...Candice Vermeulen MWF 10:00am How to Do Business in Islamic Countries According to Hayes and Vogel, business people, particularly Westerners who work in the Persian Gulf and other Islamic regions such as Asia and North Africa, need to: * Understand and appreciate the extent to which religion and Islamic law are intertwined and permeate all levels of society, including commerce, to greater and lesser degrees depending on the country. "This law is seen as deriving from direct, divine command. * Executives who understand the basic tenets of the Islamic religion as it relates to commerce will have an easier time abroad, they said. According to Hayes, the following principles of comportment are expected among businesspeople: * Contracts should be fair to all parties. Partnership is preferred over hierarchical claims. * Speculation is prohibited. "They don't like gambling," said Hayes. For instance, if you invested in an Islamic mutual fund, among those industries which would be barred from representation as funds would be the gambling industry. But gambling also relates to futures; it relates to currency hedging; so it's a major situation that you have to be aware of. * Interest is prohibited. This is the probably the thing that is most often identified with Islamic finance. Back in the time of the prophet Mohammed, some of the most rapacious individuals were the moneylenders; and so as a response to the things that these moneylenders did which were so reprehensible...
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...“Do you think that business practices in an Islamic country are likely to differ from business practices in the United States? If so, how?” I think that business practices in an Islamic country are different from business practices in the United States, some factors influence the business practices in different cultures. As the culture, values and norms, social structure and diversity of individual all might affect the business practices. Culture is a complex factor that includes beliefs, knowledge, arts, morals, law, customs, and other capabilities obtained by people as members of society (Hill, 2011). Values and norms are the cores of the components for culture, values are general ideals about a society’s good, correct and desirable fact. Norms are the social rules and guidelines that suggest appropriate behavior in specific circumstances (Hill, 2011). I don’t know much about Islamic country, but the American culture is different from Islamic culture. Due to the religion, social structure and much diversity in the two different worlds, the business practices would affect by these differences. International business is different from national business due to the culture and society. The ethics in Islamic world, governs almost all aspects of people’s life. Ethical norms and moral codes discernable from some verses of the Quran, and the teachings of the Prophet are far reaching and comprehensive (Azim, n.d.). Islamic teachings extremely influence the observance...
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...Islamic Banking Malek Alraddadi 02-24-2014 FIN-610 Introduction This study debates upon the history of Islamic banking. What are the ethical issues involved in the implementation of Islamic banking. Since the birth of Islam what type of steps are taken and by whom these measurements were taken. Besides this this paper also declares the response and customers point of view regarding Islamic banking with the help of different studies. History of Islamic banking The term Islamic banking got regular in the 1960's, however the systems and thoughts of the framework were suggested and operated since the beginning of Islam. Numerous studies and explores have indicated that Islamic money components were utilized within the Muslim world all around the Middle Ages; in leading exchange and business exercises. Charging investment on credits was not regular in those days. The first run through investment bearing credits were generally utilized within the Muslim world, particularly in the Middle East, was throughout the Ottoman Empire's governed in the fifteenth century. Mehmet Ebusuud Efendi, the senior Islamic minister of the Ottoman Empire, issued a fatwa (decision) permitting the charging of investment and thinking of it halal (allowable) as long as it was underneath 10%. Despite the fact that it was clear in The Holy Quran that investment was strictly disallowed, practically nobody could challenge the senior Islamic priest's decision since testing him might mean testing the...
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...“Islamic Accounting : Their Position in International Standard Harmonization” Rendy Anggita Putra “Islamic Accounting : Their Position in International Standard Harmonization” 1. Abstract According to (Susela, 1999) said the development of accounting theories is are affected by several factors including political and economic interests of certain people or group in community. Therefore, it can be also called if the accounting is a significant tool to illustrate the interests and perspectives of the various stakeholders. Islamic industry of finance has obtained tremendous growth in last few years, both in number of assets that manage by industry and in the diversity of financial products. A global system that can rule the industry will become significantly important for the Islamic finance sector in order to meet the needs of continued growth (Vinnicombe, 2012). Harmonization of Shari’a accounting standards has continue to be made by the AAOIFI as it is also done by the International Accounting Standards Board (IASB) for conventional accounting harmonization. In its development, financial reporting in Islamic accounting adds some different additional reports than conventional accounting to accommodate the unique transactions of Islamic economics. In that regard, this paper have objective to explore the main important values of Shari’a accounting and reporting standards of Islamic Accounting and try to find the answers of Islamic accounting positions among the process...
