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Islamic banking, Islamic finance, or Sharia-compliant finance is banking or financing activity that complies with Sharia and its practical application through the development of Islamic economics. Some of the modes of Islamic finance include mudarabah, wadiah (safekeeping), musharaka, murabahah (cost-plus), and ijarah (leasing).
Islamic economics refers to the knowledge of economics or economic activities and processes in terms of Islamic principles and teachings. Islam has a set of specific moral norms and values about individual and social economic behavior. Therefore, it has its own economic system, which is based on its philosophical views and is compatible with the Islamic organization of other aspects of human behavior: social and political systems.
Islamic banking in Malaysia began in September 1963 when Perbadanan Wang Simpanan Bakal-Bakal Haji (PWSBH) was established. PWSBH was set up as an institution for Muslims to save for their Hajj expenses. In 1969, PWSBH merged with Pejabat Urusan Haji to form Lembaga Urusan dan Tabung Haji.
Sukuk is the Arabic name for financial certificates, also commonly referred to as "sharia compliant" bonds. Sukuk are defined by the AAOIFI as "securities of equal denomination representing individual ownership interests in a portfolio of eligible existing or future assets." The Fiqh academy of the OIC legitimized the use of sukuk in February 1988.
A financial planner or personal financial planner is a qualified financial advisor. Practicing in full service personal finance, they advise clients on investments, insurance, tax, retirement and estate planning.
Wealth management (WM) or wealth management advisory (WMA) is an investment advisory service that provides financial management and wealth advisory services to a wide array of clients ranging from affluent to high-net-worth (HNW) and ultra-high-net-worth (UHNW) individuals and families. It is a discipline which incorporates structuring and planning wealth to assist in growing, preserving, and protecting wealth, whilst passing it onto the family in a tax-efficient manner and in accordance with their wishes. Wealth management brings together tax planning, wealth protection, estate planning, succession planning, and family governance.
Burj Bank Limited, formerly known as Dawood Islamic Bank Limited (DIBL), now merged into Al Baraka Bank, was Pakistan's sixth full-fledged Islamic commercial bank. The bank received its license from the State Bank of Pakistan in May 2006, and officially commenced its operations on Friday, April 27, 2007.
Murabaḥah, murabaḥa, or murâbaḥah was originally a term of fiqh for a sales contract where the buyer and seller agree on the markup (profit) or "cost-plus" price for the item(s) being sold. In recent decades it has become a term for a very common form of Islamic financing, where the price is marked up in exchange for allowing the buyer to pay over time—for example with monthly payments. Murabaha financing is basically the same as a rent-to-own arrangement in the non-Muslim world, with the intermediary retaining ownership of the item being sold until the loan is paid in full. There are also Islamic investment funds and sukuk that use murabahah contracts.
CIMB Group Holdings Berhad is a Malaysian universal bank headquartered in Kuala Lumpur and operating in high growth economies in ASEAN. CIMB Group is an indigenous ASEAN investment bank. CIMB has a wide retail branch network with 1,080 branches across the region.
Humayon Dar is the Director General of the Cambridge Institute of Islamic Finance, a research institute specializing in the financial sectors of countries with a significant proportion of Islamic banking and finance.
A Sharia Board certifies Islamic financial products as being Sharia-compliant. Because compliance with Sharia law is the underlying reason for the existence of Islamic finance, Islamic banks should establish a Sharia Supervisory Board (SSB) to advise them on whether their products comply, and to ensure that their operations and activities comply with Sharia principles. There are also national Sharia boards in many Muslim majority countries that regulate Islamic financial institutions nationwide.
Islamic finance products, services and contracts are financial products and services and related contracts that conform with Sharia. Islamic banking and finance has its own products and services that differ from conventional banking. These include Mudharabah, Wadiah (safekeeping), Musharakah, Murabahah, Ijar (leasing), Hawala, Takaful, and Sukuk.
The economic policies proposed under the banner of "Islamisation" in Pakistan include executive decrees on Zakāt (poor-due), Ushr (tithe), judicial changes that helped to halt land redistribution to the poor, and perhaps most importantly, elimination of riba. Perhaps the foremost exponent of Islamisation among Pakistan's rulers—General Muhammad Zia-ul-Haq—advanced a programme in 1978 to bring Pakistan law in line with the principles of Sharia law.
Rizwe Mohammed is the President of All Ceylon Jamiyyathul Ulama. Since 2003, Mufti M.I.M. Rizwe has been the President of All Ceylon Jamiyyathul Ulama (ACJU), the supreme body of Islamic Theologians in Sri Lanka, inaugurated in 1924, incorporated by the Parliamentary Act No. 51 of 2000.
International Shariʽah Research Academy for Islamic Finance (ISRA) is an Islamic finance research institution in Malaysia that focuses on sharia-related issues.
Rusni Hassan currently is a Professor and Dean at IIUM Institute of Islamic Banking and Finance, International Islamic University Malaysia. Previously, she was a Deputy Dean at the Institute, a Coordinator for Research and Publication and Course Coordinator for Islamic Law of Transactions and Islamic Banking and Takaful. She was a Research Committee for Review of Islamic Banking Laws, Central Bank of Malaysia and an examiner for Financial Planner Association of Malaysia. Presently she is the examiner for the Chartered Institute of Management Accountants. She was a member of Shariah Advisory Council Bank Negara Malaysia and Shariah Advisor for Association of Islamic Banking Institutions Malaysia. She also served as Secretary for the Association of Shariah Advisors in Islamic Finance Malaysia for 8 years starting from 2012 until 2020.
Profit and Loss Sharing refers to Sharia-compliant forms of equity financing such as mudarabah and musharakah. These mechanisms comply with the religious prohibition on interest on loans that most Muslims subscribe to. Mudarabah (مضاربة) refers to "trustee finance" or passive partnership contract, while Musharakah refers to equity participation contract. Other sources include sukuk and direct equity investment as types of PLS.
Muamalat is a part of Islamic jurisprudence, or fiqh. Sources agree that muamalat includes Islamic "rulings governing commercial transactions" and Majallah al-Ahkam al-Adliyyah).
Sharia and securities trading is the impact of conventional financial markets activity for those following the islamic religion and particularly sharia law. Sharia practices ban riba and involvement in haram. It also forbids gambling (maisir) and excessive risk. This, however has not stopped some in Islamic finance industry from using some of these instruments and activities, but their permissibility is a subject of "heated debate" within the religion.
Challenges in Islamic finance are the difficulties in providing modern finance services without violation of sharia. The industry of Islamic banking and finance has developed around avoiding riba by avoiding interest.
References
- ↑ "Sharia economist one of a new breed". www.theguardian.com. 12 March 2008.
- ↑ "Sheikh Nizam Mohammed Saleh Yaquby - IslamicMarkets.com". islamicmarkets.com. Retrieved 2018-04-21.