Islamic Financial Products (eBook)

Principles, Instruments and Structures

Mohd Ma'Sum Billah (Autor)

eBook Download: PDF

2019
XXVIII, 441 Seiten
Springer International Publishing (Verlag)
978-3-030-17624-2 (ISBN)

Infos

Islamic finance has grown exponentially since 1963 and has reached more than 70 countries around the world with the asset size of about $2.5 trillion. The Islamic financial system today comprises a sizable asset base and there is evidence of sustained demand for Islamic financial products and services in the global market, with demand outstripping supply. This book provides a new source of understanding of the Islamic financial products in view of facilitating academia, industrialists, professionals, product designers, students and policymakers globally. There is a mass of literature on Islamic finance available to the market, but very little research is found in the form of book exclusively on Islamic financial products and their structures. Thus, this book is a timely contribution to the global market with Islamic financial product solutions.

Mohd Ma'Sum Billah is Professor of Finance and Insurance at the Islamic Economics Institute, King Abdulaziz University, Saudi Arabia. He is a member of various organizations and groups, including the working group of the Shari'ah Compliance functions, the AAIOFI Governance & Ethics Board (AGEB), AAIOFI, Bahrain and the Audit Committee, ACIG, Saudi Arabia alongside being an advisor to ICMIF, London. He is an author of 31 books and chapters in several books in the areas of Islamic and comparative finance, insurance, investment, capital markets, business, asset management and e-Commerce. He has also published more than 150 articles in Islamic and comparative finance, banking, capital markets, insurance, business and social finance and completed nine funded research projects successfully on different issues of Islamic and comparative finance and commerce funded by the Malaysian government and the Central Bank. He has presented more than 200 papers and lectures at conferences, summits, conventions, seminars, executive workshops and forums in the specialized issues of Islamic finance, insurance, capital market, investment, business, social finance and cryptocurrency.

Inhalt

Foreword 6
Preface 8
Acknowledgements 11
Introduction 13
Contents 15
About the Author 18
List of Figures 20
List of Tables 23
Part I An Overview of Islamic Financial System 25
Chapter 1 The Islamic Financial System 26
1 Introduction 26
1.1 Sources of the Islamic Legal System 27
1.2 Al-Qur’an 27
1.3 Al-Sunnah 27
1.4 Al-Ijma’ 28
1.5 Al-Qiyas 28
1.6 Al-Ijtihad 29
2 The Islamic Financial System 29
3 Governing Laws and Policies 30
4 The Central Bank of Malaysia Act (1958) (Revised 1994) (Direct Art Company, 1999) 31
4.1 The Banking and Financial Institutions Act (1989) (BAFIA) (Repealed by the Islamic Financial Services Act, 2013) 31
4.2 The Exchange Control Act (1953) (Kuala Lumpur: Direct Art Company, 1999) 32
4.3 The Islamic Banking Act (1983) (Repealed by the Islamic Financial Services Act, 2013) 32
4.4 The Insurance Act (1996) (Direct Art Company, 1999) 33
4.5 The Takaful Act (1984) (Repealed by the Islamic Financial Services Act, 2013) 33
4.6 Essential (Protection of Depositors) Regulations (1986) (Direct Art Company, 1999) 33
4.7 The Loan (Local) Ordinance (1959) 34
4.8 The Treasury Bills (Local) Act (1946) (Revised 1977) 34
4.9 The Government Investment Act (1983) 34
5 Conclusion 34
Reference 34
Chapter 2 Role of the OIC and Other International Organizations in the Sustainable Development of Islamic Finance 35
