...RISK MANAGEMENT IN ISLAMIC BANKING AND FINANCE: THE ARAB FINANCE HOUSE EXAMPLE Bilal A. Fleifel A Thesis Submitted to the University of North Carolina Wilmington in Partial Fulfillment of the Requirements for the Degree of Master of Business Administration Cameron School of Business University of North Carolina Wilmington 2009 Approved By Advisory Committee Howard Rasheed Cetin Ciner William H. Sackley Chair Accepted By DN: cn=Robert D. Roer, o=UNCW, ou=Dean of the Graduate School & Research, email=roer@uncw. edu, c=US Date: 2010.01.21 15:02:51 -05'00' ________________________ Dean, Graduate School TABLE OF CONTENTS TABLE OF CONTENTS ..................................................................................................... ii ABSTRACT........................................................................................................................ vi ACKNOWLEDGMENTS .................................................................................................. vii DEDICATION .................................................................................................................. viii LIST OF TABLES .............................................................................................................. ix LIST OF FIGURES...............................................................................................................x GLOSSARY .............................
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...toward a product or service is influenced by a match of the product or service user image with the customer’s self-concept . Islamic banking which started in 1983 in Malaysia, refers to a system of banking that complies with Islamic law which also known as Shariah law. The underlying principles that govern Islamic banking are mutual risk and profit sharing between parties and the assurance of fairness for all transactions based on an underlying business activity. It does not allow any transactions based on interest (riba), gambling (maisir) and speculative trading (gharar) at all cost. In terms of products and services, there are more than 40 Islamic financial products and services that may be offered by the banks using various Islamic concepts such as Mudharabah, Musyarakah, Murabahah, Al-Bai Bithaman Ajil, Al-Ijarah, Al-Takjiri, Qard Hasan, Al- Wakalah, Al-Kafalah and Wadiah. This study was stated the most perception of Islamic banking product among the Malaysian customer. As one of the important in service industry today, Islamic banking is no longer regarded only to fulfil the religious obligation of the Muslim. It is also how the Islamic banks want to market their products towards the non-Muslim community in Malaysia. 2.0 FACTORS INFLUENCING THE PERCEPTION OF ISLAMIC BANKING 2.1 Religion The religious value includes factors like Islamic bank is not involved in any regulations or acts against shariah that could spiritually burden customers, free from doubtful transaction...
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...Islamic Banking Financial screening of Islamic equity funds Submitted to: Mr Arsalan Ahmed Submitted By: Muhammad Waqas l10-4747 Haris Naeem l10-4657 Dated: April 9, 2013 Background: While elimination of "Riba" or interest in all its forms is an important feature of the Islamic financial system, Islamic banking is much more. At the heart of Islam is a sense of cooperation, to help one another according to principles of goodness and piety (but not to cooperate in evil or malice). In essence, it aims to eliminate exploitation and to establish a just society by the application of the Shari'ah or Islamic rulings to the operations of banks and other financial institutions. To ensure compliance to the Shari'ah, Islamic banks use the services of religious boards comprised of Shari'ah scholars. Islamic finance may be viewed as a form of ethical investing, or ethical lending, except that no loans are possible unless they are interest-free. Among the ethical restrictions is the prohibition on alcohol and gambling and the consumption of pork. Islamic funds would never knowingly invest in companies involved in gambling, alcoholic beverages, or porcine food products. Its practitioners and clients need not be Muslim, but they must accept the ethical restrictions underscored by Islamic values. Financial Equity ratios: These three ration define the criteria for Islamic equity * Leverage ratio < 33% * Cash + interest bearing securities ratio < 33% * Liquidity ratio < 45%...
