IQRA UNIVERSITY

IU

ESSENTIALS OF ISLAMIC FINANCE

COURSE CODE: 01-05-0476 &01-05-0432

Course Study Guide

Academic Year Fall 2012

MBA/BBA Program

Department of Business Administration

Faculty of Management Sciences

Course Study Guide (Fall 2012): Essential of Islamic Finance (by Farhan Mehboob, at IUGC) 12

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IQRA UNIVERSITY
(01-05-0432/0476), for MBA/BBA

IU

Summarized Course Outline (Spring 2012), Essentials of Islamic Finance

Course Facilitator: Farhan Mehboob

Lecture 1-2

Contents of Lectures Course Introduction (Group project assigned) Simplified history of Islamic banking Fundamentals of Islamic Jurisprudence (brief overview of fundamentals) Sources of Shariah Interpretation of Quran Science of Hadith Reasons for differences amongst the Fuqaha Suggested reading: Handout 1

Book Islamic Finance Law, Economics & Practice: Chapter # 2

Handouts 1

1-2

Riba Exposed Definition of Riba interest Riba: Haram in Islam (Quran & Hadith) Types of Riba Consequences of Riba in the Hereafter The fundamental problem with interest Will Riba continue to dominate global economy ? Riba in a controlled environment Effects of Riba in the society (positive or negative ?) Resent history of interest based finance & banking Comparison of the current situation, with the early period in Madinah Misconceptions about Riba Suggested reading: Article 1

1-2

1-2

1-2

Islamic Economy The concept, applicable in the 21st Century ? The Role of the government Abhorred practices Macroeconomic variables Fiscal Policy Monetary Policy Failure of Capitalist and Socialist economies

Developments 1-2 In Islamic Banking The Case of Pakistan, by M. Mansoor Khan and M. Ishaq Bhatti Page 2 of

Course Study Guide (Fall 2012): Essential of Islamic Finance (by Farhan Mehboob, at IUGC) 12

The future of Islamic Economy Chapter # 2 Understanding Islamic Finance: Chapters 1, 2 &3

Introduction to Islamic law of contracts Types of contracts in Islam Basic elements of a contract in Islam Law of contract and its scope Four basic prohibitions in Islamic Finance Basic Islamic modes of financing Sale & purchase trade-based modes of financing (Baitijaraat) Types of sale Lease & tenancy rental-based modes of financing (Ijarah Kirayah dari) Types of lease Partnership (Shirakah shirakat dari) Type of Skirakah partnership Application of law of contract into sale and other modes of financing

Islamic Shariah Based Quraan Sunnah Ijtehad

1
Law on And

Understanding Islamic Finance: Chapters 5

MidTerm 1-2

Midterm Examination Trade-based modes of financing Introduction to trade-based modes of financing Types of sale Murabahah Explanation, rules & regulation Application in banking Musawamah Explanation, rules & regulation Application in banking Salam Explanation, rules & regulation Application in banking Istisnann Explanation, rules & regulation Application in banking Suggested reading: Article 2

Mid-Term An Introduction to Islamic Finance: Murabahah, Salam & Istisna Islamic Finance Law, Economics & Practice: Chapter # 5

Mid-Term 1-2

Understanding Islamic Finance: Chapters 9 & 10

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1-2

Rental-based modes of financing Lease & its types Ijarah & its explanation Types of Ijarah Difference between Ijarah and lease Rules and regulations Application in the banking sector Participatory modes of financing Participation & its explanation Shirakat (partnership) and its meaning Types of Shirakah (partnership) Musharakah Explanation, rules & regulations Application in the banking sector Mudarabah Explanation, rules & regulations Application in the banking sector Suggested reading: Article 3

An Introduction to Islamic Finance: Ijarah, Musharkah, Mudarbah, Musharikah & Mudarbah as modes of financing, Understanding Islamic Finance: Chapters 11

1-2

2-4

Advanced topics in Islamic banking: Islamic banks & the concept of profit & loss sharing Some confusion and misconceptions Fixation or non-fixation of return Meaning of profit and loss sharing Credit sales and price differentiation Time value of money (does time have any value in Islamic finance) Treasury operations in Islamic banks Deposit management in Islamic banks Currency trading & its rules & regulations Stock market in Islamic Finance Central bank & its role relation between state bank & Islamic banks International trade & finance, & Islamic banking Interest rate benchmarking in Islamic banking Relationship between Islamic & conventional banks Sukuk Islamic bonds Theory & application Takaful Islamic insurance Explanation, rules & regulations Difference between Takaful and conventional insurance Application Suggested reading: Article 4 & 5

An Introduction to Islamic Finance: Islamic Investment Funds Islamic Finance Law, Economics & Practice: Chapter # 6 Understanding Islamic Finance: Chapters 15 & 16