1 Introduction 35
2 Background 36
3 Objectives 36
3.1 Strengthen the Islamic Community 36
3.2 Coordinate Action for the Islamic Community 37
3.3 Work for the Islamic Community 37
4 Principles 37
5 The Organization of the OIC 37
5.1 The General Secretary 37
5.2 Responsibilities of the Department of Al-Quds Al-Sharif and Palestine 38
5.3 Bureau for the Islamic Boycott of Israel 39
5.4 Islamic Bureau for Military Coordination with Palestine 39
5.5 Department of Political Affairs 39
5.6 Department of Muslim Communities and Minorities 39
5.7 Department of Legal Affairs 40
5.8 Department of Economic Affairs 40
5.9 Department of Science and Technology 40
5.10 Information Department 41
5.11 Cultural and Social Affairs Department 41
5.12 Administration and Finance Department 41
5.13 Conference Department 41
5.14 Protocol and Public Relations Department 42
5.15 Department of Coordination for Subsidiary Bodies, Specialized and Affiliated Institutions 42
5.16 Department of Da’wah 42
5.16.1 The Islamic Summit Conference 42
5.16.2 The Islamic Conference of Foreign Ministers (ICFM) 42
5.16.3 The General Secretariat 42
5.16.4 The International Islamic Court of Justice 43
5.16.5 Subsidiary Bodies 43
5.16.6 Specialized Institutions 43
5.16.7 Affiliated Institutions 43
6 International Organizations Contributing to the Development of Islamic Finance 44
6.1 Islamic Development Bank (IDB) 44
6.1.1 Purpose 45
6.1.2 Functions 45
6.1.3 Membership 45
6.1.4 Organization and Administration 45
Board of Governors 45
Board of Executive Directors 46
The President 46
Capital 46
Development 46
6.2 Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC) 48
6.2.1 Objective 48
6.2.2 Capital 49
6.2.3 Organization and Management 49
Board of Governors 50
Board of Directors 50
The President 51
6.3 Islamic Financial Services Board (IFSB) 51
6.3.1 Purpose 51
6.3.2 Functions 51
6.4 Affiliated Institutions 52
6.4.1 Idea Groups 52
6.4.2 Islamic Chamber of Commerce and Industry (ICCI) 52
Establishment 52
Objectives 53
6.4.3 Organization of Islamic Capital Activities 53
Establishment 53
Objectives 53
Chapter 3 Evolution of Islamic Financial Products and Services 54
1 Introduction 54
2 Resurgence of Islamic Financial Products and Services 55
3 Rational Outlook of the Sustainable Growth of Islamic Financial Products 56
3.1 Mutual Cooperation with a Risk-sharing Culture 57
3.2 Green Financing Platform 57
3.3 Shari’ah Compliant Products 57
3.4 Fast and Steady Growth 57
3.5 Attracts Non-Muslim Investors 57
3.6 Global Indexing 58
3.7 Oil-rich Countries Adopt Islamic Finance 58
3.8 Effective Decision-making 58
3.9 Streamlined and Simpler 58
3.10 ‘No Crisis’ Zone 58
3.11 Humanitarian Concerns 59
3.12 Industrial Catching Up 59
4 Literature Initiative to Support the Growth of the Industry 59
4.1 Islamic Trade Finance 59
4.2 Takaful and Re-takaful Products 60
4.3 E-Commerce Products 61
4.4 Strategies Ahead 62
Part II Governing Principles and Strategies of Islamic Products and Services 63
Chapter 4 Islamic Financial Policies 64
1 Introduction 64
2 Central Concept 65
3 Application of Islamic Financing in Islamic Banking 66
3.1 Debt Financing 66
3.1.1 Al-Rahn (Rahnu) 66
4 Shari’ah Ruling 66
5 Application of al-rahnu 66
5.1 Al-Ijarah 67
5.1.1 Shari’ah Ruling 68
5.1.2 Hadith 68
5.1.3 Application of Ijarah 68
5.2 Al-Qard (Loan Contract) 69
5.2.1 Shari’ah Ruling 69
5.2.2 Application of Qard in Modern Islamic Banking 70
5.3 Al-Murabahah (Mark-Up Lump Payment Sale) 70
5.3.1 Application of Al-Murabahah 71