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...of report on “Role of IBBL-Promoting Export, Import business & Inward Foreign Remittance” Muhtaram. Assalamu Alaikum, With due respect we do hereby submit our Internship Report titled “Role of IBBL-Promoting Export, Import business & Inward Foreign Remittance” which was assigned to us as an integral part of our course requirements in B.B.A program. As we have been working in IBBL, Motijheel Local office, Dhaka, thus, it is a very good opportunity for us to prepare the report properly out of practical experiences &empirical data, as well as, application of theoretical knowledge. Preparing this report has been extremely challenging, interesting and rewarding experience. Now we are able to understand and utilize the key terms of Islamic Banking in banking sector. Now it is very easy for us to interpret any impact and its effect on bank. We would like to express our deepest gratitude to you for providing us with such an opportunity. We have tried our best to make this report as comprehensive and informative as possible within the time allowed for us. Due to various constraints, there may be some mistakes for which we beg your apology. Ma‟assalam. Yours faithfully, Md. Masud Yusuf Gazi Mohiuddin Ahmed Md. Rakibul Hasan Md. Deloar hossain Moheuddin Shadi...
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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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...Is Islamic Finance A Solution to the Financial Crisis? | Is Islamic Finance A Solution to the Financial Crisis? Lecturer Ms Tahira Jaffery Prepared by Mohammed Haider Hassan Mohammad Javed Najwat Rehman Mehdi Maloof December 30, 2009 Contents THE GLOBAL FINANCIAL MELTDOWN AND ITS IMPACT ON PAKISTANS ISLAMIC BANKING SECTOR 4 The Root of All Cause: What Caused the Financial Crisis? 4 THE ISLAMIC BANKING MECHANISM 7 Roles of Different Players 7 Modes of finance 9 CONVENTIONAL AND ISLAMIC BANKS AMID THE CRISIS IN PAKISTAN 14 Differences Between Islamic and Conventional Banks 14 GROWTH OF ISLAMIC BANKING INSTITUTIONS 18 Prevailing Trends in the Past Year 19 ISLAMIC BANKINGS CAPACITY TO WITHSTAND RECESSIONARY PRESSURES 21 CHALLENGES AND OPPORTUNITIES 24 Problems With Islamic Finance 24 Opportunities 28 Bibliography 30 THE GLOBAL FINANCIAL MELTDOWN AND ITS IMPACT ON PAKISTANS ISLAMIC BANKING SECTOR The Global Financial Crisis took the world by storm in late 2007 and has since then has created all sorts of nuisances around the world. Economists consider it to be the worst financial crisis ever since the Great Depression of the 1930s. The crisis caused losses worth trillions of U.S dollars throughout the world resulting in the failure of businesses, decline in consumer wealth, government deficits, and an overall decline in economic activity. The Root of All...
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...Archive Impact of Interest Rates on Islamic and Conventional Banks: The Case of Turkey Erge¸ Etem Hakan and Arslan Bengul Gulumser c ¨ ¨¨ January 2011 Online at http://mpra.ub.uni-muenchen.de/29848/ MPRA Paper No. 29848, posted 4. April 2011 06:17 UTC Impact of Interest Rates on Islamic and Conventional Banks: The Case of Turkey Etem Hakan Ergeça* and Bengül Gülümser Arslanb Abstract Identifying the impact of the interest rates upon Islamic banks is key to understand the contribution of such institutions to the financial stability, designing monetary policies and devising a proper risk management applicable to these institutions. This article analyzes and investigates the impact of interest rate shock upon the deposits and loans held by the conventional and Islamic banks with particular reference to the period between December 2005 and July 2009 based on Vector Error Correction (VEC) methodology. It is theoretically expected that the Islamic banks, relying on interest-free banking, shall not be affected by the interest rates; however, in concurrence with the previous studies, the article finds that the Islamic banks in Turkey are visibly influenced by interest rates. JEL classification: G21; E52 Keywords: Interest-free banking, monetary policy I. Introduction Islamic banks1 are defined as financial institutions that rely on the principle of Profit and Loss Sharing (PLS) with the entrepreneurial partners in their relevant banking activities (Nienhaus, 1983, p. 31)...
