Appendix I: Questionnaire on Islamic Finance Objectives and Achievements
Dear Respondent, I am conducting an academic research on whether the Objectives of Islamic Finance are being achieved or not by Islamic Banks and Financial Institutions. I very humbly request you to spend your precious five minutes in filling the questionnaire as per your perception about the Islamic Finance Industry. Your contribution in this regard will be highly appreciated and will be acknowledged at the time of submission of thesis.
1. Your Name (Optional): Prof./Dr./Mr./Mrs./Miss...... 2. Please select your age: a) Under 25 b) 26–35 c) 36–45 d) 46 or older 3. Please select your gender? a) Male b) female 4. How are you related with Islamic Finance, please tick any one from the following. a) Customer b) Employee of Islamic Bank c) Shariah Advisor d) Regulatory officer e) Others (Please specify ...... 5. By religion you are a? a) Muslim d) Buddhist b) Christian e) Atheist/Secular c) Hindu f) Others please specify 6. Data Collection country: a) Malaysia c) United Arab Emirates
Note: There is no right or wrong answer, all I am interested in knowing is your opinion on a “- point Scale”. Where, 5 = Strongly Agree, 4 = Agree, 3 = Neutral, 2 = Disagree, 1 = Strongly Disagree.
157 158 Appendix I: Questionnaire on Islamic Finance Objectives and Achievements
√ Please tick ( ) the number for each statement. Do you think Islamic Banking and Financial Services is:
1 True to the teachings of Islam? 5 4 3 2 1 2ShariahBased? 54321 3 A good vehicle to promote Islamic values? 5 4 3 2 1 4 Working as per the teachings of Quran and 54321 Sunnah? 5 First in conformity with the norms of Islam 54321 and then in accordance with customer’s preferences? 6 Investing in business where there is no Gharar 54321 (more risk)? 7 Practically not indulged in businesses like 54321 gambling, pornographic, alcohol, cinema and other forbidden businesses in Islam? 8 Not different from other commercial banks 54321 except in complying with Shariah legal prescriptions with regard to product offering? 9 Promoting Islamic values and way of life 54321 towards staff, clients and general public?
Do you think:
10 Shariah scholars play their role while issuing 54321 different products? 11 Shariah board acts as a watchdog while issuing 54321 different products?
Do you think Islamic banks and financial institutions:
12 Do not exploit its customers in any way? 5 4 3 2 1 13 Do not indulge in misleading advertisements? 5 4 3 2 1 14 Do not earn income through unfair means? 5 4 3 2 1 15 Are free from exploitation, discontentment and 54321 strife? 16 Are in consonance with the principles of fair 54321 dealing, justice and benevolence? 17 Properly reflect the values in which they are 54321 based? 18 Follow Islamic ethics? 5 4 3 2 1 Appendix I: Questionnaire on Islamic Finance Objectives and Achievements 159
I believe that the following objectives of Islamic finance are being achieved by Islamic Banks and Financial Institutions:
19 Maximizing profits (good percentage of return 54321 to investors). 20 Help in alleviating poverty (poverty 54321 eradication). 21Promotingsustainabledevelopmentprojects.54321 22Providingemploymentopportunities. 54321 23Minimizingcostofoperations. 54321 24Enhancingproductandservicequality. 54321 25 Offering viable and competitive financial 54321 products.
Do you think Islamic Banks and Financial Institutions:
26Areprovidingenoughretailproducts? 54321 27Contributingtosocialwelfare? 54321 28CollectinganddistributingZakat? 54321 29 Contribute in removing society’s inequalities 54321 and improving general standard of living? 30 Performance cannot be judged only through 54321 good percentage of profit/return? 31 Use modern technology in performing banking 54321 transactions? 32 Completely serve as an alternative banking 54321 system?
Do you think following products and services of Islamic finance are really Islamic:
33Mudarabah(sleepingpartnership)? 54321 34Musharakah(partnershipFinancing)? 54321 35Sukuk? 54321 36Ijarah(leasing)? 54321 37Takaful(insurance)? 54321 38Murabahah(costplusfinancing)? 54321 160 Appendix I: Questionnaire on Islamic Finance Objectives and Achievements
Your comments and suggestions are welcome, regarding the development of Islamic Finance Industry in the world ...... Ifyouneedadditionalsheets,pleaseask.
Thank You
Your Signature please Appendix II: Islamic Financial Institutions (By Region and Country1)
1. Middle East
1.1 Bahrain 1.2 Jordan 1.3 Kuwait 1.4 Lebanon 1.5 Qatar 1.6 Syria 1.7 Saudi Arabia 1.8 United Arab Emirates 1.9 Yemen
2. Asia (South and Southeast)
2.1 Bangladesh 2.2 Brunei Darussalam 2.3 Indonesia 2.4 Pakistan 2.5 Malaysia 2.6 Thailand
3. Africa
3.1 Kenya 3.2 South Africa 3.3 Sudan
4. Asia (Northern)
4.1 China
5. Australia and Pacific Islands
5.1 Australia
1 Different banks and financial institutions across globe are given. This is not the complete list in any way. In this list only those banks and financial institutions have been taken which the researcher knows from his personal website, which is ‘World Database for Islamic Banking and Finance’ (WDIBF), and having website URL www.wdibf.com.
161 162 Appendix II: Islamic Financial Institutions (By Region and Country)
6. Commonwealth of Independent States 6.1 Azerbaijan 6.2 Kazakhstan 6.3 Russia 7. Europe 7.1 France 7.2 Germany 163 The authorized capital is BD 100 million and paid up Offices in 22 countries in world 100% owned subsidiary of Citicorp Banking equity of US$ 1 billion 2007 Two branches in Bahrain Kuwait (“BBK”), capital is BD 66.235 million Corporation Special Features May 20, 19911979 1980 with a capital ofNo 500,000,000 information AD No information It has a paid-up capital1984 of US$701 million, total 61%19 increase January in 2006 profits to USJanuary $340 2009 million during Paid upJuly capital 1996 US$ 318 million fullyNovember owned 2004 subsidiary of the Bank of Bahrain and paid-up capital of BD 30 million establishment 3 9 11 6 2 4 7 8 5 10 Ithmaar Bank B.S.C. Gulf Finance House (GFH) Al Baraka Bank Bahrain Citi Islamic Investment Bank Bahrain Islamic Bank (BisB) Capinnova Investment Bank ABC Islamic Bank (E.C.) KhaleejiCommercialBank Name of the BankAl Baraka Bank of Algeria Year of Al Salam Bank Bahrain Banks http://www.citiislamic.com/ciib/homepage/. http://www.khcbonline.com/media/pdf/FH/bank’s%20profile.pdf. http://www.albaraka-bank.com/fr/ translated from Dutch languagehttp://www.bisb.com/AboutUs/history.asp. to English through Google translator. http://www.arabbanking.com/En/AboutABC/Pages/FactSheet.aspx. http://www.ithmaarbank.com/ithmaar_about_glance.asp. http://www.gfh.com/en/about-us/about-us-3.html. http://www.barakaonline.com/default.asp?action=article&ID=137. http://www.alsalambahrain.com/about_us/Profile. http://www.capinnovabank.com/. Bahrain 09 Country No. of Islamic Algeria 01 2 3 4 5 6 7 8 9 10 11 164 first Egyptian Islamic & Commercial Bank First iranian commercial bank the facilities of The East Modern Bank was present paid-in capital of IRR 7,822 billion now considered as a pioneervariety bank of banking in services offering nationwide started its operations as a public company Special Features assigned to Bank Shahanshahi. 