Vehicle Financing 71
5.3.2 Application of Al-Bai-Bithaman Ajil 74
House Financing (al-baiti) 74
5.4 Equity Financing 74
5.4.1 Al-Mudharabah 74
Shari’ah Rulings 74
Application of Al-Mudharabah in Islamic Banking 75
5.4.2 Musharakah 77
Causes of the Failure of Islamic Banks to Adopt Musharakah 78
5.4.3 Al-Wadiah 79
Application of Al-Wadiah 79
6 Recommendations 79
7 Conclusion 80
Chapter 5 Islamic Financial Services Board and Its Regulatory Functions in the Islamic Financial Industry 82
1 Introduction 82
2 Background of the IFSB 83
2.1 Objectives and Functions of the IFSB 84
2.2 The Structure of the IFSB 85
2.3 The General Assembly 85
2.4 The Council 86
2.5 The Technical Committee 87
2.6 The Secretariat 88
2.7 Shari’ah Rulings 88
2.8 Expected Contribution to the Development of Takaful Globally 90
3 Recommendation 92
4 Conclusion 92
References 93
Chapter 6 Bay’ Al-Inah (Buy Back Sale) and Its Position in Modern Islamic Finance 94
1 Definition 95
2 Legal Evaluation 95
3 Application 97
Chapter 7 Instruments that Facilitate Islamic Financing 99
1 Introduction 99
2 Al-Murabaha (Cost Plus Mark-up) 100
2.1 Conditions of Al-Murabaha 100
2.2 Types of Al-Murabaha 100
2.2.1 Ordinary Al-Murabaha Sale 100
2.2.2 Murabaha Sale Linked to a Promise 100
2.2.3 The Practical Steps of the Murabaha Sale 101
3 Al-Mudhraba (Partnership in Profit-Sharing) 102
3.1 The Mudharib 102
3.2 The Muwakkil: The Owner of the Property 102
3.3 Rules of Al-Mudharaba 103
4 Al-Ijarah 103
4.1 Definition 103
4.2 Modern Concept of Al-Ijarah 104
4.3 Application of Al-Ijarah 104
5 Al-Musharakah 105
5.1 Definition 105
5.2 Classification of Sharikah 105
5.3 Distribution of Profit and Loss 106
5.4 Application of Al-Musharakah 106
6 Al-Istisna’ 107
6.1 Definition 107
6.2 Rules of Law 107
6.3 Application of Al-Istisna’ 108
7 Advantages of the Islamic Financial System 109
8 Issues and Challenges Faced by the Islamic Financial System 109
8.1 No Regulatory and Legal Framework 110
8.2 No Single, Sizable, and Organized Financial Centre Operated in Accordance with Islamic Principles 110
8.3 The Pace of Innovation Is Slow 110
8.4 Lack of Uniformity in Accounting Standards and Procedures 110
8.4.1 Lack of Uniformity in Application of Religious Principles 111
9 Conclusion 111
References 112
Chapter 8 The Pricing Techniques of Islamic Financial Products 113
1 Regulatory Framework for Pricing of Islamic Products 114
2 Al-Murabahah (Mark-Up Pricing) 115
2.1 Al-Murabahah Legal Framework of Pricing 116
2.2 Calculation of Cost in murabahah 116
2.3 Rescheduling of Payment 116
2.4 Discount on Early Payment 117
2.5 Other Features That Form Part of a murabahah Contract 118
3 Al-Mudarabah (Profit Sharing) 118
3.1 The Legality of mudarabah from an Islamic Perspective 119
3.2 Distribution of Profit and Loss 119
3.3 Distribution of Profit and Loss in mudarabah takaful 119
3.4 Investment Amount of mudarabah 120
3.5 Features of Investment 120
3.6 Application of mudarabah Contract 120
3.6.1 Profit Distribution 120
3.6.2 Loss Venture 120
4 Qardh Al-Hasan (Benevolent Loan) 121
4.1 Qardh Al-Hasan Legal Framework of Pricing 121
4.1.1 Al-Qardh Share Financing with Profit Sharing Fund Management 121
5 Al-Bai’ bithaman ajil (Deferred Payment): A Past Experience 122
5.1 BBA Legal Framework of Pricing 122
5.2 Determination of Selling Price 123
5.3 Calculation of Selling Price 123
6 Conclusion 123
References 124
Chapter 9 Remedies for Breach of Financial Contract Under Shari’ah 125
1 Introduction 125
2 Elements of a Contract 126
3 Remedies for Breach of Financial Contract Under Shari’ah 129