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...SECTION A: LIST OF SYARIAH COMPLIANCE COMPANY In Malaysia, Kuala Lumpur Stock Exchange Shari’ah Index (KLSESI) was introduced in 1997 by Securities Commission (SC). KLSESI was introducing to provide an avenue for Muslims investors to participate in equity investment in accordance to Shari’ah principle. This index comprised of firms listed on both the Main and the Second Board, and Masdeq at KLSE (Bursa Malaysia). KLSESI is the tool in Islamic capital market (ICM) plan where the activities carried out in that market are not conflict with the conscience of Muslims and religion of Muslim. Besides, the ICM represents an assertion of religious law in capital market transactions where the market should be freed from the involvement of prohibited activities by Islam. Under this index, it focuses on the core activity and level of interest income of company to determine whether a particular company is permissible or not in the index. Before companies listed on KLSE, they should make sure that their investments are permissible under Shari’ah law. The activities are considered impermissible if the operations are based on the interest; involve gambling, manufacture or sale haram products or contains elements of gharar. Furthermore, for companies that compromised both permissible and non-permissible elements, there are several additional criteria. The criteria are: a) The core activities of the companies must not contravene the principles of Shari’ah as outlined in the four criteria...
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...Chapter 5 Financial System of Malaysia 5.1 Financial System Structure in Malaysia The Malaysian financial system is structured into two major categories, Financial Institutions and Financial Market. The Financial Institutions comprise Banking System and Non-bank Financial Intermediaries. The Financial Market in Malaysia comprises four major markets namely: Money & Foreign Exchange Market, Capital Market, Derivatives Market, and Offshore Market. Chart 1: The Financial System Structure in Malaysia Financial System Financial Institutions Banking System Non-Bank Financial 1. Bank Negara Malaysia Intermediaries 2. Banking Institutions 1. Provident and Pension • Commercial Banks Funds • Finance Companies 2. Insurance Companies • Merchant Banks (including Takaful) • Islamic Banks 3. Development Finance 3. Others Institutions 4. Savings Institutions Financial Market Money & Foreign Exchange Market 1. Money Market 2. Foreign Exchange Market Capital Market 1. Equity Market • Discount...
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...1.0 COMPANY BACKGROUND Bank Islam, established in 1983, is Malaysia’s maiden Shariah-based institution. Since its inception, it has emerged as the symbol of Islamic banking in Malaysia and its vision to be “A Global Leader in Islamic Banking” illustrates the Bank’s status as the flag bearer of the country’s financial services industry (“the industry”). Bank Islam has been growing from strength to strength as evidenced by its financial performance and paid-up capital, which in turn, was instrumental in making the growth of its assets. Throughout the year, Bank Islam has been embarking on a number of expansion programmes with its involvement in, among others, notable transaction in Sukuk and Corporate Mandates. Living up to its pioneering spirit, the Bank has continued to provide innovative and enhanced products and services which has resulted in a growing number of customers seeing Islamic banking as a true alternative to conventional banking. This growing list of clienteles in addition to truly ground breaking and quality banking solutions have been recognised by the global industry which is reflected by the Bank's position as one of the top banks in the country. From the traditional financing, savings and investment types of products exclusively for individual customers during the early years of establishment, the range of Bank Islam’s Shariah-based financial products, services and business solutions has significantly...
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...“Overall Banking Activities of Export Import Bank of Bangladesh Limited” PREPARED FOR Shah Md. Abdul Bari Sr. Vice President Human Resources Division [pic] PREPARED BY Md. Mahmud Hossain Khan ID No. MBA 03007833 [pic] Submission Date – Letter of Transmittal Date: To Ms. Farhana Diba Lecturer Department of Business Administration Stamford University, Bangladesh Subject: Submission of Internship Report. Dear Sir, It is my great pleasure to submit internship report on the project titled “Overall Banking Activities of Export Import Bank Ltd.”. I have tried my level best in order to analyze this topic based on all the recent updated information as much as possible. I have gathered a lot of practical experience about the activities from Banking Services, during my internship period. It was interesting to gather some knowledge about the Banking Sector in Bangladesh. I have tried my level best to make this report an outstanding one. But still there might be some shortcomings regarding this report. I will whole heatedly welcome any suggestion to improve this report. I hope all of you will forgive flaws. Sincerely Yours, Md. Mahmud Hossain Khan ID No. MBA 03007833 Stamford University of Bangladesh CERTIFICATE This is to certify that the internship on EXIM Bank Limited titled “Overall Banking Activities...
