SG-Islamic Finance & Banking-FM6

IQRA UNIVERSITY IU

E S S E N T I A L S O F I S L A M I C F I N A N C ECOURSE CODE: 01-05-0476 &01-05-0432

Course Study GuideAcademic Year

Fall 2012

MBA/BBA Program

Department of Business AdministrationFaculty of Management Sciences

Course Study Guide (Fall 2012): Essential of Islamic Finance (by Farhan Mehboob, at IUGC) of 12

IQRA UNIVERSITY IU

Summarized Course Outline (Spring 2012), Essentials of Islamic Finance (01-05-0432/0476), for MBA/BBA

Course Facilitator: Farhan MehboobLecture Contents of Lectures Book Handouts1-2 Course Introduction (Group project assigned)

Simplified history of Islamic banking

Fundamentals of Islamic Jurisprudence (brief overview of fundamentals)

Sources of Shari’ah Interpretation of Qur’an Science of Hadith Reasons for differences amongst the Fuqaha

Suggested reading: Handout 1

Islamic Finance Law, Economics & Practice:

Chapter # 2

1

1-2 Riba Exposed Definition of Riba – interest Riba: Haram in Islam (Qur’an & Hadith) Types of Riba Consequences of Riba in the Hereafter The fundamental problem with interest Will Riba continue to dominate global economy ? Riba in a controlled environment Effects of Riba in the society (positive or negative ?) Resent history of interest based finance & banking Comparison of the current situation, with the early period in

Madinah Misconceptions about Riba

Suggested reading: Article 1

1-2 1-2

1-2 Islamic Economy The concept, applicable in the 21st Century ? The Role of the government Abhorred practices Macroeconomic variables

Developments In Islamic Banking – The Case of Pakistan, by

1-2


Fiscal Policy Monetary Policy Failure of Capitalist and Socialist economies The future of Islamic Economy

M. Mansoor Khan and M. Ishaq Bhatti

Chapter # 2

Understanding Islamic Finance: Chapters 1, 2 & 3

1 Introduction to Islamic law of contracts Types of contracts in Islam Basic elements of a contract in Islam Law of contract and its scope

Four basic prohibitions in Islamic Finance

Basic Islamic modes of financing Sale & purchase – trade-based modes of financing (Bai’-

tijaraat) Types of sale

Lease & tenancy – rental-based modes of financing (Ijarah –Kirayah dari)

Types of lease Partnership (Shirakah – shirakat dari)

Type of Skirakah – partnership

Application of law of contract into sale and other modes of financing

Islamic Shariah Law Based on Quraan Sunnah And Ijtehad

Understanding Islamic Finance: Chapters 5

1

Mid-Term

Midterm Examination Mid-Term Mid-Term

1-2 Trade-based modes of financing Introduction to trade-based modes of financing Types of sale

Murabahah Explanation, rules & regulation Application in banking

Musawamah Explanation, rules & regulation Application in banking

Salam Explanation, rules & regulation Application in banking

Istisnann’ Explanation, rules & regulation Application in banking


An Introduction to Islamic Finance:

Murabahah, Salam & Istisna’


Chapter # 5

Understanding Islamic Finance:

1-2


Chapters 9 & 10

1-2 Rental-based modes of financing Lease & its types Ijarah & its explanation Types of Ijarah Difference between Ijarah and lease Rules and regulations Application in the banking sector

Participatory modes of financing Participation & its explanation Shirakat (partnership) and its meaning Types of Shirakah (partnership) Musharakah

Explanation, rules & regulations Application in the banking sector

Mudarabah Explanation, rules & regulations Application in the banking sector



Ijarah, Musharkah, Mudarbah, Musharikah & Mudarbah as modes of financing,


1-2

2-4 Advanced topics in Islamic banking: Islamic banks & the concept of profit & loss sharing

Some confusion and misconceptions Fixation or non-fixation of return Meaning of profit and loss sharing Credit sales and price differentiation –

Time value of money (does time have any value in Islamic finance)

Treasury operations in Islamic banks Deposit management in Islamic banks Currency trading & its rules & regulations Stock market in Islamic Finance Central bank & its role – relation between state bank &

Islamic banks International trade & finance, & Islamic banking Interest rate benchmarking in Islamic banking Relationship between Islamic & conventional banks Sukuk – Islamic bonds