3.1 Self-Help Remedies 130
3.2 Judicial Remedies 131
4 Damages (daman) 131
5 Rescission (iqalah) 134
6 Specific Performance 136
7 Injunction 138
8 Current Phenomena 142
9 Case Analysis: Bank Islam Berhad v. Adnan bin Omar [1987] CLJ 396/[1987] 2 MLJ 192 146
9.1 Facts of the Case 146
9.2 Analysis of the Case 148
10 Recommendations 152
11 Conclusion 154
References 155
Part III Islamic Financial Products 156
Chapter 10 Islamic Equity Financing: Al-Musharakah, Al-Mudharabah, and Al-Qiradh 157
1 Introduction 157
2 Bank Islam Malaysia Berhad (Bimb) 158
2.1 Interest–Free Banking Scheme 158
3 Equity Financing Instruments 159
3.1 Al-Mudharabah 159
3.2 Traditional Practise of Al-Mudharabah 159
3.3 Pillars of Al-Mudharabah 160
3.4 Modern Practice of Al-Mudharabah 162
3.4.1 Demand Deposits 162
3.4.2 Mutual Investment Deposits 163
3.4.3 Special Investment Deposits 163
3.5 Establishing an Al-Mudharabah Project 164
3.6 The Results of Al-Mudharabah 164
3.7 Payment of Al-Mudharabah Capital 164
3.8 Distribution of Wealth Resulting from Al-Mudharabah 165
4 Al-Qiradh 165
4.1 Positive Impact on the Concept Al-Mudharabah and Al-Qiradh 166
5 Al-Musharakah 167
5.1 Al-Inan 167
5.2 Al-Abdan 167
5.3 Al-Mutawadhah 168
5.4 Al-Wujuh 168
5.5 Traditional Practices of Al-Musharakah 168
5.6 Pillars of Al-Musharakah 168
5.7 Modern Practices of Al-Musharakah 169
5.8 Joint Venture Projects 169
References 170
Chapter 11 Islamic Debt Financing 171
1 Introduction 171
2 Central Idea 172
3 Shari’ah Rulings 172
3.1 Islamic and Interest-Free Financing 172
3.2 Rules of BBA and Murabahah 173
3.3 Legality of BBA and Murabahah 174
3.4 Practical Scenario and Applications 174
3.4.1 Bai’ Bithaman Ajil (BBA) Financing 174
Scope 174
Features 175
4 Murabahah Overdraft 175
4.1 Concept 175
4.2 Eligibility 176
4.3 Scope 176
4.4 Features 176
5 The Application of Al-Murabahah in Modern Islamic Banking 176
5.1 Letter of Credit Under Contract of Al-Murabahah (Deferred Lump-Sum Sale or Cost Plus) 176
6 Working Capital Financing Under the Principle of Al-Murabahah 177
6.1 Issue on Islamic Debt Financing 177
7 Conclusion 180
References 181
Chapter 12 Islamic Trade Financing Instruments and Mechanisms 182
1 Introduction 182
2 Central Idea 182
3 Debt Financing 183
3.1 Deferred Contracts of Exchange (Al-Bai, Al-Tijarahand Al-Dayn) 183
3.2 Interest-Based Lending (Riba Al-Nasiah) 184
4 Debt Financing in Pre-islamic Arab Society 184
4.1 Al-Murabahah (Deferred Lump Sum Sale or Cost Plus) 184
4.1.1 Shari’ah Rulings 184
4.1.2 Al-Qur’an 185
4.1.3 Al-Sunnah 185
4.1.4 Real Practice by BIMB of Al-Murabahah (Letter of Credit) 185
4.1.5 Working Capital Financing Under the Principle of Al-Murabahah 185
4.2 Al-Kafalah Bank Guarantee (KBG) 186
4.2.1 Shari’ah Rulings 186
Al-Qur’an 186
Al-Sunnah 186
4.2.2 The Application of al-Kafalah in BIMB 186
4.2.3 Al-Kafalah Shipping Guarantee 187
4.2.4 How Does It Work? 187
4.3 Al-Wakalah (Letter of Credit) 187
4.3.1 Shari’ah Ruling 187
Al-Qur’an 187
4.3.2 How Does It Work? 188
4.4 Bai Al-Salam (Sale by Deferred Delivery) 188
4.4.1 Shari’ah Ruling 188
Al-Qur’an 188
Al-Sunnah 188
4.4.2 How Does Salam Work? 189
4.5 Bai’ al-Istisna’ (Manufacturing Contract) 190
4.5.1 Shari’ah Ruling 190
4.5.2 Al-Qur’an 190
4.5.3 Istisna as a Method of Financing 190
4.6 Al-Musharakah (Letter of Credit): Trustee Profit Sharing 192
4.6.1 Shari’ah Ruling 192
Al-Qur’an 192
4.6.2 Modern Application by BIMB 192
4.6.3 How Does It Work? 192
4.7 Bay’ Al-Dayn 193
4.7.1 Bay’ Al-Dayn as Practised in BIMB 193
4.8 Al-Bai-Bithamin Ajil 194
4.8.1 Shari’ah Ruling 194