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...1.0 Abstract Islamic Finance is an abstract concept until the first half of the twentieth century. In Malaysia, it has been almost three decades when the first Islamic bank makes its debut. Islamic banks have to compete with its competitors which is a conventional banks which have longer history than Islamic banks. For this competition, Islamic Finance have to know the awareness, understanding and perceptions of Malaysians towards it. Islamic Finance not only available for Muslims, but it also available for non-Muslims as well. In Malaysia, 40% of the population is non-Muslims and hence non-Muslims market is equally important to Islamic Finance (Bashir & Mail, 2011; Latiff, 2007). The purpose of this research is to examine the level of awareness, understanding and perceptions of Muslims in Malaysia of Islamic Banking products and services. In additional, this study also aims to investigate if any demographic influence it’s means the structure of population of the awareness, understanding and perceptions of Islamic Finance products and services among Muslims in Malaysia. A total of 50 respondents from different course and carrier in Unikl are selected for the purpose of this study. For the analysis, we used the primary data and Secondary data was adopted to analyse the results. The results show that more than half of the respondents are aware of the Islamic Finance in Malaysia but they do not aware of most of the products and services offered by Islamic banks. Muslims understanding...
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...About Al Baraka | | Al Baraka Islamic Bank B.S.C. (c) - Bahrain (AIB - Bahrain) established 1984 in Bahrain and up the years has pioneered the development of Islamic banking and finance. The Bank is registered with the Bahrain Ministry of Industry &, Commerce CR no. 14400 and is licensed by Central Bank of Bahrain (CBB) as an Islamic Retail Bank, with an authorized capital of US$ 600 Million, of which US$ 122 Million has been issued and fully paid.AIB - Bahrain is one of the Banking Units of Al Baraka Banking Group's (ABG). ABG is a Bahraini Joint Stock Company listed on Bahrain and Dubai stock exchanges and one of the well-known leading international Islamic banks. It has been rated by Standard & Poor's as BBB- with a short-term rating of A-3. ABG offers retail, corporate and investment banking and treasury services strictly in accordance with the principles of the Sharia'a. The authorized capital of ABG is US$1.5 billion, while the total equity amounts to about US$ 1.8 billion. The Group has a wide geographical presence in the form of subsidiary banking Units in 14 countries, which in turn provide their services through more than 400 branches. These banking Units are Jordan Islamic Bank/ Jordan, Al Baraka Islamic Bank - Bahrain, Al Baraka Bank Limited/ Pakistan, Banque Al Baraka D'Algerie/ Algeria, Al Baraka Bank Sudan/ Sudan, Al Baraka Bank Ltd/ South Africa, Al Baraka Bank Lebanon/ Lebanon, Al Baraka Bank Tunisia/ Tunisia, Al Baraka Bank Egypt/ Egypt, Al Baraka...
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...TABLE OF CONTENTS PART 1: OVERVIEW ................................................................................................................. 1 1. Introduction............................................................................................................................ 1 2. Objectives .............................................................................................................................. 2 3. Scope of Application ............................................................................................................ 2 4. Legal Provision...................................................................................................................... 3 5. Effective Date & Compliance Deadline ............................................................................. 3 6. Approach................................................................................................................................ 4 PART 2: SHARIAH GOVERNANCE ARRANGEMENTS ................................................... 5 SECTION I: General Requirements of the Shariah Governance Framework ..............5 - 9 SECTION II: Oversight, Accountability & Responsibility............................................. 10 - 14 SECTION III: Independence............................................................................................ 15 - 16 SECTION IV: Competency ..................................................
