...ISTISNA’ – ISLAMIC BANKS IN MALAYSIA AND BAHRAIN BANK (S) | SALAM | ISTISNA’ | | MALAYSIA FULL-FLEDGED ISLAMIC BANKS | Bank Islam Malaysia Berhad | Nil | Disclosed in the Notes to the Financial Statements – Financing, Advances and Others | Bank Muamalat Malaysia Berhad | Nil | Disclosed in the Notes to the Financial Statements – Financing of Customers | | MALAYSIA ISLAMIC BANKING SUBSIDIARIES | Affin Islamic Bank Berhad | Nil | Only mentioned in the Directors’ Report | Alliance Islamic Bank Berhad | Nil | Nil | AmIslamic Bank Berhad | Nil | Nil | CIMB Islamic Bank Berhad | Nil | Nil | Hong Leong Islamic Bank Berhad | Nil | Nil | Maybank Islamic Berhad | Nil | Nil | Public Islamic Bank Berhad | Nil | Nil | RHB Islamic Bank Berhad | Nil | Disclosed in the Notes to the Financial Statements – Financing and Advances | | MALAYSIA FOREIGN COMMERCIAL BANKS – ISLAMIC SUBSIDIARIES | HSBC Amanah Malaysia Berhad | Nil | Nil | Standard Chartered Saadiq Berhad | Nil | Nil | OCBC Al Amin Bank Berhad | Nil | Nil | | MALAYSIA FOREIGN ISLAMIC BANKS | Al Rajhi Banking and Investment Corporation Berhad | Nil | Nil | Kuwait Finance House Berhad | Nil | Disclosed in the Notes to the Financial Statements – Financing, Advances and Other Receivables (by contract) | Asian Finance Bank Berhad | Nil | Nil | | BAHRAIN ISLAMIC BANKS | ABC Islamic Bank - Arab Banking Corporation | Nil | Nil | Al Baraka Islamic Bank | Disclosed in the Notes to the Consolidated Financial Statements...
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...Running head: CONTRADICTION CONCEPTS IN AAIOFI WITH ISLAMIC BANKING Contradiction concepts in Islamic Banking in Malaysia Nor Alina bt Abdul Latip International Islamic University Malaysia Abstract This study investigates the concepts use in Islamic Banking in Malaysia and compares it with guidelines provide by Islamic teachings. It finds that most Islamic banks in Malaysia offer BBA in home financing and Ijarah in car financing as their products. The findings show that concepts of BBA and Ijarah practise in Islamic Institutions in Malaysia are differ from the actual Islamic teachings. The study also reveals that Islamic banks are restricted to the Malaysian requirements in providing their products. Page no Abstract 2 Introduction 4 Literature review 5 Methodology 7 Findings 7 Conclusion 13 1.0 INTRODUCTION Financial Accounting Organization for Islamic Banks and Financial Institutions is known as Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI). It was established in 1991 (AAOIFI, 2007, p.8). AAOIFI standards are drawn from Islamic teaching. The standards free from three important concepts that are used in conventional institutions which are interest...
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...January/February 2009 Volume 25, Number 1 The Evolution Of Islamic Finance In Southeast Asia: The Case Of Malaysia (1) Rika Nakagawa, Institute of Developing Economies, Japan ABSTRACT The purpose of this paper is threefold: to explain why the Islamic financial system was introduced in Malaysia; to outline how the Malaysian government has promoted this system; and to analyze the development of the Islamic financial system with a specific focus on the banking sector. In Malaysia, the first Islamic bank, Bank Islam Malaysia Bhd., was established in 1983. One turning point of the Islamic financial system in the country was the Financial Sector Master Plan presented by the central bank in 2001. The government, in accordance with the plan, has taken a strong initiative in the development of an Islamic financial system. As a result, the country has succeeded in promoting a comprehensive Islamic financial system, banking and insurance sectors and capital markets. In the banking sector, this paper reveals that the profit-sharing system does not seem to be popular in this country although the reward system is central to Islamic Finance. In order for further development of the Islamic financial sector, the reasons why the percentage of contracts under the profit-sharing system is small need to be analyzed. Keywords: Islamic Finance in Malaysia, Financial Sector Master Plan, New Economic Policy, Bank Islam Malaysia Bhd., Islamic Banking Scheme INTRODUCTION I n the globalized economy,...