Al-Quran 195
5 Recommendations 195
6 Conclusion 196
References 197
Chapter 13 Islamic Trade Financing Frameworks 198
1 Introduction 198
2 Islamic Banking 199
3 Status of Islamic Banking 201
4 Islamic Trade Finance 202
5 E-banking 202
6 Recommendation 203
7 Islamic Bank 203
7.1 Products and Services 203
7.1.1 Al-Kafalah 203
7.1.2 Al-Wakalah 203
7.1.3 Al-Murabaha 203
7.1.4 Bay Al-Dyan 204
7.1.5 Bay’ Bithaman Ajil 204
7.1.6 Al-Mudaraba 204
7.1.7 Al-Musharakah 204
7.1.8 Al-Ijara 205
7.2 Other Services 205
7.2.1 Money Transfer 205
7.2.2 Collection of Proceeds of Trade Transactions 206
7.2.3 Imports/Purchases 206
7.2.4 Trade Information 206
8 Conventional Bank 207
8.1 Products and Services 207
9 Shari’ah Standard 207
9.1 Overview 207
10 The Need for Islamic Accounting Standards 207
10.1 Objective 208
10.2 Accounting Treatment: Al-Murabaha 208
10.2.1 Measurement of Asset Value at Acquisition by an Islamic Bank 208
10.2.2 Measurement of Asset Valued After Acquisition by an Islamic Bank 208
10.2.3 Potential Discount to Be Obtained After Acquisition of an Asset 209
10.2.4 Al-Murabaha Receivables 209
10.3 Accounting Treatment: Al-Mudaraba 210
10.3.1 Recognition of Mudaraba Capital 210
10.3.2 Measurement of Al-Mudaraba 210
10.3.3 Disclosure Requirements 210
10.4 Accounting Treatment: Al-Musharakah 210
10.4.1 Recognition of Musharakah Capital 210
10.4.2 Measurement of Musharakah Capital 211
11 Conclusion 211
Chapter 14 Shari’ah Model of International Trade Financing 212
1 Introduction 212
2 Basic Principles of Islamic Finance 213
3 Emergence of Islamic Banks 214
4 Salient Characteristics of Islamic Finance 215
5 Relationship with Depositors 215
6 Closing the Financing Gap 216
7 Ethics and Banking 216
8 Modes of International Trade Financing 217
8.1 Leasing Methods 220
9 Conclusion 221
References 222
Chapter 15 Islamic Model of International Trade and Shipping 223
1 Introduction 223
2 General Concern 224
3 Islamic Accepted Bills: Import 224
4 Islamic Accepted Bills: Export 225
5 Letter of Credit: Murabahah 226
6 Letter of Credit Financing: Musharakah 226
7 Letter of Credit Financing: Wakalah 227
8 Islamic Export Credit Refinancing 227
9 Multilateral Trade Using the Islamic Gold Dinar 228
10 Conclusion 229
References 230
Chapter 16 Islamic Accepted Bills 231
1 Introduction 231
2 Understanding IABs 232
2.1 IAB: Imports (Al-Murabahah/Bai’ Al-Dayn) 233
2.2 IAB: Exports or Sales (Bai’ Al-Dayn) 233
3 Determining the Price of an IAB 234
4 Features of an IAB 234
5 Guidelines and Regulations on IABs 235
6 Application of IABs 236
6.1 Imports and Local Purchases 236
6.1.1 Al-Murabahah Working Capital Financing 237
6.2 Export and Local Sales 237
7 Shari’ah Perspective on IABs 238
7.1 The Nature of Bay’ Al-Dayn 238
7.1.1 Sale of Al-Dayn to a Third Party 238
8 Conclusion 240
References 240
Chapter 17 Islamic Lease Financing (Al-Ijarah) 241
1 Introduction 241
2 Shari’ah and Legal Basis of Ijarah 242
3 Elements of an Al-Ijarah Contract (Islamic Financing: Ijarah) 243
4 Conditions of Al-Ijarah 244
5 Determination of Rental 244
6 Types of Al-Ijarah 245
7 Application of Al-Ijarah Financing 246
7.1 Procedure 246
8 Al-Ijarah Thumma Al-Bai (Aitab): Car Financing 247
8.1 Procedure 247
9 Al-Ijarah Financing in the Modern Islamic Banking System 248
9.1 Operating Ijarah Versus Financing Ijarah 248
9.2 Accounting Treatment and Taxation Implication 249
9.3 Valuation and Residual Value of the Leased Asset in Property Financing 249
9.4 Expenses of Maintenance Costs, Takaful Premium 250
9.5 Termination of Lease 251
10 Recommendations 251
