This book is written with a clear focus on learning of Islamic banking by accounting, business and finance students/professionals. Resources available on the subject have so for focused on legal side and very negligible work is available on financial front for a common user. This book is written in financial perspective and author has focused upon financial impacts, generated by application of Islamic financial laws. However a summary of Islamic commercial laws of each chapter has been provided. Author has adopted balance sheet method to inculcate the knowledge; hence, understanding of elementary balance sheet is pre-requisite to get maximum out of this book.
This book is divided into five parts. Part-1 presents update on Islamic banking, why and how Islamic banking started? What is current status? Meaning and prohibition of Riba (Interest) as reported in revealed books (Bible and Qura'n). Part two is about asset backed financing provided by IFIs. It includes trading (selling) modes of financing including Murabaha, Salam and Istisna'a; it also includes Ijara financing. At the start of part two, summary of Sharia rulings about sales is reported.
This book is divided into five parts. Part-1 presents update on Islamic banking, why and how Islamic banking started? What is current status? Meaning and prohibition of Riba (Interest) as reported in revealed books (Bible and Qura'n). Part two is about asset backed financing provided by IFIs. It includes trading (selling) modes of financing including Murabaha, Salam and Istisna'a; it also includes Ijara financing. At the start of part two, summary of Sharia rulings about sales is reported.
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Chapter two is about Murabaha (cost plus profit) the most widely used financing tool by IFIs world over and Muajjal (deferred sale). Average share of Murabaha is above 40% in portfolios of IFIs. Murabaha is a very useful tool to replace overdraft and short to medium term financing. Chapter two discusses the basic rules of Murabaha, necessary steps involved and comparative study with conventional short term loans including bank overdraft facility. Chapter three is about Bai Salam; a form of sale contract where by IFIs purchase goods for spot payment with deferred delivery. Practically it is used in financing of agricultural needs of farmers. Chapter four is about Istisna'a. This mode of financing is designed to transect business through an order to manufacture and/or supply. It is a sales contract with the exception of existence of subject matter. This tool of financing is useful for infrastructure projects. Chapter five is about Ijarah; a rental contract whereby IFIs lease an asset for a specific rent and period to the client. Ijarah is very useful in replacement of leasing. Average share o f Ijarah is 18% in portfolios of IFIs.
Part three of the book deals with profit and loss sharing modes of financing including Musharaka, diminishing Musharaka and Mudaraba. A special section is devoted to discuss the lesser application of Musharaka in operations of IFIs in addition to Sharia rulings and financial impact. Chapter seven is about Diminishing Musharaka; a form of gradually declining partnership between IFI and client generally used to finance real estates. Under diminishing Musharaka I have discussed the basic Sharia rulings, Islamic house financing, comparative study and installment calculation for house financing. Chapter eight is about Mudaraba. Under this scheme of financing IFIs provide capital to financially weak but skilful people to do the business and share outcome with IFIs.
Part four is about deposits management. Chapter nine presents various types of deposits collected by IFIs and profit sharing mechanism. Concepts of daily product and weight age based profit system are elaborated.
Part five of the book presents special topics in Islamic banking. In this part areas of liquidity management and summary of financial reports along with accounting principles as adopted/developed by accounting & auditing organization of Islamic financial institutions (AAOIFI), are discussed.
This book is useful for MBA/BBA students as a three credit hour course as well as practitioners of Islamic banking. It is also useful for accounting & finance professionals, trainers in Islamic banking, regulators, investors, corporate managers and general public interested in understanding Islamic finance.
Part four is about deposits management. Chapter nine presents various types of deposits collected by IFIs and profit sharing mechanism. Concepts of daily product and weight age based profit system are elaborated.
Part five of the book presents special topics in Islamic banking. In this part areas of liquidity management and summary of financial reports along with accounting principles as adopted/developed by accounting & auditing organization of Islamic financial institutions (AAOIFI), are discussed.
This book is useful for MBA/BBA students as a three credit hour course as well as practitioners of Islamic banking. It is also useful for accounting & finance professionals, trainers in Islamic banking, regulators, investors, corporate managers and general public interested in understanding Islamic finance.
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