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...Introduction Recent global financial crisis has highlighted the problems in the current financial system. Some of the analysts have even termed it as the downfall of the capitalism and interest based economy driven by ‘greed’ and has acknowledged the need of a new financial system. One interesting development in this whole scenario was the relative stability of Islamic Financial Institutions (IFIs). In the last decade, IFIs have witnessed an impressive growth and have begun to make an impact on the current financial setup. This paper aims to highlight the basic foundation of Islamic financial system and the development of different markets and institutions. It will then point out certain issues and challenges facing the Islamic Financial Institutions. HISTORY Early History: The history of Islamic Financial system goes back to 1,000 – 1,500 AD, during which the Middle Eastern tradesmen would engage in transactions based on Shariah. During that time, the Ottoman Empire Arabs had good trade relationships with the Spanish, and they established their financial systems without interest, based on profit and loss sharing basis. As time went by, Middle Eastern and Asian regions became important trading partners for European companies such as the Dutch East India Company, as a result of which European banks started to spread their branches in these countries, which typically were interest-based. Thus the conventional financial institutions became more dominant as Western countries started...
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...the financial system "Western." In recent months, in fact, we are witnessing the profound crisis of traditional financial systems and principles and, at the same (or accordingly), to an exaltation, instead, systems and financial principles Islamic (and especially its values). The global economy is linked to investment-oriented traditional finance is, in fact, came "in agony" due to expansion of the crisis caused by the "Collaterized Debt Obligations", structured bonds strongly infected with quote consisting of the notorious subprime mortgages, the primary cause of bankruptcies of known banks, until some time ago considered insecure. Paradoxically, to better withstand this crisis are not sophisticated products financial engineering of Western production, but the Islamic bond, the traditional sukuk, bonds that are compatible with the dictates of Sharia, very less sophisticated, but certainly safer, since in accordance with the QURANIC principle which prohibits investing money in financial firms tied to events of a uncertain. It is reasonable, therefore, to think that many Western financial institutions, are evaluating new and alternative financial instruments such as "Islamic Observant”, even in the face of an increasingly pressing need for a new system Financial more "ethical" and linked to the real economy. In truth, many banks already (in the United Kingdom, for example), even before this crisis, evaluated and then, later, successfully implement systems of Islamic finance...
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...MANAGING FINANCIAL RISKS OF SUKUK STRUCTURES Ali Arsalan Tariq M.Sc. International Banking Copyright AA Tariq, September 2004 A dissertation submitted in partial fulfilment of the requirements for the degree of Masters of Science at Loughborough University, UK. Acknowledgements First and foremost, I would like to thank my family – mother, father and my siblings – for their undying love. I would never have come so far without them. I would also like to take this opportunity to thank my supervisor, Dr. Humayon Dar, for his insightful guidance and for always being welcoming and patient with my unannounced visits throughout the year. This dissertation would never have been produced otherwise. Last but not least, I would like to thank my friends at Loughborough University that have made my summer of 2004 all the more memorable. For everything that is right, credit goes to all of the above. For anything that is wrong, I am culpable. Ali Arsalan Tariq September 2004 2 TABLE OF CONTENTS I. Introduction II. Islamic Financial Assets: Overview of Theoretical Aspects 2.1 Prohibitions 2.1.1. Prohibition of Riba (Interest) ` 2.1.2. Prohibitions of Gharar (Excessive Uncertainty) 2.1.3. Avoidance of Unethical Investments and Services 2.2 Alternative Basis of Financial Instruments 2.2.1 Partnership Contracts 2.2.2. Exchange Contracts 2.2.3. Financial Assets III. Evolution and Profile of Sukuk Structures and Markets 3.1 Types of Sukuk 3.1.1 Pure Ijarah Sukuk 3.1.2. Hybrid/Pooled Sukuk 3...
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...There are studies done (Hanira and Hasniah, 2006; Faisol and Rosila, 2014), that investigate on the viability of Istisna’ to a housing project in Malaysia. So in this case, there is a lack of research done on Istisna’ financing for infrastructure projects such as roads, bridge, dam, and tunneling project. Besides, a statistical data recorded by Bank Negara Malaysia in the year 2014 revealed that financing through the Istisna’ is only RM960 million from a total of RM314,190.2 million. So, in this case, it shows that the level of utilization of Istisna’ in construction is still low in Malaysia. It could be that construction players are not aware of the Islamic project finance model offered or how it could be used to improve value for money and affordability (Amila, Mahadi, Abdullahi and Faris,...