10.1 Operating Ijarah Versus Financing Ijarah 251
10.2 Accounting Treatment Together with Taxation and Zakat Implication 252
10.3 System Maintenance 252
10.4 Valuation and Residual Value of the Leased Asset of the Property Financed 253
10.5 Expenses of Maintenance Costs: Takaful Premium 253
10.6 Termination of Lease 254
11 Conclusion 254
References 255
Chapter 18 Islamic Leasing Leading to Ownership (Al-Ijarah Tantahi Bi Al-Tamleek) 256
1 Introduction 256
2 Al-Ijara wa Al-Iqtina’ (Leasing Leading to Ownership) 256
3 Implications of Al-Ijarah wa Al-Iqtina’ 257
3.1 Implications for Economics 257
3.2 Implications for Society 258
4 Shari’ah Recognition of Al-Ijara wa Al-Iqtina’ 258
4.1 Free from Gharar 258
4.2 Free from Riba 259
4.3 Based on Trading 259
4.4 Avoid Prohibited Investments 259
5 Why Profits from Al-Ijara wa Al-Iqtina’ Are Acceptable Under Shari’ah 259
5.1 Ownership Risk (Ghurmi) 259
5.2 Effort (Kasb) 260
5.3 Liability (Damn) 260
6 Leasing Leading to Ownership in Relation to Takaful 260
7 Terms and Conditions of a Hire Purchase Agreement 260
8 Rational Outlook of the Concepts of Hire Purchase and Takaful 262
9 Different Practices of Hire-Purchase 265
10 Ambank Group 265
11 Conclusion 267
Chapter 19 Islamic Hire Purchase (Al-Ijarah Thumma Al-Bay’) 268
1 Introduction 268
2 Central Idea 269
3 Corporate Understanding 270
4 Practical Scenario and Application 272
5 AITAB Procedure 273
6 Recommendations 274
7 Shari’ah Rulings 274
8 Conclusion 275
8.1 Purpose of Financing 275
8.2 Total Lease Rentals 275
8.3 Guarantee 275
8.4 Security or Collateral 276
8.5 Early Termination of Al-Ijarah (Lease Financing) 276
References 276
Chapter 20 Islamic Manufacture Financing (Al-Istisna’) 277
1 Introduction 277
2 Central Idea 278
3 Characteristics of Al-Istisna’ (Manufacturing) 279
4 Rules of Al-Istisna’ 281
5 Conditions Relating to Al-Istisna’ 281
6 Application of Al-Istisna’ 282
7 Procedure of Al-Istisna’ 283
8 Application of the Al-Istisna’ Financing Facility in Islamic Countries 283
9 Scholars’ Views on Al-Istisna’ 286
10 Recommendations 287
11 Conclusion 288
References 288
Chapter 21 Islamic Manufacture Financing Contract (Aqd al-Istisna’) 290
1 Introduction 290
2 Central Idea 290
3 Terms and Concepts 291
4 Terms and Conditions of the Islamic Development Bank 291
5 Legality of Al-Istisna’ 293
6 Current Scenario 294
6.1 Application 294
6.2 Al-Istisna’ Sale 295
7 Payment Methods 295
8 Empirical Illustration 296
9 Issues in Al-Istisna’ 296
9.1 Al-Istisna’ and Economic Development 296
9.2 Foreign Exchange Risk 297
10 Findings and Recommendations 297
11 Conclusion 298
11.1 Procedure for Al-Istisna’ Financing 298
References 300
Chapter 22 Islamic Venture Capital 301
1 Introduction 301
2 Al-Musharakah 302
2.1 Rules of Al-Musharakah 302
2.2 Distribution of Profit 302
2.3 Sharing in Loss 303
2.4 The Nature of Capital 303
2.5 Management of Al-Musharakah 304
2.6 Termination 304
2.7 Modern Operation of Musharakah Model 305
2.8 The Practical Scenario 305
3 Conclusion 306
Chapter 23 Sukuk Paradigm and Structure 308
1 Introduction 308
2 Phenomena 308
3 Modern Bond Market 310
4 Market Participants 311
4.1 Dealers 311
4.2 Brokers 312
4.3 Investors 312
5 Types of Bond 312
5.1 Convertible Bonds 312
5.2 Extendable or Retractable Bonds 313
5.3 Foreign Currency Bonds 313
5.4 Government Bonds 313
5.5 Corporate Bonds 313
5.6 High Yield or Junk Bonds 314
5.7 Inflation-Linked Bonds 314
5.8 Zero Coupon Bonds 314
6 Valuation of Bonds 315
6.1 Present Value 315
6.2 Yield to Maturity 315
6.3 Duration 315
6.4 Coupon Interest Rate 316