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...Bulletin of Islamic Area Studies, 1-2 (2007), pp. 38-53 Islamic Microfinance: A Missing Component in Islamic Banking Abdul Rahim ABDUL RAHMAN 1. Introduction Microfinance means “programme that extend small loans to very poor people for self employment projects that generate income in allowing them to take care of themselves and their families” (Microcredit Summit, 1997). The World Bank has recognized microfinance programme as an approach to address income inequalities and poverty. The microfinance scheme has been proven to be successful in many countries in addressing the problems of poverty. The World Bank has also declared 2005 as the year of microfinance with the aim to expand their poverty eradication campaign. The main aim of the paper is to assess the potentials of Islamic financing schemes for micro financing purposes. The paper argues that Islamic finance has an important role for furthering socio-economic development of the poor and small (micro) entrepreneurs without charging interest (read: riba’). Furthermore, Islamic financing schemes have moral and ethical attributes that can effectively motivate micro entrepreneurs to thrive. The paper also argues that there is a nexus between Islamic banking and microfinance as many elements of microfinance could be considered consistent with the broader goals of Islamic banking. The paper, first, introduces the concepts of microfinance, and presents a case for Islamic microfinance to become one of the components of Islamic banking...
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...Islamic Banking in Western China Group Paper 3 Group 4 November 6, 2014 Banking in some form has been around for thousands of years. It started small with loans of food or some other valuable product in local villages and has now evolved into the global industry we know today. There is a newer kind of banking that has seen a surge of acceptance from across the world, and that new kind of banking is known as Islamic banking. Islamic banking is a fairly new alternative to western banking, starting in the 1970’s. It is based on Shariah, the fundamental Islam religion. This is a socially responsible way to do banking and allows religion to guide decisions. Interest based transactions are not allowed because they violate Islamic law (Varriale, 2014). Instead, they share profits and losses with the lenders and borrowers of the banks. A few concepts, musharaka, murabaha, and mudaraba, are used in place of interest. Musharaka is when a borrower repays their loan through principal payments and a predetermined percentage of profits. Mudaraba is when a borrower agrees to pay the bank a handling fee if the investment is successful (R.J.C. and A.O.S., 2009). Murabaha is when the bank buys an asset for a customer and then sells it to them on a deferred basis, avoiding an interest-bearing loan. They also offer leasing agreements (R.J.C. and A.O.S., 2009). Islamic banking also requires tangible assets to back up the financial products. This is a much more conservative approach...
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...History of Islamic Business Transaction Without a doubt, the history of Islamic Banking is quite interesting. Since the medieval era (1,000 – 1,500 AD), businesspeople in the Middle East engaged in financial transactions. At this time though, these transactions used the same financial principles as the Europeans. Early History of Islamic Banking Since the Arabs of the Ottoman Empire traded extensively with people in Spain, they also developed certain no-interest financial systems that worked on a profit and loss sharing method. These systems, in turn, financed trade and other business affairs. When the Middle Eastern and Asia began to be more important trading partners for various European companies, the Europeans opened banks in these countries – with many of these banks based on the interest-bearing financial system. As the trading relationship with the Europeans continued to play an important role, these types of financial institutions began to be more prominent outside of Europe. However, even when local trading business owners used these commercial banks, they often only transferred money between accounts. Both borrowing and depositing money was limited as the local population wanted to refrain from partaking in interest-bearing transactions. Further, certain co-operative institutions based on the original profit and loss sharing model still existed, but only in certain locations. As economic demands increased, avoiding banks was not an option for local business people...
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...of Mudarabah & a new approach to equity financing in Islamic finance Salman Ahmed Shaikh International Association of Islamic Banks 1. July 2011 Online at http://mpra.ub.uni-muenchen.de/19697/ MPRA Paper No. 19697, posted 19. September 2011 12:50 UTC A Critical Analysis of Mudarabah & A New Approach to Equity Financing in Islamic Finance Journal of Islamic Banking & Finance, ISSN 1814-8042 By Salman Ahmed Shaikh Project Director, Islamic Economics Project islamiceconomicsproject@gmail.com www.islamiceconomics.viviti.com Abstract Financial intermediation serves a valuable purpose, but it can also be structured using equity modes of financing. This can relieve the financee and increase diversity of entrepreneurial undertakings as in debt based commercial financing, there is little room for diversity with obligatory and stipulated servicing of debt. Using Islamic equity modes of financing poses the challenge of the agency problem and moral hazard. The extent of this agency problem in Mudarabah and its impact on economic payoffs between counterparties is analyzed in this study with a simulation model. Based on review of alternate solutions proposed, the author presents two possible covenants which could make Mudarabah mode of financing more acceptable and widely usable in financial intermediation. This would also further the egalitarian objectives of an Islamic economic order. Keywords: Interest free economy, Islamic Economic System, Mudarabah, Agency Problem, Moral Hazard...