5 July, 1979 19 December, 1992No information when started Islamic banking established for InvestmentDecember and 20, Development 19791987 ranking among theNo top information 1000 when banks ofstarted the Islamic world banking No information when started Islamic banking 1974 October 11, 1980 first privately-owned bank in operation establishment 12 13 18 14 20 19 16 15 17 Bank Mellat Bank Keshavarzi Maskan Bank Bank Melli Iran Bank Tejarat Bank Depah Kararafin Bank Iraqi Islamic Bank Name of the BankFaisal Islamic Bank of Egypt Year of 01 01 Banks http://www.faisalbank.com.eg/FIB/faisal_en/Elnash2a_1.jsp. http://www.iraqiislamicb.com/. Translated from Arabic tohttp://www.bmi.ir/En/BMIHistory.aspx?smnuid=10011. English through Google translator. http://en.bankmellat.ir/portal.aspx?tabid=405. http://www.tejaratbank.ir/. Translated from Persian Languagehttp://www.banksepah.ir/English/default.aspx?tabid=450. to English through Google translator. http://www.agri-bank.com/Static/English/About/Profile.asp. http://bank-maskan.ir/default-4446.aspx. http://en.karafarinbank.com/history/default.kb. Iran 09 Iraq (Continued) Country No. of Islamic Egypt 12 13 14 15 16 17 18 19 20 165 Darwaza, Kuwait City, share capital of US$ 1.4 mln. registered under No. 178028 on September80 6, ATMs 2001 al over the country Dubai Islamic Bank along with its partner Jordan public shareholding company in accordance with the companies Law of 1989 Kuwait Real Estate Bank (incorporatedhas in been 1973) renamed to “KuwaitBank International to exercise its business asFirst an Islamic Islamic Bank bank. in Kuwait Four main branches are in Mubarak tower, Farwaniya, Dajeej andTower. Qebla Conventional bank converted into Islamic Dubai Capital August, 2002 July, 2001 1978 2007 9 February, 1998 July 2007 1977 No information April, 2010 24 29 27 23 28 22 21 26 25 Persian Bank Jordan Dubai Islamic Bank Kuwait Finance House Boubyan Bank International Bank of Kuwait Saman Bank Ahli United Bank Kuwai Jordan Islamic Bank Islamic International Arab Bank http://www.sb24.com/. http://www.parsian-bank.com/historyofbank_en.html. http://www.jordanislamicbank.com/en/?pid=DY&lan=1&ppi=124&pgi=127&th=1. http://www.jdib.jo/About-JDIB.aspx. http://www.iiabank.com.jo/en/Home/AboutUs/tabid/54/Default.aspx. http://www.kib.com.kw/KREBClient/ClientPages/Index.aspx?Id=76. http://www.kfh.com/en/about/index.aspx. http://www.bankboubyan.com/mission_vision.html. http://www.ahliunited.com.kw/aub_kw.html. Kuwait 04 21 22 23 24 25 26 27 28 29 Jordan 03 166 first developing bank in Lebanon working according Arab Finance House’s Management strongly supports this incentive (Law 318) bank provides zakat affinity card 14 branches and the head office at Deir More than 100 ATMs 12 branches and 50 ATMs Special Features QR 60.5 million in 2007 to Fiduciary Contract Law NumberJune 520 6, dated 1996 in fullShariah compliance with Islamic al-Balah establishment 1992 No information No information 16 December, 1995 8 July 1982 January 1, 1992 1995 30 32 33 31 34 36 35 Lebanese Islamic Bank Qatar International Islamic Bank Qatar Islamic Insurance Company Palestine Islamic Bank Name of the BankAl-Baraka Bank Lebanon Year of Arab Finance House Qatar Islamic Bank Banks http://www.al-baraka.com/aboutus.php?cat=history.php. http://www.afh.com.lb/prevention.asp. http://www.lebaneseislamicbank.com.lb/index.asp. www.islamicbank.ps. Translated from Arabic tohttp://www.qib.com.qa/english/site/topics/static228e228e.html?cu_no=1&lng=0&template_id=321&temp_type=42&parent_id=300. English through Google translator. http://www.qiib.com.qa/qiib/en/qiibcms.aspx?qcid=6. http://www.qiic.com.qa/English_Pages/History/index.html. Palestine 01 (Continued) Country No. of Islamic Lebanon 03 30 31 32 33 34 35 36 Qatar 04 167 The Shariah board of Alinmapursuant Bank to was resolution formed No.12/01/1428 3/43, dated The purpose of the bankMuslim is countries the development of Paid up capital US $ 8corporate million capital of 3,000,000,000 Saudi Riyals. determined on presenting the mostservices advanced in Islamic banking authorized capital of USD 200 Mn More than 2500 ATMs operates under commercial registration No. 4030010523 23 branches and 656 employees celebrated its 25th birthday in 2008 31 January, 2007 20 October, 1975 1988 No information 4 November, 2004 June 21, 1975 1984 1982 No information No information 40 38 46 43 44 45 42 39 37 41 Islamic Development Bank Al Rajhi Bank Bank Albilad Bank Al Jazira Emirates and Sudan Bank National Commercial Bank Islamic Co–operative Development Bank Al Salam Bank 06 Alinma Bank 07 Al Baraka Bank Sudan http://www.alinma.com/wps/portal/alinma/!ut/p/c5/04_SB8K8xLLM9MSSzPy8xBz9CP0os3hzf2cLDy93A0t3d1c3A093Ixd3_yBfI29TA_3g1Lz40GD http://www.isdb.org/irj/portal/anonymous?NavigationTarget=navurl://24de0d5f10da906da85e96ac356b7af0. http://www.alrajhibank.com.sa/AboutUs/Pages/default.aspx. http://www.alahli.com/en-US/About%20Us/Corporate%20Profile/Pages/CorporateProfileHome_Page.aspx. http://www.bankalbilad.com/en/about.asp?TabId=1. http://www.baj.com.sa/about/default.asp?ab=view. http://www.albaraka.com/default.asp?action=article&id=96. http://www.iscob.com/about_E.htm. http://www.alsalambank.net/html/about.html. http://www.eandsbank.com/aboutus/aboutus.html. 9gmxHRQC3tlD5/. Saudi Arabia 37 38 39 40 41 42 43 44 45 46 Sudan 168 The national private sector holds% about of 83.14 the capital of thehead bank quarter of the bank isgood at reputation Khartoum at Sudan both localleval and international Decree No. 35 (2005) First Islamic bank in Syria universal commercial bank Kuwait finance house has 62%bank shares in this foreign partners share is 66,16%, Special Features January 15, 2003 May, 1978 March, 1983 September 7, 2006 September 7, 2006 October, 2009 1989 1985 establishment 47 49 48 54 52 51 53 50 Faisal Islamic Bank Tadamon Islamic Bank Bank Zaytuna Bank Kuveyt Turk Participation Bank AlBaraka Turk Name of the Bank Year of Export Development Bank Cham Bank 02 Syria International01 Islamic 04 Banks http://www.edbank.sd/en_web/aboubank1.aspx. http://www.fibsudan.com/en/. http://www.tadamonbank-sd.com/english/1.php. http://www.siib.sy/index.php?option=com_content&view=article&id=47&Itemid=66&lang=en. http://www.chambank.com/index.php?option=com_content&view=category&layout=blog&id=34&Itemid=61&lang=en. http://www.banquezitouna.com. Translated from French tohttp://www.kuveytturk.com.tr/en/Hakkimizda_Tarihce.aspx. English through Google translator. http://www.banquezitouna.com. Translated from French to English through Google translator. ttp://en.albarakaturk.com.tr/about_us/detail.aspx?SectionID=YXL0%2bpPb1ZGxucFd8yJzIw%3d%3d&ContentId=opVi0iuq7IuzLtB3Mxt%2fnQ% 3d%3d. Syria Tunisia Turkey (Continued) Country No. of Islamic 47 48 49 50 51 52 53 54 169 now serving over 1 million customers at 182 branches world’s first fully-fledged Islamic bank Inauguration on18th April 1999 Shari’a board comprising several prestigious scholars of Islamic law paid-up capital of AED 3 billion authorized capital of AED 4 billion 22 branches in UAE global Islamic financial services division of the HSBC Group December 30, 2005 1975 May 20, 1997 2004 2007 June 19, 2008 1975 1998 first private finance house having ISO 9001 Quality Management System Certification, 58 59 62 57 60 63 61 October 24, 55 56 Dubai Islamic Bank Bank Asya Türkiye Finans Katılım Bankası 1996 Abu Dhabi Islamic Bank Emirates Islamic Bank Noor Islamic Bank Al Hilal Bank Sharjah Islamic Bank HSBC Amanah 11 http://www.bankasya.com.tr/en/about_us/index.jsp. http://www.turkiyefinans.com.tr/en/about_us/history.aspx. http://www.alislami.ae/en/index.htm. http://www.adib.ae/mission-objectives. http://www.emiratesislamicbank.ae/eib/en/aboutus/. http://www.noorbank.com/ae/english/info/about-us/About-NIB/index.aspx. http://www.alhilalbank.ae/web/?page=history. http://www.sib.ae/en/about-sib/about-us.html. http://www.hsbcamanah.com/amanah/about-amanah/. 