6.5 Market Interest Rate 316
7 Sukuk (Islamic Bond) Market 316
8 Three Main Steps of Bond Issuance 317
8.1 The Creation of an al-Tawarruq (Special Purpose Vehicle) Underlying Asset 317
8.2 Issuance of Islamic Debt Certificate (Shahdah al-Dayn) 318
8.3 Trading of Debt Certificates: Discounted Bay’ al-Dayn 318
8.4 The Nature of Bay’ al-Dayn 320
8.5 Sale of Al-Dayn (Debt) to a Third Party 320
9 Types of Islamic Bonds (Sukuk) 322
9.1 Sukuk Al-Ijarah (Lease Bonds) 322
9.2 Sukuk Al-Istisna’ (Manufacturing Bonds) 322
9.2.1 Sukuk Al-Musharakah (Partnership Bonds) 323
9.2.2 The Difference Between an Al-Musharakah Certificate and a Conventional Bond 323
9.3 Sukuk al-Muqarada Is an Alternative to Sukuk al-Dayn (Debt Bonds/Debenture Certificates) 323
10 Prospects for Sukuk in the Non-Muslim World 324
11 Process and Issuance of Sukuk (Tawreeq) 325
12 Risk Factors in Sukuk 326
12.1 Market Risk 326
12.2 Credit Risk 327
12.3 Risk as to Shari’ah Compliant 327
12.4 Management and Operational Risk 328
12.5 Risk of Organizational Rigidity 328
13 Managing Sukuk Risks 328
13.1 Organizational Challenges 329
14 Sukuk and Its Rating Formula 331
14.1 Credit Rating 331
14.2 Appointment of Credit Rating Agency 331
14.3 Issuer’s Obligations 332
14.4 Non-application of Requirements 332
15 Conclusion 333
References 333
Chapter 24 Islamic Loan (Al-Qardh) 335
1 Central Idea of al-Qard (Loan) 335
2 Divine Rulings on al-Qardh (Loan) 335
2.1 Al-Qur’an 335
2.2 Al-Sunnah 336
3 Objectives 337
3.1 Linguistic Approach 337
4 Pillars of a Loan 337
5 Loan Versus Sale Contract 337
6 Special Features in al-Qardh Contract 337
7 Practical Scenario 338
8 Borrowers Unable to Pay the Loan on Time 339
9 Defects Found in the Subject Matter 339
10 BBA Property Financing 340
11 Recommendations 340
Chapter 25 Islamic Financial Wealth Management 342
1 Introduction 342
2 Protection in Islam 345
2.1 Basis of Cooperation 346
2.2 Basis of Responsibility 346
2.3 Basis of Mutual Protection 346
2.4 Accumulation of Wealth in Islam 346
3 Wealth Preservation 348
4 Wealth Distribution 348
5 Financial Planning Process 349
5.1 Establishing a Financial Goal 349
5.2 Gathering Relevant Data 349
5.3 Analysis of the Data 349
5.4 Developing a Plan for Achieving the Goal 349
5.5 Implementing the Plan 350
5.6 Monitoring the Plan 350
6 Recommendations 350
6.1 Wasiyah 350
6.2 Waqf 352
6.2.1 Advantages of Waqf 353
6.3 Hibah 354
6.3.1 Advantages in Hibah 355
7 Conclusion 356
References 356
Chapter 26 Islamic Financial Planning 357
1 Introduction 357
2 Central Idea 358
3 Practical Scenario of Islamic Financial Planning 361
4 Islamic Unit Trusts 363
5 Islamic Bonds (Sukuk) 366
6 Family Takaful Plans 367
7 Planning for Retirement 370
8 Shari’ah Ruling 371
9 Recommendations 372
9.1 Exposure 372
9.2 Attract More Non-Muslims 372
9.3 Islamic Teachings 373
9.4 Flexibility 373
10 Conclusion 373
Reference 373
Chapter 27 Islamic Unit Trust (Micro-Saving) 374
1 Introduction 374
2 Overview of Unit Trust Industry 375
3 The Concept of Unit Trust 376
3.1 Central Idea 376
3.2 Mechanism of Unit Trusts 376
3.3 The Difference Between Unit Trusts and Mutual Funds 378
3.4 Types of Fund 378
3.5 Shari’ah Rulings 378
3.6 Examples of Islamic Unit Trusts 379
3.7 The Future of the Islamic Unit Trust Industry 381
References 382
Chapter 28 Islamic Financing for the Sustainable Development Goals 383
1 Introduction 383
1.1 Income Inequality Distribution 384
2 Low-Income Group 385
3 Determinants of the Low-Income Group 386
4 Poverty: An Islamic Perspective 386
5 Islamic Financial System 389