Theory & application Takaful – Islamic insurance

Explanation, rules & regulations Difference between Takaful and conventional

insurance Application

Suggested reading: Article 4 & 5


Islamic Investment Funds


Chapter # 6

Understanding Islamic Finance: Chapters 15 & 16

2-4

1 Islamic Finance & Banking: threats, opportunities, weaknesses & strengths

An Introduction

1


Implications of an interest-free economy The problems with contemporary Islamic Banks Islamic Banking – Halal or Haram ? The future of Islamic finance & banking

Suggested reading: Article 6 & 7

to Islamic Finance:

The performance OF Islamic Banks- A Realistic Evaluation



Chapter # 80-2 Submission of Projects I & II & Presentations

(No late work will be accepted!)0-2 0-2

Final Final Examination Final Final

Course InstructionsImportant note:

Students are required to research the topic of Tawaraq. It will not be covered in class, but will be included on the mid-term examination. This is a self study, research assignment.

Students are required to research the topic of Sukuk, Mugarasa, Muzara, and Musaqah. They will not be covered in class, but included on the final examination. This is a self study, research assignment. Further, videos will be provided for student to view and study on their own; students are encouraged to discuss in class. The videos will be included in the final examination.

Text Books Islamic Shariah Law Based on Quraan Sunnah And Ijtehad Shari’ah Law An Introduction Understanding Islamic Finance, by Muhammad Ayub The Art of Islamic Banking & Finance – Tools & Techniques for community based

banking, by Yehia Abdur-Rehman, Wiley Finance Islamic Financial Services, by Muhammad Obaidullah Meezan Bank’s Guide To Islamic Finance, by Dr Muhammad Imran Ashraf Usmani An Introduction To Islamic Finance, by Mufti Taqi Usmani, Islamic Finance Law, Economics, and Practice, By Mahmoud A. El Gamal, Cambridge

University Press Developments In Islamic Banking – The Case of Pakistan, by M. Mansoor Khan and M.

Ishaq Bhatti Milestones To Eternity by Muhammad Abu Mutawakkil, Darul Ishaat, Karachi, Pakistan. Islamic Economics & Finance (2nd Edition), A Glossary, by Muhammad Akram Khan,

Routledge Taylor & Francis Group (London & New York). Milestones To Eternity by Muhammad Abu Mutawakkil, Darul Ishaat, Karachi, Pakistan. Growth of Islamic Banking in Pakistan, by Agha Zohaib Khan


Important advice:Only those student are advised to take this course who: Have access to a reliable and secure pc, connected to the internet; Have a decent command of the English language; Are ready to put in at least 6 hours per week of relevant dedicated “work”. Are not afraid of learning what they don’t know, and in some cases may not see the

technology applied in Pakistan.

Attendance policy Attendance once marked will NOT be changed. NO excused absence at all. NOT present in class (for whatever unavoidable reasons) means ABSENT. 4 absences means a grade of FAIL! LATE means absent. Class disruption or any other nuisance that disturbs the discipline of the class will result in negative class

participation marks. Prolonged class distraction will result in suspension from class. With regards to the above issues DON’T bother me. NEVER call me!

Assignments:Students are responsible for all class work and assignments according to the schedule, even in case of absence. No late work will be accepted. Students should be expecting assignment every week. Assignment will be assigned in class or available on the course network folder. Assignment are designed to give student hands on practical experience.

Comprehensive TestsFour comprehensive test scheduled during the semester, to clarify concepts and help students judge their level of preparation before the midterm and final.

Standard University Grading Policy (What you do, is what you will get!)

Mid-term 30%Final 45%Tests, Project & Presentation 25%Total 100%

Individual project IStock Market Portfolio Management & presentation-$100,000 multiplied or vanished?Each student is required to submit their project in the last class (that is, the class before the final exam). Students are not allowed to work as a group. DO NOT plagiarize. I want original work. Your 7 minute self explanatory presentation should be in PowerPoint. However, you will not be required to present. Your project documentation must be at least 16 pages (12 Times New Roman, 1.5 spacing, reference pages, table of contents, titles, sub-titles, appendix, etc). You will submit your project report hard copy (which will include a CD, properly labeled, with the soft copy of your slide presentation and project report). You are required to sign up (open an account) with the website “simulator.investopedia.com” and actively trade on the simulated portfolio (startup of US $100,000.00), using live stock market quotes (from the AMEX, NASDAQ & NYSE). Your project report must include justification for all your transactions: You must start from day one; Your ending portfolio value must be clearly stated on the cover page!; supporting document should be

included as an appendix ; Give your justification for each executed transaction; Did the market justify your transaction;


