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To the layman who wishes to understand modern Islamic financial
transactions, this book will prove friendly and helpful. It
provides the underlying principles of Shariah financial instruments
and presented them in actual and practical form. Since 1983,
Malaysia has been making significant inroads into the Islamic
financials landscape. Today Islamic financial transactions have
made their presence felt in almost all financial institutions
including banks, unit trusts, insurance, discount houses, fund
management, factoring, pawn broking and project financing. And with
more than USD200 billion Islamic funds available in global finance
today, it is logical that the business of Islamic banking,
insurance and fund management is fast expanding and encroaching
into non-traditional financing. As the Holy Quran enjoins profit
creation via trading and commercial transactions (al-bay') while
forbidding profit earned from loans (riba), increasing Islamic
consciousness among the Muslims today has opened up new business
opportunities in Islamic finance, financial planning and wealth
management. The Shariah not only condone interest as riba, but
prohibits elements of gambling (maisir) in financial transactions.
Ambiguities (gharar) in contractual agreements must be avoided at
all cost while companies seeking Islamic capital must not engage
with prohibited goods such as alcoholic beverages, pork and
pornographic material. But current practices although
unintentionally seem to out focus the real Quranic agenda for
wealth creation and management. The Quranic alternative to riba is
trade and commerce (al-bay'). The essence of trade and commerce is
profit creation that implicates risk-taking (ghorm) and
value-addition (kasb). Doing so promotes fairness and equitable
transactions ('adl) and thus putting ethics and morality (akhlak)
into the limelight of corporate business today. This book has
attempted to venture into several issues of Islamic finance that
incorporates the Quranic conception of trading and commerce
(al-bay'). Profit created from financial instruments devoid of
risk-taking (ghorm) and value addition (kasb) does not fit into the
Quran's outlook of al-bay'. It critically examines current Islamic
financial products offered by banks, mutual funds and insurance
companies and help guide prospective customers to understand the
underlying Shariah principles on which these products are
structured. Products ranging from bank deposits/assets and capital
market instruments are discussed based on prevailing practical
experience in Malaysia as well as other Muslim countries. Divergent
Shariah opinions on sale-buyback (bay' al-'inah) and debt trading
(bay'al-dayn) are discussed with good intentions to harmonize
global Islamic financial transactions. Of most significant is the
push for equity financing (musyarakah/mudarabah) in the banking
business with proper application of salam and istisna' contract as
well. Widespread use of murabahah and al-bai-bithaman ajil (credit
sale) contracts in Islamic finance is a worrying trend. This book
tries to explore the place of Islamic financial contracts in modern
financial markets, whether Islamic financial instruments actually
reflect true label. Implication of trading (al-bay') is expected to
invite venture capital application in Islamic banking and
rationalizes universal banking model for Islamic banks. This book
serves to guide banking customers, practitioners and investors over
the range of Shariah products available in Malaysia's financial
market and help impress how these products can impact their
earnings and business.
To the layman who wishes to understand modern Islamic financial
transactions, this book will prove friendly and helpful. It
provides the underlying principles of Shariah financial instruments
and presented them in actual and practical form. Since 1983,
Malaysia has been making significant inroads into the Islamic
financials landscape. Today Islamic financial transactions have
made their presence felt in almost all financial institutions
including banks, unit trusts, insurance, discount houses, fund
management, factoring, pawn broking and project financing. And with
more than USD200 billion Islamic funds available in global finance
today, it is logical that the business of Islamic banking,
insurance and fund management is fast expanding and encroaching
into non-traditional financing. As the Holy Quran enjoins profit
creation via trading and commercial transactions (al-bay') while
forbidding profit earned from loans (riba), increasing Islamic
consciousness among the Muslims today has opened up new business
opportunities in Islamic finance, financial planning and wealth
management. The Shariah not only condone interest as riba, but
prohibits elements of gambling (maisir) in financial transactions.
Ambiguities (gharar) in contractual agreements must be avoided at
all cost while companies seeking Islamic capital must not engage
with prohibited goods such as alcoholic beverages, pork and
pornographic material. But current practices although
unintentionally seem to out focus the real Quranic agenda for
wealth creation and management. The Quranic alternative to riba is
trade and commerce (al-bay'). The essence of trade and commerce is
profit creation that implicates risk-taking (ghorm) and
value-addition (kasb). Doing so promotes fairness and equitable
transactions ('adl) and thus putting ethics and morality (akhlak)
into the limelight of corporate business today. This book has
attempted to venture into several issues of Islamic finance that
incorporates the Quranic conception of trading and commerce
(al-bay'). Profit created from financial instruments devoid of
risk-taking (ghorm) and value addition (kasb) does not fit into the
Quran's outlook of al-bay'. It critically examines current Islamic
financial products offered by banks, mutual funds and insurance
companies and help guide prospective customers to understand the
underlying Shariah principles on which these products are
structured. Products ranging from bank deposits/assets and capital
market instruments are discussed based on prevailing practical
experience in Malaysia as well as other Muslim countries. Divergent
Shariah opinions on sale-buyback (bay' al-'inah) and debt trading
(bay'al-dayn) are discussed with good intentions to harmonize
global Islamic financial transactions. Of most significant is the
push for equity financing (musyarakah/mudarabah) in the banking
business with proper application of salam and istisna' contract as
well. Widespread use of murabahah and al-bai-bithaman ajil (credit
sale) contracts in Islamic finance is a worrying trend. This book
tries to explore the place of Islamic financial contracts in modern
financial markets, whether Islamic financial instruments actually
reflect true label. Implication of trading (al-bay') is expected to
invite venture capital application in Islamic banking and
rationalizes universal banking model for Islamic banks. This book
serves to guide banking customers, practitioners and investors over
the range of Shariah products available in Malaysia's financial
market and help impress how these products can impact their
earnings and business.
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