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...1. Islamic banking is banking activity that is consistent with the principles of Sharia- Islamic law and participates actively in achieving the goals and objectives of an Islamic economy. Sharia prohibits the interest-based transactions and Investing in businesses that provide goods or services considered contrary (vrazrez) to Islamic principles, for example alcohol, pork, gambling (igra na birze,azartnaja igra), or businesses that produce media such as gossip columns or pornography. The aim of this is to engage in only ethical investing, and moral purchasing. 2. Interest-free banking seems to be of very recent origin. The earliest references to the organisation of banking on the basis of profit sharing rather than interest are found in 1946. In the next two decades interest-free banking attracted more attention, partly because of the political interest it created in Pakistan and partly because of the emergence of young Muslim economists. In The early 1970s were held several conferences on Islamic Economics and banking. The involvement of institutions and governments led to the application of theory to practice and resulted in the establishment of the first interest-free banks. The Islamic Development Bank, an inter-governmental bank established in 1975, was born of this process. It was set up with the mission to provide funding to projects in the member countries. The efforts undertaken in the 1980’s to Islamize the economy at national level are considered as pioneering...
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...Benefits The idea of Islamic banking was initiated and brought up by some economists who were conscious about socio economic development of Muslim nations based on Islamic principles. It was based on noble vision and objective of Islamic banking base on profit and loses sharing principle. The foundation of Islamic banking theory that they proposed was based on mudaraba and musharakah contracts as mechanism to operate Islamic banking system. “The early contributions on the theory of Islamic banking were only discussed as part of the subject in Islamic economic system. For example, the book by Qureshi on Islam and the Theory of Interest (Qureshi (l946)) which looked upon banking as a social service that should be sponsored by the government like other public institutions such as public health and education.2 His view was based on the point that the bank could neither pay any interest to account holders nor charge any interest on loans advanced. He also suggests the possibility for both Islamic banks and entrepreneur to create a partnership. No mention was made of profit-sharing.” Other economists were come up with different ideas at earlier stages such “the principle of mudarabah was appealed systematically by Uzair (l955). His main contribution lay in suggesting mudarabah as the main premise for 'interest less banking'. However, his argument that the Islamic bank should not make any capital investment with its own deposits rendered...
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..............................................7 3. Understanding Riba ...........................................................10 3.1 A world shaped by Riba.................................................... 10 3.2 What is Riba? ................................................................. 11 4. The Misunderstanding of Riba............................................20 4.1. Religious reformism and capitalism ................................... 20 4.2 The Islamic Reformers ..................................................... 23 4.3 The followers of Reda ...................................................... 27 4.4 The misunderstanding of Riba an-nasiah today.................... 28 4.5 Equating Riba to interest in a loan ..................................... 33 4.6 Islamic Banking .............................................................. 34 4.6.1 Islamic Banks are banks ............................................. 34 4.6.2 Murabaha: what it is and what it is not ......................... 38 4.6.3 How the Islamic Bank’s version of the contract of Murabaha came into being ................................................................. 41 4.6.4 The danger of making principles out of contracts............ 46 4.7 The Stages of the “Islamisation” process ............................ 48 4.8 On the methodology of modernism .................................... 49 5. Understanding Paper Money ..............................................54 5.1 Paper money backed by gold and...
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...skill and labour.The provider of capital is called ‘Shahib-al-Mal’ or the ‘Rabb-ul-Mal’ (the financier or owner of the fund) and acts like a sleeping or dormant partner while the provider of skill and labour is called ‘Mudarib’ (entrepreneur/organizer) who provides the entrepreneurship andmanagement for carrying on any venture, trade, industry or service with the objectives of earning profits.Both the parties share the profit as per pre-agreed ratio and the losses, if any, being borne bythe provider of capital i.e. ‘Shahib-al-Mal’ except if it is due to breach of trust, misconduct,negligence or violation of the conditions agreed upon by the Mudarib becomes liable for that.The Mudarib is in the nature of a trustee as well as an agent of the business. He is to work with honesty and sincerity and to exercise the maximum possible care and precaution in theexercise of his functions. Deposit Products of FSIB Al-Wadeah Current Account Mudaraba Savings Account Mudaraba Special Notice Account ...
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