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...Islamic Banking and Finance To Dr Mohammad Omar Zubair, who is a source of inspiration for all those working in the field of Islamic economics and finance Islamic Banking and Finance New Perspectives on Profit-Sharing and Risk Edited by Munawar Iqbal Islamic Development Bank, Saudi Arabia David T. Llewellyn Loughborough University, UK Edward Elgar Cheltenham, UK • Northampton, MA, USA In association with: International Association of Islamic Economics Islamic Development Bank The Islamic Foundation © Dr Munawar Iqbal and Professor David T. Llewellyn 2002 (on behalf of the Steering Committee for the Fourth International Conference on Islamic Economics and Banking held at Loughborough University, UK, August 13–15, 2000) 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 the prior permission of the publisher. Published by Edward Elgar Publishing Limited Glensanda House Montpellier Parade Cheltenham Glos GL50 1UA UK Edward Elgar Publishing, Inc. 136 West Street Suite 202 Northampton Massachusetts 01060 USA A catalogue record for this book is available from the British Library Library of Congress Cataloguing in Publication Data Islamic Banking and Finance: New Perspectives on Profit-Sharing and Risk / edited by Munawar Iqbal, David T. Llewellyn p. cm. “Some of the papers were presented...
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...2; February 2011 Differences and Similarities in Islamic and Conventional Banking Muhammad Hanif Assistant Professor, National University of Computer & Emerging Sciences, Islamabad PhD-Finance Scholar at International Islamic University, Islamabad, Pakistan E-mail: muhammad.hanif@nu.edu.pk Abstract Islamic Banking is growing at a rapid speed and has showed unprecedented growth and expansion in last two decades in spite of mismatching of existing financial framework and business practices. By the end of 2008 volume of Islamic banking has reached to US $ 951 Billion with operation in more than 50 countries. Middle East is the centre of Islamic banking with contribution of approximately 80% while 20% share is contributed by rest of the world. In Pakistan Islamic banking is at infant stage although last 6 years growth is marvelous. Islamic banking has grown at an average annual rate of 76% in the last six and half years (12/03 - 06/10) in Pakistan. Although Islamic banking faces multi challenges however three of them are very vital for its existence. First is Sharia compliance in its operations in an environment which is dominated by interest based practices even in Muslim societies. Second is perception of financial industry practitioners about its performance whether the system is able to serve the total needs of trade and industry. Third is the perception of a large majority of Muslims whether existing practice of Islamic banking is Sharia compliant or mere copy of conventional...
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...ISLAMIC BANKING SYSTEM & PRODUCTS Name Course Instructor Institution Date Islamic banking Introduction Over the past decades, Islamic banking has expanded into a distinctive and fast growing competitive substitute to conventional banking in many countries. Despite the rapid expansion of the Islamic banking system in recent years, little is however understood of how it differs from conventional banking systems, especially in the non Muslim world. Although Islamic banking works in accordance with the Islamic laws (shariah), in other countries, they are allowed to operate incomparably with the conventional banks that are interest based. The desire of Muslim communities to reorganize their social economic activities, and revival of financial institutions such as Zakah on an interest free basis can be said to be the main drivers to the development of Islamic baking over the past (Wilson, 1994: 110). Nevertheless, Islamic banking is not a religious product as it may insinuate, but it can rather be understood as a series of growing financial products that are developed with the aim of meeting the requirements of Islamic culture and its people (Sole, J. A., 2007: 6). Thus theses systems have developed so as to enable Muslims to invest savings and equally raise finance without compromising their religious and ethical practices. In order to comprehend the fundamental principles of operation of the Islamic banking system, it is thus necessary to understand what it is. There is...
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...Introduction to Islamic Insurance K. M. Mortuza Ali 1 K. M. Mortuza Ali Managing Director Prime Islami Life Insurance Limited 29 Dilkusha C/A Raj Bhaban (6th Floor) Dhaka – 1000 Phone – 9560889, 9570729 (Off) 8353552 (Res) Mobile – 019-366617 Fax – 880-2-9564390 Email – plicl@bdonline.com kmortuza@bdmail.net 2 Chapter (I) Basic ideas about Risk & Insurance 1. 2. 3. 4. 5. 6. 7. 8. 9. What is Risk? How do we distinguish between pure risk and speculative risk ? How risk is handled? Why every risk is not insured? What are the characteristics of Insurable risks? What are the requisites of Insurance for Covering Risk? What are the Principles of Insurance contract? What are the different types of Life Insurance policies? How Insurance is different from Gambling? 10. What is the main function of insurance? 11. What is the greatest value of insurance? 12. What is the Purpose of Life Insurance? 13. How insurance protects value of life? 14. How life Insurance schemes meet the saving needs? 15. What are the social and economic values of Insurance? 16. What is the Actuarial principle of Life Insurance? 17. What is reinsurance? 18. What are the different methods of reinsurance? 1. What is Risk? Risk has been defined as the uncertainty as to the occurrence of an economic loss. It is the passivity of adverse result from a desired outcome. Risk and probability are not synonymous. We must understand the difference between risk and probability. The terms hazard and peril are...