55 56 57 58 59 60 61 62 63 United Arab Emirates 170 part of Commercial Bank of Dubai Islamic Banking arm of Mashreq group modern Islamic bank of choice paid up capital of AED 1bank billion runs assets that1.415 are million estimated US dollars 7500 shareholder of all segments ofprovides society all kinds of moderncustomers facilities like to SMS, its ATM etc. 1987 Special Features No information No information 2002 No information May 25, 1995 April, 1997 No information March 30, 1983April 30, 1987 first of its kind in Southeast Asia banking operations commenced on May 20, establishment 72 70 65 69 64 68 67 66 71 Limited Mashreq Al Islami Dubai Bank Ajman Bank Saba Islamic Bank Islamic Bank of Yemen for Finance and Investment ICB Islamic Bank Limited Tadhamon international Islamic bank Attijari Al Islami Name of the Bank Year of 06 Islami Bank Bangladesh 03 Banks http://www.cbdislami.ae/cbdislamic/about_board.aspx. http://www.mashreqalislami.com/english/information/about-us/. http://www.dubaibank.ae/Content/Default.aspx?ID=43. http://www.ajmanbank.ae/en/about-us/company-profile/Pages/Company-Profile.aspx. http://www.tiib.com/pages.aspx?id=67. http://www.sababank.com/view.htm. Translated from Arabic to Englishhttp://www.iby-bank.com/eng/default.asp. through Google translator. http://www.islamibankbd.com/introduction.php. http://www.icbislamic-bd.com/. Yemen Bangladesh (Continued) Country No. of Islamic 64 65 66 67 68 69 70 71 72 171 headquarter of the bank is in Dhaka headquarter of the company is in Jakarta, More than 600 employees 53 branches in 2008 present address at Chand Mansion,Dilkusha C/A, 66, Dhaka-1000 and the Government of Indonesia Indonesia 1995 September 22, 1999April 19, 2001 52 branches functioning May 10, 2001 September 29, 1991July 7, 2005 First islamic financial insitution November 1, 1991Feburary 24, 1994 endorsed by the Indonesian Council of Ulemas 80 76 74 78 79 77 75 73 Shahjalal Islami Bank Limited (SJIBL) Takaful Indonesia Al-Arafah Islami Bank First Security Islami Bank Limited Indonesia Islamic Finance and Investment Limited (IFIL) Bank Islam Brunei Darussalam Amanah Islam Brunei 05 Bank Muamalat 02 Perbadanan Tabung http://www.al-arafahbank.com/glance.php. http://www.fsiblbd.com/about.php. http://www.ifilbd.com/linkfiles/about-islamic.php. http://www.shahjalalbank.com.bd/about.asp. http://www.taib.com.bn/abouttaib/profile.htm. http://www.bibd.com.bn/index.php?option=com_content&view=article&id=62&Itemid=55. http://www.muamalatbank.com/index.php/home/about/profile. http://takaful.com/index.php/profile/list/?SGLSESSID=16232628798ad3e88f655e6768718296&/1/. Indonesia Brunei 73 74 75 76 77 78 79 80 172 From only RM80 million initially, Bank Islam’s first foreign Islamic bank to be granted a licence country capital base obligations of Sharia into PTBukopin Bank Syariah paid-up capital swelled to RM1.73June billion 2009 as at needs of customers seeking anconventional alternative banking to under the Islamic Banking Act (Malaysia) 1983 Special Features November 1, 1999August 24, spread 2004 over 26 provinces throughout the October 24, 2008 bank was established by developing a strong PT Bank1977 Bukopin transferred rights and July, 1983 March 28, 2005 Bank is poised towards reaching out to the establishment 83 81 84 86 85 82 Bank Syariah Mega Indonesia Bank Syariah Bukopin’s Hong Leong Islamic Bank Berhad (HLISB) Bank Islam Bank Shariah Mandari Name of the Bank Year of 13 Kuwait Finance House Banks http://www.syariahmandiri.co.id/banksyariahmandiri/profilperusahaan.php. http://www.bsmi.co.id/Profil-SekilasBSMI.php. http://www.syariahbukopin.co.id/index.php?app=sub_contents&a=2&b=1. http://www.kfhonline.com.my/kfhmb/ep/kfhContentView.do?contentTypeId=3000&channelId=-8113&displayPage=%2Fep%2Fcontent%2Fkfh_ http://www.bankislam.com.my/. http://www.hlisb.com.my/abhlib/icpo.htm. editorial_content.jsp&programId=8457&pageTypeId=8479&contentId=8056. Malaysia (Continued) Country No. of Islamic 81 82 83 84 85 86 173 first commercial bank to offer Islamic banking uthorized and paid-up Capital of RM 1 billion 19 branches products and services through aconcept in window 1993 November 2008, the first branch of HSBC by Bank Negara Malaysia underBanking the Act, Islamic 1983 and RM 398 million respectively Amanah Malaysia Bank branches and 26 hireMalaysia purchase centres in with its holistic banking scope,consumer focuses banking, on commercial banking and SMEs to boost the business November 28, 2005 AsianApril Finance 1, Bank 2006 is regulated and supervised October, 2006 January 1, 2008 November 12, 20082008 headquarter of the bank isNovember in 1, Kula 2008 Lumpur No information Islamic Banking transactions at all 242 Public 90 88 94 93 92 89 87 91 Maybank Islamic Berhad Standard Chartered Saadiq Berhad Asian Finance Bank Berhad HSBC Amanah EONCAP Islamic Bank Al Rajhi Bank Public Islamic Bank Alliance Islamic Bank http://www.asianfinancebank.com/corporate_overview/corporate_organization.html. http://www.eonbank.com.my/islamic/aboutus/corporate_profile.shtml. http://www.alrajhibank.com.my/. http://www.maybank2u.com.my/maybankislamic/corporate_info/index.shtml. http://www.standardchartered.com.my/islamic-banking/en/. http://www.hsbcamanah.com/amanah/about-amanah. transactions at all 242 Publichttp://www.allianceislamicbank.com.my/index_aboutus.html. Bank branches and 26 hire purchase centres in Malaysia. 87 88 89 90 91 92 93 94 174 parent company is a listed company in Dubai 29 branches Special Features license Pakistan Bank establishment No informationNo information CIMB is a universal Islamic1991 bank Operates as an Islamic co-operativeJanuary bank 27, 1997 Pakistan’s first full-fledged commercial banking October 18, 2004 second full-fledge Islamic Commercial Bank2006 in February, 2007 60 on-lineApril branches 27, in 2007 36 cities Pakistan’s sixth full-fledged Islamic commercial 96 99 97 95 98 101 100 102 Meezan Bank Limited Emirates Global Islamic Bank Limited (EGIBL) CIMB Islamic Bank Berhand Name of the Bank Year of Bank Islami Pakistan Limited Dubai Islamic Bank Pakistan Limited (DIBPL Bank Kerjasama Rakyat Malaysia Dawood Islamic Bank Limited (DIBL) 06 Al Baraka Islamic Bank (AIB) Banks http://www.dibpak.com/AboutUs.aspx?tab=4. http://www.egibl.com/egibl/HTML/AboutUs.html. http://www.dawoodislamic.com/AboutBank.aspx. http://www.cimbislamic.com/index.php?ch=islam_global&pg=islam_global_malaysia&tpt=islamic. http://investing.businessweek.com/research/stocks/private/snapshot.asp?privcapId=5538864. http://www.albaraka.com.pk/about/index.php. http://www.meezanbank.com/history.aspx. http://www.bankislami.com.pk/about_us/milestones.php?id=2. (Continued) Country No. of Islamic 95 96 97 98 99 100 101 102 Pakistan 175 paid-up capital of 1 billion baht Kenya’s first fully Shari’ah compliant bank Alternative banking in many paces The bank is jointly owned by South African group was to provide a practical model of First commercial banks in Azerbaijan. investors. DCD London & Mutual Plc Reputed bank starting equity of only $A2000 Islamic finance in Australia Kuwait Finance House has 62 % shares 2005 June 1, 2008 1989 1991 June, 2003 1997 1989 1988 No information1989 Dr. Djabiev is a pioneer in introducing this 108 107 104 106 103 111 105 110 112 109 Al Shams Capital Kauthar Bank GulfAfrican Bank First Community Bank AlBaraka Bank Absa Islamic Bank Islamic Bank of Thailand Kuveyt Turk Islamic Co-operative Finance Australia Pvt. Ltd Muslim Community Co-operative (Australia) Limited 01 01 02 02 01 02 02 http://www.gulfafricanbank.com/Home/About-Us. http://www.firstcommunitybank.co.ke/index.php?option=com_content&task=view&id=126&Itemid=138. http://www.albaraka.co.za/About_alBaraka/Corporate_Profile.aspx. http://www.absa.co.za/Absacoza/Individual/Banking/Exclusive-Banking/Islamic-Banking. http://www.ibank.co.th/2010/en/about/about_detail.aspx?ID=1. http://www.icfal.com.au/about_us.htm. http://www.mcca.com.au/Pages/Aboutus.html. http://www.kautharbank.com/en/. http://alshamscapital.com/. http://www.kuveytturk.com.tr/en/Hakkimizda_Tarihce.aspx. Russia Azerbaijan Kenya 103 104 105 106 107 108 109 110 111 112 South Africa Thailand Germany Australia 176 ABC’s network spreads over 22 countrie Ahli United Bank (UK) PLC (AUBUK Pioneering FSA regulated bank offering keeps strictly within the frameworkGerman of and European rights toIslam. the rules of investment bank authorized by FSA estate and treasury. formerly known as The UnitedKuwait Bank PLC) of introduced Manzil Home Purchase Plan Shariah compliant wholesale banking services based in London, UK. Special Features No information first company in the German market that 1980 1997 January, 2005 FirstNo independent information shariah complaint Islamic Asset management, corporate finance,2008 real establishment 114 118 113 115 116 117 QIB (UK) Gatehouse Bank PLC ABC International Bank plc Ahli United Bank European Islamic Investment Bank PLC Name of the Bank Year of IFIS Islamic Banking 06 Banks