Introduction to Islamic Banking and Finance

Introduction to Islamic Banking

and Finance

IN HOUSE TRAINING PROGRAM

OUTLINE

PROGRAM SCOPE:

HOW THIS COURSE WILL ASSIST?

The objective of this program offered by Sharia House is to educate and train

individuals who are new to the Islamic Finance and less equipped with the

knowledge in this field. This course will be a comprehensive guide for attendees,

equipping them with the basic and detailed understanding of the Sharia based

finance system. The course content is developed with the rich content keeping the

needs of attendees in the mind.

COURSE DESCRIPTION

Introduction to Islamic banking and finance course is designed to understand the

need of Islamic banking and the difference between conventional counterparts.

Attendees will also be enlightened with Islamic law of business transactions and

contracts. This course will not only help the attendees to work with the Islamic

modes of finance but will also equip them with enough understanding of Islamic

Investment Banking, Fund Management, and Project Finance & Financial

Engineering.

Introduction to Islamic Finance

Ethical Financial System

Distinguishing Features of Islamic Economic System

Islamic Law of Contracts and Business Transactions

Islamic Modes of Finance

Islamic Investment Banking

Islamic Financial Engineering

Islamic Fund Management

Islamic Project Financing

Training Methodology

In order to engage diversified group of participants and ensure learning of the

comprehensive concepts to every participant, we have developed diversified and

tested training techniques that include:

- Discussion based interactive class room sessions

- Case Studies

- Group Discussion/ Class Exercises

- Presentations

TRAINING COURSE OUTLINE

DAY – 1

“Ethical Fianancial System"

Topic 1: Distinguishing Features of Islamic Economic System.

Session 1 introduces the fundamentals of Sharia for Islamic Finance. It will

highlight the sources of Sharia, and its objectives. Difference between trade and

usury is particularized in terms of application of Sharia principles in the conduct

of Islamic banking. It will highlight the main prohibited elements in Islamic

transactions and will discuss the norms of ethics in Islamic financial system.

Islamic Sharia and its Objectives

Sources of Sharia Tenets

Objectives (Maqasid) of Sharia

Paraphernalia of Islamic Economics

Ownership of Resources and Property Rights

The Factors of Production

Restrained Individual Freedom

Liberalism versus State Intervention

Topic 2: Islamic Financial System: An Overview

Session 2 will develop the understanding of basic philosophy of Islamic finance

and rulings on avoidance of elements in Islamic Finance.

In this session we will discuss the basic features of Islamic finance directly

affecting the products, instruments, institutions and markets in the framework of

business and finance. This includes avoiding interest, involvement in genuine

trade and other business, Kharaj bi-al-Daman (Risk and Return), and other

requirements for profit entitlement in various kinds of businesses, money earning

money versus risk-based business and their impact on banks, depositors and the

fund users.

Norms of Ethics in an Islamic Financial System

Financial System Efficiency

Financial Product & Services

Financial Markets

Norms Relating to Riba

Norms Relating to Gharar

Norms Relating to Ta'wun

Topic 3: Islamic Law of Contracts and Business Transactions

Session 3 will develop the understanding of basic concepts about Wealth, its use

and ownership from Islamic viewpoint. It will cover the sharia’s standpoint on

contract, and the basic elements of contracts. Different transactions have

different features that need to conform to the tenets of the Sharıa. We will

comprehensively discuss Contracts that do not conform to Sharia doctrines or

that involve prohibited elements to have an in-depth understanding of these

elements to avoid invalid contracts.

Islamic banks and financial institutions are dealing in goods by entering into

contracts like sale, leasing, partnership, surety ship, agency, assignment of debt,

and mortgages it will be valuable discussion in detail.

Maal (Wealth), Usufruct and Ownership

General Frame work of Contracts

Elements of a contract

Broad Rules for the validity of Muamalat

Wadah (Promise) and related matters

Types of Contracts

Commutative Contracts and Non-commutative Contracts

Legal Status of Conditional and Contingent Contracts

DAY – 02

“Islamic Commercial Banking”

Topic 1: Commercial Banking

Day 2’s first Session will span over several topics including the discussion on

conventional commercial banking, their appraisal form Islamic finance angle

and what are their Islamic counter parts available. We will comprehensively

discuss the Islamic models of deposit and their mechanism. Finally we will

thoroughly cover the Islamic debit and charge card.

Conventional Commercial Banking

Islamic Appraisal of Conventional Commercial Banking

Islamic Alternatives

Current Deposit (Wadiah/Qardh)

Debit & Charge Card

Saving Deposits (Wadiah/Qardh)

Investment Deposits (Mudarabah)

Issues in Product Management

Topic 2: Financing Products (Equity - Based)

After understanding the essentials of commercial banking, we will lead the

discussion towards the basic modes of Islamic Finance; Mudarabah facility will

be elaborated which acts as a trustee partnership facility. We also discuss the

Musharaka mode of finance, more over the innovative mode of declining

partnership will be discussed which is being used frequently by the Islamic banks

to facilitate their clients.