A from 88% Your targetB+ from 81% Very achievableB from 74%C+ from 67%C from 60%FAIL below 60% 59% = FAIL

What investment strategy did you pursue; You are also required to maintain a detailed transaction report through our the semester, which will include

quantity, commission, buying and selling price, or well as profit or loss. What mistakes did you make, and what did your learns; What was your ending portfolio valuation…& what can you say/do now ? Justify your claim to another US $ 100,000.00 Was there an investment strategy that worked for you; In your opinion what rules should an investor abide by; Discuss why you would like to pursue this line of career; How do you recommend one to handle pressure situation and nervous moments, caused by pathetic and

impulsive gut instinct investment decisions ?

Life doesn’t get better than this - GOOD LUCK! OR does it ?

Individual project II & presentation-LATE work will NOT be accepted! DON’T COPY!DO NOT plagiarize. Plagiarized work will be rejected; serious action will be taken, that may include, negative marks, assigning a grade of “F”, suspension, or even expulsion! I want original work. Do NOT copy from the internet. Your 8 minute presentation should be in PowerPoint. Your project must be at least 18 pages (12 Times New Roman, 1.5 spacing, reference pages, table of contents, titles, sub-titles, etc). The project should be informative, well researched and referenced. Your project should be more practically oriented (as per Shariah requirement, central/statebank requirement, technical jargon, forms, policies, etc), and based on empirical data (actual number, real data). Topics will be assigned to students on a first come basis. Each student should submit its request by lecture # 5. Along with your project report (hard copy) you are required to submit the CD with your presentation and project soft copy. Request must included names, id, topic, etc. Each student must choose a topic from the following (or submit a request for an alternative topic):1. The impact of Riba on the society2. Setting up an Islamic Investment Financing company3. The Islamic Economy4. Islamic Analysis of Pakistan5. Islamic Analysis of Bangladesh6. Islamic Analysis of India7. Islamic Analysis of Iran8. Islamic Analysis of Libya9. Islamic Analysis of Egypt10. Islamic Analysis of Saudia Arabia11. Islamic Analysis of Malaysia12. Islamic Analysis of Turkey13. Islamic Analysis of Somalia14. Islamic Analysis of USA15. Islamic Analysis of Mali16. Islamic Analysis of Bulgaria17. Islamic Analysis of Spain & Portugal18. Islamic Analysis of the Russian Federation19. Setting up a company using “Islamic” financing20. Setting up a Islamic Rent-a-car21. Setting up a business entity using Musharikah22. A United Muslim Ummah: A natural Superpower23. Setting up a business entity using Mudarabah24. Setting up a business entity using Salam25. Setting up a business entity using Istisnann’


26. Islamic Finance & the plastic industry27. Islamic Investment & the real estate development projects28. Islamic Investment & the construction industry29. Islamic Investment & the manufacturing Industry30. Islamic Finance & the aircraft manufacturing industry31. How should Muslim countries address the current interest based Jewish global financial might ?32. The implications of an interest-free society33. The banking paradox: Interest based progress & development34. Global study of food & water in light of Qur’an & Ahadeeth: with recommendation for future trends35. Reasons for the recent financial collapse in America & Europe36. Lessons to learn from Muslim experiences in Spain37. The obstacles faced by an Islamic financing company in an un-Islamic environment38. Recent history of interest based banking39. Tawaruq & its applications40. Sukuk41. Agriculture in Islam42. The Dynamics of Islamic Management Principles43. The Munafiq Corporation!44. The Mutaqee Corporation!45. The Islamic Stock Market46. My company: From zero to a conglomerate47. Compare Takaful and insurance; discuss the future of Takaful; is it the Islamic alternative of insurance ?48. Discuss the concept of the stock market from an Islamic perspective49. Compiling the Saheeh Ahadeeth related to trade & finance50. Satanic Trades & Professions51. The harms of intoxicants52. Empirical Comparison: Halal verus Haram Economy53. Empirical Comparison: Halal verus Haram Financing54. Muzara, Mugarasa, and Musaqah55. Factors of success in trade56. How Islamic are Islamic Banks ?57. The series of steps economic and financial steps the Islamic Republic of Pakistan should have taken since

