Introduction to islamic banking & finance

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  1. 1. Supplementary Resources The Pearson commitment goes further than just providing excellent textsbooks like this are also accompanied by a host of supplementary materials designed to enhance the teaching and learning experience. Introduction to Islamic Banking and Finance is supported by a detailed, easy to use Instructor Manual, powerful Test Bank Generator and dynamic PowerPoint Slides. Its all part of the Pearson service. This introductory text provides students with a conceptual framework for understanding the key concepts, theories and principles associated with Islamic banking and finance. Important elements of the discipline are explained over ten chapters, providing students with a thorough understanding of the central products and services the Islamic banking and finance industry offers. Current issues and concerns pertinent to Islamic banking and finance are also considered, giving readers insight into the possible future directions of this rapidly growing industry. Students are encouraged to connect with the subject matter through the inclusion of case studies and practice problems based on current industry trends and practices. With an emphasis on engaging readers through the use of relevant and applicable material and activities, this book gives students an excellent grounding in Islamic banking and finance. HassanKayedOseniIntroductiontoIslamicBanking&Finance Introduction to Islamic Banking & Finance Principles and Practice M. Kabir Hassan Rasem N. Kayed Umar A. Oseni CVR_IIBF_SB_ARW_7315_CVR.indd 1 06/02/2013 12:25
  2. 2. al-aqidan contracting parties al-maqud alaih subject matter of contract al-rida consent aqd contract aqd infiradi unilateral contract aqd thunai bilateral contract arbun down payment Bait al-mal state treasury bay sale transaction bay al-dayn sale of debt bay al-inah sale and repurchase back bay al-muajjal deferred sale bay al-sarf contract of exchange of currencies bay al-tawrid mutual forward contract bay bithaman ajil deferred payment sale dhimmah juristic personality fatwa legal ruling fiqh Islamic jurisprudence fiqh al-muamalat jurisprudence of commercial transactions gharar speculative risk-taking hadith Prophetic tradition hajj pilgrimage to Mecca hawalah contract of debt assignment hibah gift hilah legal artifice hisbah guarding against infringements ibra rebate ijarah lease contract ijarah mawsufah fi dhimmah forward lease ijarah muntahia bittamlik lease ending with ownership ijarah thumma al-bay Islamic hire-purchase ijma consensus of opinion ijtihad independent legal reasoning istihsan juristic preference istisna manufacturing contract jualah contract of commission kafalah contract of guarantee majlis al-aqd session of contract maslahah mursalah unregulated public interest maysir gambling muallaq contingent contract muamalat commercial transactions mudarabah trust investment partnership mudarabah al-muqayyadah restricted trust financing contract mudarabah al-mutlaqah unrestricted trust financing contract mudarabah sukuk trust investment certificates mudarib entrepreneur muhtasib ombudsman mukallaf legally accountable person muqaradah trust financing contract muqasah offset contract murabahah cost-plus financing musharakah joint venture partnership musharakah mutanaqisah diminishing partnership muwaadah bilateral promise muzakki zakat payer nikah marriage nisab threshold amount for zakat qard hasan benevolent loan qimar game of chance rabb al-mal capital provider rahn collateral or mortgage riba interest or usury riba al-buyuu interest in trade riba al-duyun interest on loans riba al-fadl interest of exchange surplus riba al-jali obvious interest riba al-khafi hidden interest riba al-nasiah interest on money lent riba al-mubashir direct interest riba ghayr al-mubashir indirect interest ribawi interest-bearing Saa volume measurement (3 kg) sadaqah charity or voluntary alms Sadd al-dhariah preventive measures salam forward sale contract sanadat commercial papers sarf exchange Sharah Islamic law shibh al-aqd quasi contract shirkah partnership shura consultation sighah form sukuk Islamic bonds or certificates Sunnah traditions of Prophet Muhammad tabarru donation tabarruat gratuitous contracts takaful Islamic insurance takaful taawuni cooperative insurance scheme talaq divorce tawarruq cash procurement tawriq securitization ujrah fee or commission waad unilateral promise wadiah contract of bailment wadiah yad damanah guaranteed bank deposit wakalah contract of agency waqf charitable endowment wasiyyah bequest zakat obligatory wealth levy text for flap.indd 1 09/01/2013 08:47
  3. 3. Preface M. Kabir Hassan, Ph.D. University of New Orleans, United States of America Rasem N. Kayed, Ph.D. Arab American University Jenin, Palestine Umar A. Oseni, Ph.D. International Islamic University, Malaysia Introduction to Islamic Banking & Finance Principles and Practice A01_HIBF_SB_ARW_7315_PRE.indd 1 18/02/2013 09:35
