest, we would not need compound growth. And if we did not need compound growth, we would not have most of the debt-induced poverty, resource-hungry wars, and runaway climate change we now see. All interest - whether simple interest or compound interest, whether at very low rates or very high rates - grows so fast that we simply cannot keep up.

    Need an example? Brazil is home to the beautiful Amazon rainforest. This lush wonder supplies us with a quarter of the world’s oxygen. Unfortunately, this forest will vanish in our lifetimes. Why? So Brazil can pay off $200 billion of debt. How? With lumber.

    Or take an example closer to home. Are you or someone you know crushed under growing personal debt? 43% of all American families now spend more than they earn each year. And this problem gets worse each year for millions of families around the world.

    We believe there is a connection between interest and many of the world’s problems. And we believe that Islamic finance can help solve some of these problems.

    But for this to happen we need two things: the letter of the law and the spirit of the law. For the letter of the law to work, Islamic finance needs to follow some basic minimum standards. Standards that won’t be taken seriously unless central banks start pulling some licenses.

    The best standard in the industry - de facto in over 90% of the world’s Islamic finance jurisdictions - is AAOIFI (pronounced “a-yo-fee”), which stands for the Accounting and Auditing Organization for Islamic Financial Institutions. AAOIFI brings together scholars from all over the world who agree on Shariah standards. And because AAOIFI provides minimum standards, if it isn’t AAOIFI-compliant, it probably isn’t Shariah-compliant. As one scholar put it, “The closest thing we have to ijma (scholarly consensus) in Islamic finance is AAOIFI.” Ijma, as you know, is the highest evidentiary source after the Quran and hadith in traditional Islamic jurisprudence. We believe that following AAOIFI Shariah Standards - and questioning whether your bank, scholar, or trainer is following them - is a good starting point for following the letter of the law.

    But we can’t stop there. Islamic finance needs to follow the spirit of the law as well.

    We need to promote equity-based structures like Musharakah and Mudarabah and reduce our dependence on expedient structures like Murabaha. We need to eliminate Tawarruq. And at a broader level, we need to address the larger problem of fractional debt-reserve banking. Why do banks get to lend money they don’t have? And make money on money that doesn’t exist? Does this make sense?

    While the reality is that banks aren’t going away anytime soon, a first step to challenging fractional debt-reserve banking is establishing a global