http://www.kuveytturk.com.tr/en/Hakkimizda_Tarihce.aspx. http://wiki.islamicfinance.de/index.php/ABC_International_Bank_plc. http://www.iibu.com/. http://www.eiib.co.uk/html/aboutus.asp. http://www.qib-uk.com/. http://www.gatehousebank.com/about-us/history/. United Kingdom (Continued) Country No. of Islamic 113 114 115 116 117 118 177 To create an Islamic financial base for sharia awarded Best Business Leadership in North compliant investments. AIM market – on October 12, 2004. for 2009 America by World Finance MagazineFinance Islamic Awards in 2009 September, 2004No information aunched on theNo London information Stock Exchange – The Board Declared1991 6% Patronage Dividend Chances for growth and diversification 2004 November 1, 2006No information Shariah complaint mutual funds Provides global iman fund 120 125 121 119 122 123 124 UM Financial Qurtuba Housing Cooperative & Al-Ittihad Investment Inc Global Prosperata Funds An-Nur (Ontario) Housing Cooperative Corp. Ltd. frontierAlt Capital Corporation Islamic Bank of Britain Ansar Co-Operative Housing Corporation Ltd. 06 http://www.islamic-bank.com/about-us/. http://www.ansarhousing.com/main.htm. http://www.nurcoop.com/. http://qurtuba.ca/en/presentation.html. http://www.umfinancial.com/index.php?page=content&pid=43. http://www.frontieralt.com/frontieralt-oasis-irc.html. http://www.globalcareers.ca/en/about.htm. 119 120 121 122 123 124 125 Canada 178 affiliate. Provides good number of products serves clients in all states either directly or Special Features Only True Community Commercial Bank Headquartered Within The City Of Whittier slogan. through its ownership $25 million and above per transaction establishment December 20, 1982 No informationNo information Provides murabahah and ijara products only Complete Islamic banking1996 solution as 1987 No information Provides three simple steps to home 130 131 126 127 129 128 Bank of Whittier Lariba American Finance House Name of the Bank Year of University Islamic Financial Corp Guidance Residential Devon Bank Ameen Housing Cooperative of California Zayan Finance No information Provides financing from $500,000 to 14 Banks https://www.bankofwhittier.com/about.htm. http://www.devonbank.com/islamic/index.html. http://www.universityislamicfinancial.com/IBDMain.html. http://www.ameenhousing.com/home/about-us. https://www.lariba.com/default.htm. http://www.guidanceresidential.com/. (Continued) Country No. of Islamic United States 126 127 128 129 130 131 179 Principles Don’t, is the ... Provides azaad ethical mid cap fund Provides Amana Income, Amana Growth and international presence in the United States, slogan of this bank Amana Developing world Singapore Funds Award in 2007 Malaysia, Turkey and Saudi Arabia June 20001997 July 1, Markets 2009 Fluctuate 1989 ceased trading on October 19,No 2010. information Operates inNo Bahrain, information Atlanta, London and awarded the2004 prestigious Master of Islamic 132 135 138 133 137 136 134 JETS DJIM International Index Fund Amana Mutual Fund Trust Azzad Asset Management Arcapita Shariah capital Inc. Unicorn Investment Bank Allied Asset Advisors – Iman Fund http://www.investaaa.com/. http://azzad.net/new/aboutus_whyazzad.aspx. http://www.javelinfunds.com/jets-djim.php. http://wiki.islamicfinance.de/index.php/Saturna_Capital_Corp. http://www.arcapita.com/about/corpinfo/overview.html. http://www.shariahcap.com/index.php. http://www.unicorninvestmentbank.com/en/about/strategic-business-overview.html. 132 133 134 135 136 137 138 Appendix III: Glossary on Islamic Finance
Al Ghunm bil Ghurm: This provides the rationale and the principle of profit- sharing in Shirkah arrangements. Earning profit is legitimized only by engaging in an economic venture, risk sharing and thereby contributing to the economy. Al-Aariyah (Gratuitous loan of non-fungible objects): Al-Aariyah means the loan of a particular piece of property, the substance of which is not consumed by its use, without anything being taken in exchange. In other words, it is the gift of usufruct of a property or commodity that is not consumed on use. It is different from Qard, which is the loan of fungible objects which are consumed on use and in which the similar and not the same commodity has to be returned. It is also a virtuous act like Qard. The borrowed commodity is treated as liability of the borrower who is bound to return it to its owner. Al-Kafalah (Suretyship): Literally, Kafalah means responsibility, amenability or suretyship. Legally, in Kafalah a third party becomes surety for the payment of debt. It is a pledge given to a creditor that the debtor will pay the debt, fine, etc. Suretyship in Islamic law is the creation of an additional liability with regard to the claim, not to the debt or the assumption only of a liability and not of the debt. Al-Qur’an (also written as the Qur’an only): The Holy Book of Muslims, con- sisting of the revelations made by God to Prophet Muhammad (peace be upon him). The Qur’an lays down the fundamentals of the Islamic faith, including beliefs and all aspects of the Islamic way of life. Al-Rahn: Pledge, collateral; legally, Rahn means to pledge or lodge a real or corpo- real property of material value, in accordance with the law, as security, for a debt or pecuniary obligation so as to make it possible for the creditor to recover the debt or some portion of the goods or property. In the pre-Islamic contracts, Rahn implied a type of earnest money which was lodged as a guarantee and material evidence or proof of a contract, especially when there was no scribe available to put it into writing. The institution of earnest money was not accepted in Islamic law and the common Islamic doctrine recognized Rahn only as a security for the payment of a debt. Al-Sarf : Basically, in pre-Islamic times it was exchange of gold for gold, silver for silver and gold for silver or vice versa. In Islamic law such exchange is regarded as ‘sale of price for price’ (BaialThamanbilThaman), and each price is consideration of the other. It also means sale of monetary value for monetary value – currency exchange. Amanah: It refers to deposits in trust. A person can hold a property in trust for another, sometimes by express contract and sometimes by implication of a
180 Appendix III: Glossary on Islamic Finance 181 contract. Amanah entails absence of liability for loss except in breach of duty. Current Accounts are regarded as Amanah (trust). If the bank gets authority to use Current Accounts funds in his business, Amanah transforms into a loan. As every loan has to be repaid, banks are liable to repay full amount of the Current Accounts. Arbun: Down payment; a non-refundable deposit paid by a buyer retaining a right to confirm or cancel the sale. Awqaf : Plural of waqf. Waqf means appropriation or tying up a property in perpetuity for specific purposes. No property rights can be exercised over the corpus. Only the usufruct is applied towards the objectives (usually charitable) of the waqf. Ayah: Averseofal-Qur’an. Bai bil Wafa: Sale with a right in the seller, having the effect of a condition, to repurchase (redeem) the property by refunding the purchase price. According to majority of Fuqaha it is not permissible. Bai Muajjal: Literally, it means a credit sale. Technically, a financing technique adopted by Islamic banks that takes the form of Murabaha Muajjal. It is a con- tract in which the seller earns a profit margin on his purchase price and allows the buyer to pay the price of the commodity at a future date in a lump sum or in installments. He has to expressly mention cost of the commodity and the margin of profit is mutually agreed. The price fixed for the commodity in such a transaction can be the same as the spot price or higher or lower than the spot price. Bai Salam: Salam means a contract in which advance payment is made for goods to be delivered later on. The seller undertakes to supply some specific goods to the buyer at a future date in exchange of an advance price fully paid at the time of contract. According to normal rules of the Shariah, no sale can be effected unless the goods are in existence at the time of the bargain, but Salam sale forms an exception given by the Holy Prophet (SAW) himself to the general rule provided the goods are defined and the date of delivery is fixed. It is necessary that the quality of the commodity intended to be purchased is fully specified leaving no ambiguity leading to dispute. The objects of this sale are goods and cannot be gold, silver or currencies because these are regarded as monetary values exchange of which is covered under rules of Bai al Sarf, i.e. mutual exchange is hand to hand without delay. Barring this, Bai Salam covers almost everything which is capable of being definitely described as to quantity, quality and workmanship. Bay al-salam: A sale in which payment is made in advance by the buyer and the deliveryofthegoodsisdeferredbytheseller. Bay: Stands for sale. It is often used as a prefix in referring to different sales-based modes of Islamic finance, like murabahah, ijarah, istisna, and salam. Daman:(1) Contract of guarantee, security or collateral; (2) Responsibility of entrepreneur/manager of a business; one of two basic relationships toward property, entailing bearing the risk of its loss; compare Amanah. 