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...1.0 Definition of Sukuk in general The word ‘sukuk’ is taken from the Arabic name to represent the financial certificate or an Islamic bond. It comes in Arabic form which is “sak” in singular and “sukuk” in plural. Sukuk is the Islamic bond or security that provides return to investor without breaking the Islamic law, which prevent in charging or paying interest. Sukuk in Islamic finance provides an opportunity to obtain the expected return with the lowest risk as the majority of investment opportunities is based on the stock market. Income is fixed when applying sukuk resulted in no interest is charged on the bonds. Bonds are securities based on debt while sukuk are securities based on asset. Sukuk is an important mechanism that will enhance the financial international capital markets through Islam. Sukuk are primarily composed of investment certificates of ownership claim in a pool of assets. In conclusion, sukuk refers to Islamic bonds that give an advantage to the investor to own a piece of property, along with a commensurate cash flow and risk. Sukuk is in compliance with Islamic law and also refers to the Islamic principles which do not charge interest. 2.0 Background of Sukuk in general Sukuk is an Islamic capital market instruments. Sukuk refers to Islamic securities with rather distinctive features in the modern day of Islamic finance. The first Sukuk transactions occurred in Damascus, Syria, located in the Grand Mosque of Damascus in the 7th century AD...
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...GUIDELINES FOR CONDUCTING ISLAMIC BANKING Section I Introduction to Islamic Banking Islamic Banking has experienced a phenomenal growth and expansion in Bangladesh in the backdrop of strong public demand and support for the system along with its gradually increasing popularity across the world. As a result, a number of full-fledged Islamic Banks has been established, while a good number of conventional banks have come forward to offer services compliant with Islamic Shariah through opening of Islamic branches along with conventional ones. There is also a trend of conversion of conventional banks into Islamic bank. It has, therefore, become necessary to ensure that activities of the fast growing Islamic Banks are carried out properly and uniformly according to the principles of Islamic Shariah. With this end in view, Bangladesh Bank constituted a Focus group comprising representatives of the central Bank, a number of Islamic Banks and the Central Shariah Board for Islamic Banks of Bangladesh to formulate an integrated guideline for conducting banking business of the Islamic Bank/Islamic bank branches of conventional banks. Based on the recommendations of the Focus group this guideline embodying different terminologies used in Islamic Banking operations, definitions of the terminologies, the principles and modes of deposits and investments has been prepared. It also dwelt upon the issues of liquidity, maintenance of books of accounts and preparation of financial statements and other...
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...Introduction Unlike conventional economics which focuses on profit maximization, the Islamic economic system aims at the “study of human falah achieved by organising the resources of earth on the basis of cooperation and participation (Akram Khan, p.55).” In other words, the Islamic economic system aims at attaining Allah s.w.t’s pleasure, while pursuing economic activities within the boundaries of the Islamic shariah. The Islamic shariah puts a heavy importance on the well being of the community and social justice. Thus, this also means the prohibition of interest. The prohibition of interest is one of the main factors that put Islamic economics in distance with the conventional economics. Because of this difference in nature, Islamic Financial Institutions (IFIs) have different types of contracts as practiced by conventional financial institutions. One of the types of contracts entered by IFIs is the Ijarah contract. Ijarah contracts are also known as Islamic leasing. Basically, this study is done in order to understand more the nature of leasing according to Islamic principles, and at the same time, the differences of ijarah with conventional leasing. In addition, this study also aims to identify the types of ijarah practiced by IFIs in Malaysia and also to see how Malaysian IFIs disclosed their ijarah financing in comparison to their counterparts in Bahrain IFIs. This is because as one ummah, it is important to have a standardized standard that is Shariah compliant...
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...1. Introduction 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...
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