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...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 to play an important role in world economy. Although, credit unions and co-operative societies based on profit and loss sharing system continued to exist, their activities were focused on very small geographical areas. Islamic Banking Practice, Early Initiatives: Islamic Finance started to grow radically in the...
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...Islamic Financing for Large Infrastructure Projects Jasper Camacho International Financial Mgmt, Section 1 Fall 2005 Summary This paper examines the growing Islamic finance market and how it is becoming an important source of capital to fund infrastructure projects in the Muslim world. The paper starts by introducing basic tenants of Islamic finance and the problems as it relates to large capital projects. Innovations in Islamic project financing are then introduced along with the complexity that those have to innovations address. The paper concludes with a description of selected recent infrastructure development projects that use Islamic financing. Islamic Project Development Needs Increasing population throughout the Muslim world and the appetite for demand in investment for infrastructure in Muslim populated countries has led an increase need for capital that conforms to Islamic standards (see exhibit 1 for list of Organization of Islamic Countries).1 In many of these countries especially in the Middle East, Central Asia and South East Asia, oil and natural gas deposits push the need for companies to build extraction, transport and refining capacity. In developing countries such as the ones in Africa, Pakistan, and Afghanistan, there is an increasing need for electricity and water desalination stations. These projects are capital especially capital intensive in nature. Islamic Financing Basics Islamic financing is the method of financing that complies with the Shari’ah...
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...Islamic Modes of Finance Theory and Key Shariah Principles Modes Of Finance • Two are ideal modes which provide an alternative to interest banking and if implemented on a national level will result in much fairer distribution of wealth in society 1. Mushaarakah – رآ (equity finance) 2. Mudhaarabah - ر (equity finance - sleeping partner) • Two are not ideal as they replicate the effects of conventional banking but nevertheless are tolerated in Shariah 3. Ijaarah - ( إ رةleasing) 4. Muraabahah - ( اcost plus pricing) We will also briefly analyse Salam - , Istisnaa‘ – ع Tawarruq – رق اand 1 Mushaarakah • “Mushaarakah” literally means sharing • “Mushaarakah” is derived from “shirkah” which means “being a partner”. • Mushaarakah is “a joint enterprises formed for conducting business in which all partners share the profit according to an agreed ratio while the loss is shared according to the ratio of investment” • It is an ideal alternative for interest based financing with far reaching effects on the economy. Types of Shirkah SHIRKAH SHIRKAT-UL-MILK joint ownership SHIRKAT-UL-‘AQD joint enterprise OPTIONAL via joint purchase NON OPTIONAL inheritance SHIRKATUL-AMWAAL SHIRKATUL-‘AMAL SHIRKATUL-WUJOOH mushaarakah Mushaarakah • The term Mushaarakah has been introduced recently by those who have written on the subject of Islamic modes of financing • It is normally restricted to a particular type of “Shirkah”, i.e. Shirkat-ul-amwaal...
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...INVESTMENT BANK Definition:- Investment bank is a financial institution that assists individuals, corporations, and governments in raising capital by underwriting and or acting as the client's agent in the issuance of securities. An investment bank may also assist companies involved in mergers and acquisitions and provide ancillary services such as market making, trading of derivatives and equity securities, and FICC services (fixed income instruments, currencies and commodities). Investment banks do not take deposits. There are two main lines of business in investment banking. Trading securities for cash or for other securities (e.g. facilitating transactions, market-making), or the promotion of securities (e.g. underwriting, research, etc.) is the "sell side", while buy side is a term used to refer to advising institutions concerned with buying investment services. Private equity funds, mutual funds, life insurance companies, unit trusts, and hedge funds are the most common types of buy side entities. An investment bank can also be split into private and public functions with an information barrier which separates the two to prevent information from crossing. The private areas of the bank deal with private insider information that may not be publicly disclosed, while the public areas such as stock analysis deal with public information. List of the bank: 1) CIMB Investment Bank Berhad 2) RHB Investment Bank Berhad 3) Alliance Investment...
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