182 Appendix III: Glossary on Islamic Finance
Dayn (or Debt): A Dayn comes into existence as a result of any other contract or credit transaction. It is incurred either by way of rent or sale or purchase or in any other way which leaves it as a debt to another. Duyun (debts) ought to be returned without any profit since they are advanced to help the needy and meet their demands and, therefore, the lender should not impose on the borrower more than what he had given on credit. Falah: Falah means to thrive, to become happy or to have luck and success. Technically it implies success both in this world and in the Akhirah (Hereafter). The Falah presumes belief in one God, the apostlehood of Prophet Muhammad (Peace be upon him), Akhirah and conformity to the Shariah in behaviour. Fatawa: Plural of fatwa. Religious verdicts by fuqaha. Fiqh: Refers to the whole corpus of Islamic jurisprudence. In contrast with con- ventional law, fiqh covers all aspects of life, religious, political, social, commercial or economic. The whole corpus of fiqh is based primarily on interpretations of the Qur’an and the Sunnah and secondarily on ijma (consensus) and ijtihad (individ- ual judgment). While the Qur’an and the Sunnah are immutable, fiqhi verdicts may change due to changing circumstances. Fuqaha: Plural of faqîh meaning jurist, who gives opinion on various juristic issues in the light of the Qur’an and the Sunnah. Gharar: It means any element of absolute or excessive uncertainty in any busi- ness or a contract about the subject of contract or its price, or mere speculative risk. It leads to undue loss to a party and unjustified enrichment of other, which is prohibited. Ghish: Literally means deception, fraud. Technically, means trying to deceive someone by concealing vital information in a deal. Hadith: Sayings, deeds and reactions of Prophet Muhammad (peace be upon him) narrated by his companions. Halal: Anything permitted by the Shariah.
Haram: Anything prohibited by the Shariah. Hawalah: Literally, it means transfer; legally, it is an agreement by which a debtor is freed from a debt by another becoming responsible for it, or the transfer of a claim of a debt by shifting the responsibility from one person to another – con- tract of assignment of debt. It also refers to the document by which the transfer takes place. Hibah: Hibah means Gift. Hikmah: Wisdom. Ijab: Offer, in a contract; see also qabul. Ijarah: Letting on lease. Sale of a definite usufruct of any asset in exchange of definite reward. It refers to a contract of land leased at a fixed rent payable in cash and also to a mode of financing adopted by Islamic banks. It is an arrangement under which the Islamic banks lease. Appendix III: Glossary on Islamic Finance 183
Ijarah-wal-Iqtina: A mode of financing, by way of Hire-purchase, adopted by Islamic banks. It is a contract under which the Islamic bank finances equipment, building or other facilities for the client against an agreed rental together with a unilateral undertaking by the bank or the client that at the end of the lease period, the ownership in the asset would be transferred to the lessee. The under- taking or the promise does not become an integral part of the lease contract to make it conditional. The rental as well as the purchase price is fixed in such a manner that the bank gets back its principal sum along with some profit, which is usually determined in advance. Ijma: Consensus of all or majority of the leading qualified jurists on a certain Shariah matter in a certain age. Ijtihad: It refers to an endeavor of a qualified jurist to derive or formulate a rule of law to determine the true ruling of the divine law in a matter on which the revelation is not explicit or certain, on the basis of Nass or evidence found in the Holy Qur’an and the Sunnah. Express injunctions have no room for Ijtihad. Implied injunctions can be interpreted in different ways by way of inference from the accepted principles of the Shariah. Illah: It is the attribute of an event that entails a particular Divine ruling in all cases possessing that attribute. Illah is the basis for applying analogy for determining permissibility or otherwise of any act or transaction. Inah (a kind of Bai): Double sale by which the borrower and the lender sell and then resell an object between them, once for cash and once for a higher price on credit, with the net result of a loan with interest. Inan (a type of Shrikah): It is a form of partnership in which each partner contributes capital and has a right to work for the business, not necessarily equally. Israf : It refers to immoderateness, exaggeration and waste and covers spending on lawful objects but exceeding moderation in quantity or quality; spending on superfluous objects while necessities are unmet; spending on objects which are incompatible with the economic standard of the majority of the population. Istihsan: It is a doctrine of Islamic law that allows exception to strict legal rea- soning, or guiding choice among possible legal outcomes, when considerations of human welfare so demand. Istisna’a: It is a contractual agreement for manufacturing goods and commodi- ties, allowing cash payment in advance and future delivery or a future payment and future delivery. A manufacturer or builder agrees to produce or build a well-described good or building at a given price on a given date in the future. Price can be paid in installments, step by step as agreed between the parties. Istisna’a can be used for providing the facility of financing the manufacture or construction of houses, plants, projects, and building of bridges, roads and highways. Jahl or Jahala: Ignorance, lack of knowledge; indefiniteness in a contract, sometime leading to Gharar. 184 Appendix III: Glossary on Islamic Finance
Jua’alah or Ji’alah: Literally, Joalah constitutes wages, pay, stipend or reward. Legally, it is a contract for performing a given task against a prescribed fee in a given period. A similar contract is ‘Ujrah’ in which any work is done against stipulated wage or fee. Kali bil-Kali: The term Kali refers to something delayed; appears in a maxim forbidding the sale of al-Kali bil-Kali i.e. the exchange of a delayed counter value for another delayed counter value. Kharaj bi-al-Daman: Gain accompanies liability for loss; a Hadith forming a legal maxim and a basic principle – see also Al- Ghunm bil Ghurm. Khilafat al-Rashidah: The period of the first four caliphs after the Prophet (peace be upon him), ranging from the year 11AH (632 AC) to the year 41AH (661 AC). Khiyar al-Majlis: Option of the contracting session; the power to annul a contract possessed by both contracting parties as long as they do not separate. Khiyar al-Shart: A right, stipulated by one or both of the parties to a contract, to cancel the contract for any reason for a fixed period of time.
