An Introduction to Islamic Finance

Front Cover
BRILL, 2002 - Law - 125 pages
4 Reviews
Although the principles of Shari'ah require banks and financial institutions to be structured on an interest-free basis, this does not mean that such institutions are charitable concerns. As long as a person advancing money expects to share in the profits earned (or losses incurred) by the other party, a stipulated proportion of profit is legitimate. The philosophy is enshrined in the traditional Islamic concepts of musharakah and mudarabah, along with their specialized modern variants murabahah, ijarah, salam, and istisna'. This guide to Islamic finance clearly delineates the all-important distinctions between Islamic practices and conventional procedures based on interest. Justice Usmani of Pakistan, who chairs several Shari'ah supervisory boards for Islamic banks, clearly explains the various modes of financing used by Islamic banks and non-banking financial institutions, emphasizing the necessary requirements for their acceptability from the Shari'ah standpoint and the correct method for their application. He deals with practical problems as they arise in the course of his presentation, and offers possible solutions in each instance.
Investors and others doing business (or intending to do so) in Islamic countries have in this book a practical guide to a crucial factor in the success of their endeavours.
 

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“An Introduction to Islamic Finance” will solve all confusions.
This book today in my hand is by Mufti Muhammad Taqi Usmani entitled “An Introduction to Islamic Finance” was published in 1998. The
book is actually about the principles of Islamic Finance in depth and the main difference in Islamic and Conventional banking. The author is a Hanafi Islamic Scholar and has remained the chairman and member of sharia supervisory boards of different Islamic banks in different parts of the world. He is an expert in the fields of Islamic Jurisprudence, economics, Tassawuf and Hadith.
In the book author has successfully drawn attention that modes of financing are being used by the Islamic banks and financial institutions since last two decades, but all these instruments are not the substitutes of interest in the strict sense. It will also be wrong to presume that they may be used exactly in the same style as current conventional product is used. The instruments have their own set of principles, philosophy and conditions without which it is not allowed in Shari‘ah to use them as modes of financing.
The present book is a compiled collection of author’s previous different articles. He has discussed some preliminary points for Islamic banking at the beginning of the book. The author aimed to provide basic information about the principles and concepts of Islamic finance, with special reference to the modes of financing like Musharka, Mudarba, Murabaha, Ijara, Salam& Istisna, used by the banks and non-banking financial institutions. He has tried to explain the basic concept underlying these instruments. The compulsory requirements for their acceptability from the Shari‘ah standpoint, and the correct method of their application in contemporary banking system. He has also dealt with the practical issues involved in the application of the instruments and their possible solutions in the light of Quran and Sunnah.
I have observed it very helpful because it is written in simple English. Each financing model is explained in very detail including its types, profit calculation, termination time and its practice in contemporary banks
I hope it will facilitate to understand the basic principles of Islamic finance and the main points of difference between conventional and Islamic banking. I will prefer this book for the beginners of the Islamic finance. It is also easily understandable for those who do not belong to field of Islamic Finance. It is hoped that this brief discussion will open new horizons for the thinking of Muslim jurists and economists and will help them implementing a true Islamic economy.
 

User Review - Flag as inappropriate

Excellent Book for understanding the laws of shariah in regards to Muamulaat. It is an important reminder of how dynamic Islam is for all times and all eras. May Allah grant the author great reward and a long life. Amen.

Contents

Musharakah
1
2 The Concept of Musharakah
5
3 The Basic Rules of Musharakah
6
31 Distribution of Profit
7
33 Sharing of Loss
8
35 Management of Musharakah
10
36 Termination of Musharakah
11
4 The Concept of Mudarabah
12
512 Rescheduling of Payments in Murabahah
64
6 Conclusions
66
Ijarah
69
2 Basic Rules of Leasing
70
3 Determination of Rental
71
4 Lease as a Mode of Financing
72
41 The Commencement of Lease
73
43 Expenses Consequent to Ownership
74

41 Business of the Mudarabah
14
43 Termination of Mudarabah
15
5 Combination of Musharakah and Mudarabah
16
6 Musharakah and Mudarabah as Modes of Financing
17
62 Securitization of Musharakah
18
63 Financing of a Single Transaction
20
64 Financing of the Working Capital
21
65 Sharing in the Gross Profit Only
22
66 Running Musharakah Account on the Basis of Daily Products
23
7 Some Objections to Musharakah Financing
27
72 Dishonesty
28
73 Secrecy of the Business
29
8 Diminishing Musharakah
30
Murabahah
37
2 Some Basic Rules of Sale
38
21 Bai Muajjal Sale on Deferred Payment Basis
40
3 Murabahah
41
4 Basic Features of Murabahah Financing
42
5 Some Issues Involved In Murabahah
44
52 The Use of The InterestRate as a Benchmark
48
53 Promise to Purchase
49
54 Securities Against Murabahah Price
52
55 Guaranteeing the Murabahah
54
56 Penalty of Default
55
57 An Alternative Suggestion
58
58 No RollOver in Murabahah
60
510 Calculation of Cost in Murabahah
62
511 SubjectMatter of Murabahah
63
45 Variable Rentals in LongTerm Leases
75
46 Penalty for Late Payment of Rent
77
48 Insurance of the Assets
78
5 SubLease
79
6 Assigning of the Lease
80
8 HeadLease
81
Salam and Istina
83
12 Conditions of Salam
84
2 Salam as a Mode of Financing
86
21 Some Rules of Parallel Salam
88
31 Difference Between Istisna and Salam
89
33 Time of Delivery
90
Islamic Investment Funds
93
21 Conditions for Investment in Shares
95
3 Ijarah Fund
98
4 Commodity Fund
99
6 Baialdain
100
7 Mixed Fund
101
The Principles of Limited Liability
103
11 Waqf
105
13 Joint Stock
106
14 Inheritance under Debt
107
15 The Limited Liability of the Master of a Slave
108
The Performance of The Islamic Banks
111
Selected Bibliography
117
Index
119
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