1947, and their justification ?58. The world of Islam today from the perspective of the sahabah 59. Difference between Islamic & commercial banking60. Case Study: Edhi Trust-A Good Example of An Islamic Organization61. Case Study: Saylani-A Good Example of An Islamic Organization62. Case Study: SOS Village63. Learning lessons from the downfall of the Mughal Empire in light of the Qur’an and Sunnah 64. A detailed case study of an Islamic Organization 65. The harms of pigs and related products66. Reforms required in Islamic Finance & Banking67. The Key To Success in Volunteer Management: The Islamic Perspective68. Islam & Technology69. The marketing of Islam 70. A critical analysis of the reign of Sultan Muhammad (Mehmet-II) Al-Fateh71. The corporate future in light of the signs of the Day of Judgment 72. Reforms required in the corporate world, in compliance to Shar’iah requirements73. Islamic finance & e-Business74. The Islamic Monetary System75. The Global Islamic Central Bank76. Islam & Weapons of Mass Destruction77. Islamic Analysis of the Financial Statements of Meezan Bank78. Islam & the Universe


79. The Vanguards of Islam80. Islam, Capitalism, & Socialism: A comparative study81. Islam & Darwinism82. The Islamic architecture83. Learn from the Khulafah-e-Rashideen84. The present, past & future: In light of the Qur’an & Sunnah85. Salient features of Islamic Finance86. The Blueprint of the Islamic (media) Channel87. Islam & the cartoon industry88. Reconciling to differences of opinion amongst the Madhab by using “Mugnee” by Ibne-Qaddama89. Islam & human rights90. A critical analysis of Muslim financial fiascos & failures91. Contemporary Muslim figures of hope for the Ummah92. Contemporary figures of hope for Pakistan93. Miracles in Islam94. Islamic & sports95. Islam & Sea Trade96. The history of barbarians97. The Role of women in Islamic trade & finance98. Islam in Africa99. Islam in Europe100. Islam & Khurasan101. Islam & (Bilad) As-Sham102. Islam & Qoqaz103. Islam & the laws of physics104. Learning lessons from the Songhi Empire105. Learning lessons from the plight of Muslims in Burma106. A critical analysis of Usman Dan Fido107. A critical analysis of “Ikhwan-Al-Muslimeen”108. A critical analysis of Temur Langh109. A critical analysis of the concept of the “Akhira”110. A critical analysis of the sources of misguidance111. Islam as a “trade”112. A critical analysis of the true teachings & followers of Prophet Esa (s)113. Setting up the ideal Islamic Investment Consortium114. Islam & food trade115. Constructing a house within the bounds of shar’iah116. The fundamental realities of life117. A historical accounts of the treachery of the munafiqeen118. Life in outer space119. A critical analysis of 9/11 & its financial implication120. Islam & taxation121. Global resource management: The Islamic perspective122. Islamic business directives for the era of “Fitan”123. From Khaibar to Ludd, the plots of the Jews124. History of the terrorists of the world125. Answering the skeptic comprehensively126. The ideal Muslim personality of era127. In search of “the Sufyani”128. In search of “the Qahtani”129. A critical analysis of Imam Mahdi Al-Muntazar (s)130. The System of Kufr setting the stage for Dajjal131. Life as a good Muslim in the 21st Century132. The strategy of Shaitan


133. Applications of the discoveries of Ibn Sina in our time134. Applications of the discoveries of Al-Bayruni in our time135. Research article (see me)136. Book (see me)137. Other topic (see me)

Dealing with students of different intellectual levels

While it is not possible to justly deal with students with different levels of intellect, the approach adopted enhances to a certain level the understanding which by most standards is acceptable. The instructor relies primarily on comprehensive tests, backed by infrequent assignments and class work (if and when needed). It has been observed that the initial tests are not taken seriously by student, with average marks of about 30%-35%. However, average marks for midterms are about 70%, while those of the final are 75%-80%. A final average assessment of 75%-80% reflects a good overall understanding; weak student score over 60% (at times even over 75%); good students score in 85%+ range. Further, students claim retention of concepts even months after completing the course. Repeated testing enhances students’ test taking skills, apart from improving drafting and composing answer techniques.


SG-Islamic Finance & Banking-FM6

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