Khiyar al-shart: Option to rescind a sales contract. One of the parties to a sales contract may stipulate certain conditions, which if not met, would grant a right to the stipulating party an option to rescind the contract.
Khiyar: Option or a power to annul or cancel a contract. Maisir: An ancient Arabian game of chance played with arrows without heads and feathering, for stakes of slaughtered and quartered camels. It came to be identified with all types of hazard and gambling. Mal-e-Mutaqawam: Things the use of which is lawful under the Shariah; or wealth that has a commercial value. Legal tenders of modern age that carry monetary value are included in Mal-e-Mutaqawam. It is possible that certain wealth has no commercial value for Muslims (non-Mutaqawam) but is valuable for non-Muslims. Examples are wine and pork. Mithli (Fungible goods): Goods that can be returned in kind, i.e. gold for gold, silver for silver, wheat for wheat, etc. Mubah: Object that is lawful (i.e. something which is permissible to use or trade in). Mudarabah: A form of partnership where one party provides the funds while the other provides expertise and management. The latter is referred to as the Mudarib. Any profits accrued are shared between the two parties on a pre-agreed basis, while loss is borne by the provider(s) of the capital. Murabaha: Literally it means a sale on mutually agreed profit. Technically, it is a contract of sale in which the seller declares his cost and the profit. This has been adopted by Islamic banks as a mode of financing. As a financing technique, it can involve a request by the client to the bank to purchase a certain item for him. The bank does that for a definite profit over the cost which is stipulated in advance. Appendix III: Glossary on Islamic Finance 185
Musaqah: A contract in which the owner of a garden agrees to share its produce with someone in an agreed proportion in return for latter’s services in irrigating and looking after the garden. Musawamah: Musawamah is a general kind of sale in which price of the com- modity to be traded is bargained between seller and the purchaser without any reference to the price paid or cost incurred by the former. Musharakah: Musharakah means a relationship established under a contract by the mutual consent of the parties for sharing of profits and losses in the joint business. It is an agreement under which the Islamic bank provides funds which are mixed with the funds of the business enterprise and others. All providers of capital are entitled to participate in management, but not necessarily required to do so. The profit is distributed among the partners in pre-agreed ratios, while the loss is borne by every partner strictly in proportion to respective capital contributions. Qabul: Acceptance, in a contract; see also Ijab. Qard (Loan of fungible objects): The literal meaning of Qard is ‘to cut’. It is so called because the property is really cut off when it is given to the borrower. Legally, Qard means to give anything having value in the ownership of the other by way of virtue so that the latter could avail of the same for his benefit with the condition that same or similar amount of that thing would be paid back on demand or at the settled time. It is that loan which a person gives to another as a help, charity or advance for a certain time. The repayment of loan is obligatory. The Holy Prophet is reported to have said “ .... Every loan must be paid ...... ”. But if a debtor is in difficulty, the creditor is expected to extend time or even to voluntarily remit the whole or a part of the principal. Qard is, in fact, a par- ticular kind of Salaf. Loans under Islamic law can be classified into Salaf and Qard, the former being loan for fixed time and the latter payable on demand (see Salaf). Qard al-hasan: A loan extended without interest or any other compensation from the borrower. The lender expects a reward only from God. Qimar: Qimar means gambling. Technically, it is an arrangement in which pos- session of a property is contingent upon the happening of an uncertain event. By implication it applies to a situation in which there is a loss for one party and a gain for the other without specifying which party will lose and which will gain. Qiyas: Literally it means measure, example, comparison or analogy. Technically, it means a derivation of the law on the analogy of an existing law if the basis (illah) of the two is the same. It is one of the sources of Islamic law. Rabb al-mal: Capital owner (financier) in a mudarabah contract. Riba Al-Fadl: Riba Al-Fadl (excess) is the quality premium in exchange of low quality with better quality goods e.g. dates for dates, wheat for wheat, etc. – an excess in the exchange of Ribawi goods within a single genus. The Con- cept of Riba Al-Fadl refers to sale transactions while Riba Al-Nasiah refers to loan transactions. 186 Appendix III: Glossary on Islamic Finance
Riba Al-Nasiah: Riba Al-Nasiah or riba of delay is due to exchange not being immediate with or without excess in one of the counter values. It is an increment on principal of a loan or debt payable. It refers to the practice of lending money for any length of time on the understanding that the borrower would return to the lender at the end of the period the amount originally lent together with an increase on it, in consideration of the lender having granted him time to pay. Interest, in all modern banking transactions, falls under purview of Riba Al- Nasiah. As money in present banking system is exchanged for money with excess and delay, it falls, under the definition of riba. A general accord reached among scholar about its prohibition. Riba: An excess or increase. Technically, it means an increase over principal in a loan transaction or in exchange for a commodity accrued to the owner (lender) without giving an equivalent counter-value or recompense (iwad) in return to the other party; every increase which is without an iwad or equal counter-value. Ribawi: Goods subject to Fiqh rules on Riba in sales, variously defined by the schools of Islamic Law: items sold by weight and by measure, foods, etc. Salaf (or Loan/Debt): The word Salaf literally means a loan which draws forth no profit for the creditor. In wider sense, it includes loans for specified periods, i.e. short, intermediate and long-term loans. Salaf is another name of Salam as well, wherein price of the commodity is paid in advance while the commodity or the counter value is supplied in future; thus the contract creates a liability for the seller. Amount given as Salaf cannot be called back, unlike Qard, before it is due. Shariah: The term Shariah refers to divine guidance as given by the Holy Qur’an and the Sunnah of the Prophet Muhammad (PBUH) and embodies all aspects of the Islamic faith, including beliefs and practice. Shirkah: A contract between two or more persons who launch a business or financial enterprise to make profits. In the conventional books of Fiqh, the part- nership business has been discussed under the option of Shirkah that, broadly, may include both Musharakah and Mudarabah. Sunnah: Custom, habit or way of life. Technically, it refers to the utterances of the Prophet Muhammad (PBUH) other than the Holy Quran known as Hadith, or his personal acts, or sayings of others, tacitly approved by the Prophet. Tabarru: It is a donation/gift the purpose of which is not commercial but is seek- ing the pleasure of Allah. Any benefit that is given by a person to other without getting anything in exchange is called Tabarru. Gracious repayment of debt, abso- lutely at lender’s own discretion and without any prior condition or inducement for reward, is also covered under Tabarru. Repaying a loan in excess of principal and without a pre-condition is commendable and compatible with the Sunnah of the Holy Prophet (peace be upon him). But, it is matter of individual discretion and cannot be adopted as a system because this would mean that loan would necessarily yield a profit. If such reward takes the form of a system, it would be considered Riba. Tabzir: Spending wastefully on objects which have been explicitly prohibited by the Shariah irrespective of the quantum of expenditure. See also Israf. Appendix III: Glossary on Islamic Finance 187
Takaful: An alternative for the contemporary insurance contract. A group of per- sons agree to share certain risk (e.g. damage by fire) by collecting a specified sum from each. In case of loss to anyone of the group, the loss is met from the collected funds. Tawakkul: Trust in God for results after one has undertaken all necessary effort. It is one of the important values for Muslims. After making all necessary efforts, a Muslim believes that the results are in the hand of God. Ujrah: See Jua’alah. Wadiah: A contract whereby a person leaves valuables with someone for safe- keeping. The keeper can charge a fee, even though in Islamic culture it is encouraged to provide this service free of charge or to recover only the costs of safekeeping without any profit. Wakalah: A contract of agency in which one person appoints someone else to perform a certain task on his behalf, usually against a certain fee. Waqf : Appropriation or tying up a property in perpetuity for specific purposes. No property rights can be exercised over the corpus. Only the usufruct is applied towards the objectives (usually charitable) of the waqf. Zakah: The amount payable by a Muslim on his net worth as a part of his religious obligations, mainly for the benefit of the poor and the needy. Notes
1 Islamic Finance: An Introduction
1. An event in which there is a possibility of total loss to one party. Maysir has elements of gharar, but not every gharar is maysir. 2. Gharar is the sale of probable items whose existence or characteristics are not certain, due to the risky nature which makes the trade similar to gambling. The sale of fish in the sea and the birds in the sky are examples of this. 3. This hadith is reported by all the six famous books of hadith (see Ibn ul- humam, Fath-ul-humam, Fath-ul-Qadir v. 6, p. 25). 4. In the case of a Sovereign Sukuk, the underlying assets (such as toll roads and utilities) will need to be permitted assets from a Shariah perspective.