6 How Does Islamic Finance Help to Grow the Low-Income Group Towards Sustainable Development Goals? 389
6.1 Al-Musharakah (Venture Capital) 389
6.2 Al-Mudharabah (Profit and Loss Sharing) 391
6.3 Al-Murabahah (Cost Plus Financing) 392
6.4 Al-Ijarah (Lease) 393
6.5 Al-Qard (Loan) 394
6.6 Method of Financing Through Baitul Mal 395
6.7 Distribution of Income 396
7 Conclusion 397
References 397
Chapter 29 Islamic Fin-Tech: Digital Financial Products 398
1 Introduction 398
2 Types of Digital Financial Product 399
3 Smart Authorization 399
3.1 Key Features 400
3.2 Key Benefits 400
4 Credit Card Processing 401
4.1 Key Features 401
4.2 Key Benefits 401
5 Electronic Cheque Processing 402
6 E-Dinars 403
7 Financial Risk Versus Exchange Risk 404
8 Benefits in Digital Financial Products 404
8.1 Availability 404
8.2 Convenience 405
8.3 Efficiency 405
9 Issues of Security in Digital Services 405
9.1 Confidentiality 405
9.2 Authenticity 406
9.3 Non-repudiation 406
10 Symmetric Key Encryption 406
11 Public Key Encryption 407
12 Using a Digital Signature to Validate Data Integrity 407
13 Digital Timestamping 408
14 Certificate 408
15 Certification Authorities 409
16 The Secure Sockets Layer Protocol 409
17 Secure Electronic Transmission 411
18 Secure HTTP 411
19 Shari’ah Issues with Digital Financial Products and Services 411
20 Reference to Al-Qur’an and Al-Sunnah 412
21 Al-Ijma’, Al-Qiyas, Al-Istehsan and Masaleh al-Mursalah 412
22 Al-Qur’an 413
22.1 The Choice of Infrastructure 413
22.2 Freedom of Contract 414
22.3 Protection of IP, Data Protection, Digital Signature and Certification 414
23 Al-Sunnah 414
23.1 Prevention from Violation, Computer Crimes and Privacy 414
23.2 Fraud in Business Dealings 414
24 Conclusion 414
Chapter 30 Islamic Cryptocurrency 415
1 Introduction 415
2 Objectives 419
3 Governing Principles 419
4 Ethical Principles 420
5 Model and Structure 420
6 Operational Mechanism 421
7 Technological Model 422
8 Scope and Limitations 422
9 Products and Services 423
10 Backing Assets 423
11 Decision-Makers 424
12 Shari’ah Advisory Board 424
13 Board of Advisors 425
14 The Management Company 425
15 The Road Map of a Shari’ah Cryptocurrency Operation 425
16 The Public Statement 425
17 The White Paper 429
17.1 Introduction to Shari’ah Coin 429
17.1.1 The Shari’ah Coin 429
17.1.2 Emerging of Block-Chain 430
17.1.3 Background of Shari’ah Coin 430
17.1.4 How Shari’ah Coin Could Help to Solve Some Problems 431
17.1.5 The Meaning of Shari’ah Coin 431
17.2 Shari’ah Coin Branding and Definition 431
17.2.1 Shari’ah Coin Structural Analysis 431
17.3 Application of a Shari’ah Cryptocurrency 432
17.3.1 Financial Assets Exchange (Backing Assets) 432
17.4 Pass-Up Plan 433
17.4.1 Total Volume 433
17.4.2 Launch Time and Its Checklist 433
17.4.3 Digital Asset Ratio 433
17.4.4 Shari’ah Cryptocurrency Appreciation Logic 433
17.5 Project Progress and Team 434
17.6 Operation 434
17.7 Market 434
17.8 Accounts 434
17.9 Significant Results 435
17.10 Humanitarian Concern Through Tabarru’at 435
18 Conclusion 435
References 436
Index 437

Produkt-Details

• Erscheint lt. Verlag: 28.6.2019
• Zusatzinfo: XXVIII, 441 p. 42 illus., 17 illus. in color.
• Sprache: englisch
• Themenwelt: Wirtschaft ► Betriebswirtschaft / Management
• Schlagworte: Debt Financing • Equity financing • Investments and Securities • Islamic Finance • Islamic Financial Products • Islamic financial system • Islamic Instruments • Istisna’ Model • project financing • Shari’ah Standard
• ISBN-10: 3-030-17624-X / 303017624X
• ISBN-13: 978-3-030-17624-2 / 9783030176242