  4. 4. Pearson Education Limited Edinburgh Gate Harlow Essex CM20 2JE England and Associated Companies throughout the world Pearson Education Limited 2013 The rights of M. Kabir Hassan, Rasem N. Kayed and Umar A. Oseni to be identified as authors of this work have been asserted by them in accordance with the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without either the prior written permission of the publisher or a licence permitting restricted copying in the United Kingdom issued by the Copyright Licensing Agency Ltd, Saffron House, 610 Kirby Street, London EC1N 8TS. All trademarks used herein are the property of their respective owners. The use of any trademark in this text does not vest in the author or publisher any trademark ownership rights in such trademarks, nor does the use of such trademarks imply any affiliation with or endorsement of this book by such owners. Pearson Education is not responsible for the content of third party internet sites. First published 2013 21 20 19 18 17 16 15 14 13 IMP 10 9 8 7 6 5 4 3 2 1 ISBN: 978-0-2737-3731-5 Acquisitions Editor: Rasheed Roussan Senior Development Editor: Sophie Bulbrook Project Editor: Jeanette Hewitt Copy-editor: Louise Bolotin Proofreaders: Paul Stirner, Stephen York Design Manager: Sarah Fach Permissions Editor: Rachel Thorne Picture Researchers: Iman Naciri, Zohir Naciri Printed in China Indexer: Indexing Specialists (UK) Ltd Marketing Manager: Sue Mainey Production Controller: Christopher Crow Cover Designer: Sarah Fach Typesetter: Tech-Set Ltd, Gateshead Typeface: 9/14pt The Serif HP3 Light A01_HIBF_SB_ARW_7315_PRE.indd 2 18/02/2013 09:35
  5. 5. This textbook is dedicated to our respective families who have stood behind us during the course of writing this pioneering work. They have been a constant source of inspiration. With renewed zeal, we have pursued the goal of producing a textbook for the global Islamic finance industry that will enhance the Islamic finance pedagogy. A01_HIBF_SB_ARW_7315_PRE.indd 3 18/02/2013 09:35
  6. 6. iv About the Authors About the Authors M. Kabir Hassan Dr. M. Kabir Hassan is a financial economist with consulting, research, and teaching experience in development finance, money and capital markets, Islamic finance, corporate finance, investments, monetary economics, macroeconomics, and international trade and finance. He has provided consulting services to the World Bank (WB), International Monetary Fund (IMF), Islamic Development Bank (IDB), African Development Bank (AfDB), USAID, Government of Bangladesh, Organization of Islamic Conferences (OIC), Federal Reserve Bank, USA, and many corporations, private organizations, and universities around the world. Dr. Hassan received his BA in Economics and Mathematics from Gustavus Adolphus College, Minnesota, USA, and MA in Economics and PhD in Finance from the University of Nebraska-Lincoln, USA, respectively. He is now a tenured Full Professor in the Department of Economics and Finance at the University of New Orleans, Louisiana, USA. He has 135 papers published in refereed academic journals to his credit. Dr. Hassan has published in the Journal of Banking and Finance, Pacic Basin Finance Journal, Journal of Financial Services Research, Financial Review, Quarterly Review of Economics and Finance, Journal of Business, Finance and Accounting, Journal of Economics and Finance, Global Finance Journal, World Development, Thunderbird International Business Review, African Development Review, Islamic Economic Studies, Review of Islamic Economics, Journal of King Abdul Aziz University and Journal of Developmental Entrepreneurship. Dr. Hassan supervised 27 doctoral theses, and many of his students are now well placed in the academia, government and private sectors. He is editor of The Global Journal of Finance and Economics and Journal of Islamic Economics, Banking and Finance, International Journal of Islamic and Middle Eastern Finance and Management, and co-editor of Journal of Economic Cooperation and Development. Dr. Hassan has edited and published many books along with articles in refereed academic journals. He is co-editor (with M. K. Lewis) of Handbook of Islamic Banking and Islamic Finance, The International Library of Critical Writings in Economics (Edward Elgar, 2007), and co-editor (with Michael Mahlknecht) of Islamic Capital Market: Products and Strategies (John Wiley and Sons, 2011). He is co-author of Islamic Entrepreneurship (Routledge UK, 2010). A frequent traveler, Dr. Hassan gives lectures and workshops in the USA and abroad, and has presented more than 257 research papers at professional conferences and has delivered 91 invited papers/seminars. Rasem N. Kayed Dr. Rasem N. Kayed is currently the Head of Business Administration and Marketing Departments and Deputy