2 Historical Development and Research Design
1. S. Heffernan (1996). John Wiley and Sons, UK. 2. W.J. Fischel (1992) “Djahbadh,” TheEncyclopedia of Islam, vol. 2, pp. 382–3. 3. A.A. Duri (1986) “Baghdad”, The Encyclopedia of Islam (Leiden, E.S. Brill), vol. 1, pp. 894–909. 4. J.H. Kramers (1952) “Geography and Commerce.” In T. Arnold and A. Guillaume (eds), The Legacy of Islam (Oxford: Oxford University Press). 5. Overview of Islamic Finance, US Department of the Treasury Office of International Affairs, August 2006. 6. All of Iran’s banking assets were converted by law to be Shariah-compliant in 1983 (Islamic Banking Law). 7. www.wdibf.com (World Database for Islamic Banking and Finance).
3 Islamic Finance – An Overview
1. (Qur’an 5:3). ‘5’ indicates the chapter number and ‘3’ indicates the verse number. 2. Qur’an is the highest and most authentic authority in Islam. It consists the sacred writings of Islam revealed by Allah (God) to the prophet Muhammad (PBUH) during his life at Mecca and Medina. Quotations from the Quran are normally followed by a reference to the number of the chapter (sura) and the number of the quoted verse (aya). All Quranic texts in this thesis are printed in italics. 3. It is a collection of the Prophet’s sayings and deeds, including his opin- ions about matters, as well as the practices of his companions. The sunnah occupies a place second to the Qur’an. 4. A committee of religious advisers whose opinion is sought on the acceptabil- ity of new instruments, and which conduct a religious audit of the bank’s activities as well as other features reflecting their religious status. These are
188 Notes 189
usually those people who have a command on economic as well as religious knowledge. 5. Peace Be Upon Him (PBUH). 6. Muslim, Kitab al-Musaqat, Bab la’ana akil al-riba wa mu’kilahu;alsoin Tirmidhi and Musnad Ahmad. 7. Muslim, Kitab al-Hajj, Bab Hajjat al-Nabi, may peace be on him; also in Musnad Ahmad. 8. Mishkat al-Masabih, Kitab al-Buyu, Bab al-riba, on the authority of Ahmad and Daraqutni). Bayhaqi has also reported the above hadith in Shuab al- Iman with the addition that “Hell befits him whose flesh has been nourished by the unlawful” (ibid.). 9. Ibn Majah, Kitab al-Tijarah, Bab al-taghliz fi al-riba; also in Musnad Ahmad. 10. Abu Dawud, Kitab al-Buyu, Bab fi ijtinab alshubhat; also in Ibn Majah. 11. Mustadrak al-Hakim, Kitab al-Buyu. 12. Commentary on verse 2:275 in Tafsir al-Kabir of Fakhruddin al-Razi. 13. Jabir ibn Abdallah, giving a report on the Prophet’s Farewell Pilgrimage, said: The Prophet, peace and blessings of God be on him, addressed the people and said: All of the riba of Jahilliyyah is annulled. The first riba that I annul is our riba, that accruing to Abbas ibn Abd al-Muttalib (the Prophet’s uncle); it is being cancelled completely. (Muslim, Kitab al-Hajj, Bab Hajjat al-Nabi, may peace be on him; also in Musnad Ahmad). 14. Al-Qur’an (106:2). 15. Abd al-Rahman al-Jaziri’s book ‘Al-Fiqh Ala al-Madhahib al-Arba‘ah’ is a com- pendium on the juristic opinions of the four predominant schools of Muslim jurisprudence. It is held in high esteem and considered to be an authority on the subject. 16. From Abu Hurayrah: The Prophet, peace be on him, said: “Riba has seventy segments, the least serious being equivalent to a man committing adultery with his own mother” (Ibn Majah). 17. Cited by Ibn Kathir in commentary on verse 2:275. 18. From Umar ibn al-Khattab: The last verse to be revealed was on riba and the Prophet, peace be on him, was taken without elaborating it to us; so give up not only riba but also ribah [whatever raises doubts in the mind about its rightfulness] (Ibn Majah, op. cit.). 19. There are two Hadiths related to this:
(1) From Anas ibn Malik: The Prophet, peace be on him, said: “Deceiving a mustarsal [an unknowing entrant into the market] is riba (Suyuti, al- Jami al-Saghir, under the word ghabn; Kanz al Ummal, Kitab al-Buyu, al-Bab al-thani, al-fasl al-thani, on the authority of Sunan al-Bayhaqi). (2) From Abdallah ibn Abi Awfa: The Prophet, peace be on him, said: “A najish (one who serves as an agent to bid up the price in an auction) is a cursed taker of riba (Cited by Ibn Hajar al-Asqalani in his commen- tary on al-Bukhari called Fath al-Bari, Kitab al-Buyu, Bab al-najash; also in Suyuti, al-Jami al-Saghir, under the word alnajish and Kanz al-Ummal, op. cit., both on the authority of Tabarani’s al-Kabir).