Trustee Partnership Facility (Mudarabah)

Joint Venture Facility (Musharaka)

Declining Partnership Facility (Musharaka)


Areas of Application

DAY – 03

“Islamic Financing Products –

Debt Based”

Topic 1: Financing Products (Debt - Based) I

This session will shift the spot light towards the asset side of Islamic banks,

financing products of an Islamic bank would be covered. From Islamic modes of

finance; the more popular financing products based on Murabaha, Bai-

Bithaman-Ajil and Ijarah will be discussed comprehensively.

Deferred Payment (Bai-Bithaman-Ajil) with Cost-Plus-Profit Sale

Facility (Murabaha)

Leasing Facility (Ijarah)



Topic 2: Financing Products (Debt - Based) II

After discussing the common modes of finances, we will shift the limelight

towards forward delivery contracts. These are debt-financing techniques that

are slowly making their appearance on the Islamic finance scene. In Salam

which is a deferred delivery sale, we will also cover how Islamic banks can use it

for pre-shipment export finance. After covering the Salam; we will shift towards

the one in a kind Islamic mode of finance where the payment and delivery both

can be subject to the future.

Deferred Delivery Sale Facility (Salam)

Manufacture Sale Facility (Istisna)

Recurring Sale Facility (Istijrar)

Benevolent Loan Facility (Qardh)


Topic 3: Financing Products (Debt - Based) III

Session 3 will be based on the overview of mechanisms which have been

introduced recently but either is forbidden or at best controversial. These

products have been the subject to intense debate, and we will uncover the

scholarly outlook in this session.

Repurchased (Bai-al-Einah)

Credit Card Based on Bai-al-Einah

Bill Discounting (Bai-ul-Dayn)

Tripartite Resale (Tawarruq)



Topic 4: Fee-Based Products

Session 4 will cover few of the wide range of fee based services offered by

Islamic banks. The modern Islamic commercial banks offer a wide array of

services to the customers based on fee and are distinct from the services that

are fund based. Some of the Islamic products such as Wakalah and Kafala will

be discussed which do not require employment of funds.

Letter of Credit (Wakalah)

Letter of Guarantee (Kafala)

DAY – 04

“Investment Banking, Fund

Management, Project Finance &

Financial Engineering”

Topic 1: Investment Banking

Day 4’s introductory session will deal with investment banking and will initiate the

discussion with how conventional investment banking is practiced and

undertakes an assessment of the same from the stand point of sharia

compliance. The Islamic alternative investment banking products – both in pre-

market stage and after-market stage will be presented briefly. Moreover, this

session will also emphasize on venture financing, creation of securities and other

services, such as stock broking.

Conventional Investment Banking

Islamic Appraisal of Conventional Investment Banking


Venture Finance

Creation of Securities

Stock Broking

Topic 2: Financial Engineering

Session 2 will undertake an elaborate discussion of basic risk management

products based on options, forwards and futures and swaps. An Islamic

appraisal will be done after introduction of conventional financial engineering

and their Islamic alternatives will be debated comprehensively.

Conventional Financial Engineering

Islamic Appraisal of Conventional Financial Engineering

Forwards & Futures

Options

Swaps


Topic 3: Fund Management

Session 3 will be devoted to fund management and will comprise the discussion

of how funds are managed conventionally through various mutual funds, unit

trusts and real estate in investment companies. This session will undertake

assessment of the same from the standpoint of Sharia compliance. The Islamic

alternative fund management products will be then briefly presented.

Furthermore, it will elaborate on various issues relating to the fund management

products.

Conventional Fund Management

Islamic Appraisal of Conventional Fund Management


Fund Management Products


Topic 4: Project finance

Lastly, we will discourse project financing, and this session will begin with a

discussion of project finance as is undertaken in the conventional way and goes

on to examine the issue of Sharia compliance. Some project finance structures

that are deemed Islamic will be presented, the important issue of risk sharing

and management in the context of project finance will then be discussed.

Conventional Project Finance

Islamic Appraisal of Conventional Project Finance



DAY – 05

COURSE AGENDA

“WORKSHOP & CERTIFICATION”

Session – 01: Workshop & Case Study

Session – 02: Q&A

Session – 03: Certification

Contact

AFSHEEN SHAIKH

CHAIRMAN

Emirates Towers, Level 41. Sheikh Zayed Road, Dubai, P O Box 31303, UAE

M: +971 (55) 5565980

T: +971 (4) 458 5116

F: +971 (4) 458 5178

E:[email protected]

EHSAN WAQUAR

CEO

Business Centre, Office No. 701, 7th Floor, Shahre- Faisal Road, Karachi. Pakistan

M: +92 - 300 – 8286191

T: +92-213-4324102

F: +92-213-4324101

E:[email protected]

mailto:[email protected]

mailto:[email protected]

Introduction to Islamic Banking and Finance

Documents

Transcript of Introduction to Islamic Banking and Finance