Introduction to Islamic Banking and Finance

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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.

Transcript of 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 sharias standpoint on

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

    different features that need to conform to the tenets of the Shara. 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 2s 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)

    - Issues in Product Management

    - 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)

    - Issues in Product Management

    - Areas of Application

    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)

    - Areas of Application

    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)

    - Issues in Product Management

    - Areas of Application

    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 4s 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

    -