20. From Abu Umamah: The Prophet, peace be on him, said: “Whoever makes a recommendation for his brother and accepts a gift offered by him has 190 Notes
entered riba through one of its large gates” (Bulugh al-Maram, Kitab al-Buyu, Bab al-riba, reported on the authority of Ahmad and Abu Dawud). 21. This is explained in three hadiths:
(1) From Abu Sa‘id and Abu Hurayrah: A man employed by the Prophet, peace be on him, in Khaybar brought for him janibs [dates of very fine quality]. Upon the Prophet’s asking him whether all the dates of Khaybar were such, the man replied that this was not the case and added that they exchanged a sa’ [a measure] of this kind for two or three [of the other kind]”. The Prophet, peace be on him, replied, “Do not do so. Sell [the lower quality dates] for dirhams and then use the dirhams to buy janibs.” [When dates are exchanged against dates] they should be equal in weight”. (Bukhari, Kitab al-Buyu, Bab idha arada bay tamarin bi tamarin khayrin minhu; also Muslim and Nasa’i). (2) From Abu Sa’id: Bilal brought to the Prophet, peace be on him, some barni [good quality] dates whereupon the Prophet asked him where these were from. Bilal replied, “I had some inferior dates which I exchanged for these – two sa’s for a sa’.” The Prophet said, “Oh no, this is exactly riba. Do not do so, but when you wish to buy, sell the inferior dates against something [cash] and then buy the better dates with the price you receive”. (Muslim, Kitab al-Musaqat, Bab al-ta‘am mithlan bi mithlin; also Musnad Ahmad). (3) From Fadalah bin Ubayd al-Ansari: On the day of Khaybar he bought a necklace of gold and pearls for twelve dinars. On separating the two, he found that the gold itself was equal to more than twelve dinars. So he mentioned this to the Prophet, peace be on him, who replied, “It [jew- ellery] must not be sold until the contents have been valued separately”. (Muslim, Kitab al-Musaqat, Bab bay al-qiladah fiha kharaz wa dhahab; also in Tirmidhi and Nasa’i).
22. This is explained in two Hadiths:
(1) From Abu Sa‘id al-Khudri: The Prophet, peace be on him, said: “Do not sell gold for gold except when it is like for like, and do not increase one over the other; do not sell silver for silver except when it is like for like, and do not increase one over the other; and do not sell what is away [from among these] for what is ready”. (Bukhari, Kitab al-Buyu, Bab bay al-fiddah bi al-fiddah; also Muslim, Tirmidhi, Nasa’i and Musnad Ahmad). (2) From Abu Sa’id al-Khudri: The Prophet, peace be on him, said: “Gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates, and salt for salt – like for like, and hand-to-hand. Whoever pays more or takes more has indulged in riba. The taker and the giver are alike [in guilt]”. (Muslim, ibid; and Musnad Ahmad).
23. David Oakley, Shannon Bond, Cynthia O’Murchu, and Celve Jones, “Islamic Finance Explained,” Financial Times. 24. Reuters, “Islamic Finance Set to Cross $1 Trillion: Moody’s,” The Economic Times, 21 October 2010. Notes 191
25. Jospeh DiVanna and Brian Caplen, “Top 500 Islamic Financial Institutions,” The Banker, 2 November 2010. 26. www.thecityuk.com and retrieved on 13 June 2011. 27. A form of partnership where one party provides the funds while the other provides expertise and management. The latter is referred to as the Mudarib. Any profits accrued are shared between the two parties in pre-agreed ratios, while loss is borne by the provider of the capital. 28. Musharikah means a relationship established under a contract by the mutual consent of the parties for sharing of profits and losses in the joint busi- nesses. It is an agreement under which the Islamic bank provides funds, which are mixed with the funds of the business enterprises and others. All providers of capital are entitled to participate in the management, but not necessarily required to do so. The profit is distributed among the part- ners in pre-agreed ratios, while the loss is borne by each partner strictly in proportion to respective capital contributed. 29. A contract under which an Islamic bank finances equipment, building or other facilities for the client against an agreed rental together with a unilat- eral undertaking by the bank or the client that at the end of the lease period, the ownership in the asset would be transferred to the lessee. The undertak- ing or the promise does not become an integral part of the lease contract to make it conditional. The rental as well as the purchase price is fixed in such manner that the bank gets back its principal sum along with profit, which is usually determined in advance. 30. Literally, it means a sale on mutually agreed profit. Technically, it is a con- tract of sale in which the seller declares his cost and profit. Islamic banks have adopted this as a mode of financing. As financing technique, it involves a request by the client to the bank to purchase a certain item for him. The bank does that for a definite profit over the cost, which is settled in advance. 31. http://www.pwc.com/my/en/issues/islamic-finance-malaysia.jhtml. Retrieved on May 5, 2011. 32. http://www.moneyworks.ae/news/archive/3200708.pdf. Retrieved on 12 May 2011. 33. http://www.beltoneenclave.com/research/Beltone_UAE_Banking_Sector_Review_ for_BE.pdf. Retrieved on 12 May 2011.
4 Objectives of Islamic Finance
1. Quran (4:29). 2. Cited by Ibn Rushd in Bidayat al- Mujtahid, Cairo, 1960, vol. 2, p. 167. 3. Jaziri, vol. 2, pp. 283–4. 4. Quran (2:284). 5. Quran (23:84–5). 6. Quran (24:33). 7. Muslim (second athentic hadith book after Bhukahri), vol. 2, p. 728: 122. 8. See, for example, verses 3 and 4 of Surah 53 of the Holy Qur’an. 9. Quran (15:9). 10. Quran (33:21). 11. Quran (24:54). 12. Quran (6:165). 192 Notes
13. Quran (75:36). 14. Muslim, vol. 4, p. 1987: 34. 15. Bukhari, vol. 8, p. 15. 16. Ibid., p. 199; and Nisa’i, vol. 8, p. 65. 17. Musnad lmam Ali al-Rida. Beirut, 1966, p. 474. 18. Abu Yusuf, Kitab al-Kharaj; Cairo, 1367 A.H. 19. Abu Yusuf, pp. 4 and 6.
5 The Objectives and Achievements of Islamic Finance: An Analysis
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achievements 143 Ijtehaad 44 age profile of respondents 92 institutions 161 interest 44 background 41 investment and investment banks 6 management 6 branches 9 Islamic banking 5 Islamic banking assets 59 challenges of Islamic Finance 61 Islamic finance 1 components of Islamic Finance 6 in Malaysia 56 conclusion 13, 35, 64, 141, 146, 156 in Saudi Arabia 21 conventional banks 5 in the United Arab Emirates 59 conventional financial system 4 Islamic financial system 4 country profile of respondents 93 Islamic objectives 75 current Islamic finance market 19 vs age 108 customers 87 vs country 110 vs gender 111 development of Islamic Finance 51 vs profession 107 Islamic Shariah and its economic objectives 76 objectives 70 vs age 128 vs country 129 limitations of the research 34 vs gender 130 literature review 25 vs profession 126 employees of Islamic banks 88 meaning of Riba (usury) 47 equity and capital market 7 Mudarabah (sleeping partnership) 11 ethical objectives 79 Murabahah (cost-plus financing) 10 vs age 115 Musharakah (partnership financing) vs country 116 11 vs gender 117 vs profession 113 objectives (Maqasid) of Shariah 72 factor analysis 101 objectives of Islamic finance 66 full-fledged banks 9 objectives of the study 30 operating structure of Islamic gender profile of respondents 91 banks 8 general banking services 6 others 89 glossary 180 plan of the research 33 history of Islamic finance 15 products and services of Islamic hypotheses of the study 30 finance 10 prohibition of Riba (interest) 45 Ijara (leasing) 12 in Hadith 46 Ijma 43 in Qur’an 45
200 Index 201
Qiyas 43 vs gender 123 questionnaire 85, 157 vs profession 119 Qur’an 43 social services 7 sources of Islamic/divine law 43 references 14, 36, 64, 81, 141 sources of Shariah tenets 70 Regulatory Officers 89 stakeholders 87 reliability of data 98 statement of the problem 24 religious profile of respondents 92 subsidiaries 9 research gap 29 suggestions for development of research methodology 32 Islamic finance 151 research process 31 Sukak (bond) 13 research questions 32 Sunnah 43 Riba (meaning) 47 Riba Al-Fadl 49 Takaful (insurance) 7, 13 Riba Al-Nasi’ah 47 Takaful assets 59 right people 63 talent shortage 62 types of Islamic Finance Objectives Salam 12 75 sample 84 types of Riba 47 sampling plan 86 sampling size 89 universe 83 scope for further research 35 Shariah advisors 88 validity 100 social objectives 78 vs age 121 Waqf and Zakat 8 vs country 122 Window Model 9