2-4

Islamic Finance & Banking: threats, opportunities, weaknesses & strengths Implications of an interest-free economy

An Introduction to Islamic

Course Study Guide (Fall 2012): Essential of Islamic Finance (by Farhan Mehboob, at IUGC) 12

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The problems with contemporary Islamic Banks Islamic Banking Halal or Haram ? The future of Islamic finance & banking

Finance: The performance OF Islamic Banks- A Realistic Evaluation Understanding Islamic Finance: Chapters 17 Islamic Finance Law, Economics & Practice: Chapter # 8 0-2 Final

Suggested reading: Article 6 & 7

0-2 Final

Submission of Projects I & II & Presentations (No late work will be accepted!) Final Examination

0-2 Final

Course Instructions
Important note: Students are required to research the topic of Tawaraq. It will not be covered in class, but will be included on the mid-term examination. This is a self study, research assignment. Students are required to research the topic of Sukuk, Mugarasa, Muzara, and Musaqah. They will not be covered in class, but included on the final examination. This is a self study, research assignment. Further, videos will be provided for student to view and study on their own; students are encouraged to discuss in class. The videos will be included in the final examination. Text Books Islamic Shariah Law Based on Quraan Sunnah And Ijtehad Shariah Law An Introduction Understanding Islamic Finance, by Muhammad Ayub The Art of Islamic Banking & Finance Tools & Techniques for community based banking, by Yehia Abdur-Rehman, Wiley Finance Islamic Financial Services, by Muhammad Obaidullah Meezan Banks Guide To Islamic Finance, by Dr Muhammad Imran Ashraf Usmani An Introduction To Islamic Finance, by Mufti Taqi Usmani, Islamic Finance Law, Economics, and Practice, By Mahmoud A. El Gamal, Cambridge University Press Developments In Islamic Banking The Case of Pakistan, by M. Mansoor Khan and M. Ishaq Bhatti Milestones To Eternity by Muhammad Abu Mutawakkil, Darul Ishaat, Karachi, Pakistan.
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Islamic Economics & Finance (2nd Edition), A Glossary, by Muhammad Akram Khan, Routledge Taylor & Francis Group (London & New York). Milestones To Eternity by Muhammad Abu Mutawakkil, Darul Ishaat, Karachi, Pakistan. Growth of Islamic Banking in Pakistan, by Agha Zohaib Khan

Important advice:
Only those student are advised to take this course who: Have access to a reliable and secure pc, connected to the internet; Have a decent command of the English language; Are ready to put in at least 6 hours per week of relevant dedicated work. Are not afraid of learning what they dont know, and in some cases may not see the technology applied in Pakistan.

Attendance policy Attendance once marked will NOT be changed. NO excused absence at all. NOT present in class (for whatever unavoidable reasons) means ABSENT. 4 absences means a grade of FAIL! LATE means absent. Class disruption or any other nuisance that disturbs the discipline of the class will result in negative class participation marks. Prolonged class distraction will result in suspension from class. With regards to the above issues DONT bother me. NEVER call me! Assignments:
Students are responsible for all class work and assignments according to the schedule, even in case of absence. No late work will be accepted. Students should be expecting assignment every week. Assignment will be assigned in class or available on the course network folder. Assignment are designed to give student hands on practical experience.

Comprehensive Tests
Four comprehensive test scheduled during the semester, to clarify concepts and help students judge their level of preparation before the midterm and final. A Your Standard University Grading Policy (What you do, is whatfrom 88% get!) target you will

Mid-term Final Tests, Project & Presentation Total

30% 45% 25% 100%

B+ B C+ C FAIL

from 81% from 74% from 67% from 60% below 60%

Very achievable

59% = FAIL

Individual project I Stock Market Portfolio Management & presentation-$100,000 multiplied or vanished?
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Each student is required to submit their project in the last class (that is, the class before the final exam). Students are not allowed to work as a group. DO NOT plagiarize. I want original work. Your 7 minute self explanatory presentation should be in PowerPoint. However, you will not be required to present. Your project documentation must be at least 16 pages (12 Times New Roman, 1.5 spacing, reference pages, table of contents, titles, sub-titles, appendix, etc). You will submit your project report hard copy (which will include a CD, properly labeled, with the soft copy of your slide presentation and project report). You are required to sign up (open an account) with the website simulator.investopedia.com and actively trade on the simulated portfolio (startup of US $100,000.00), using live stock market quotes (from the AMEX, NASDAQ & NYSE). Your project report must include justification for all your transactions: You must start from day one; Your ending portfolio value must be clearly stated on the cover page!; supporting document should be included as an appendix ; Give your justification for each executed transaction; Did the market justify your transaction; What investment strategy did you pursue; You are also required to maintain a detailed transaction report through our the semester, which will include quantity, commission, buying and selling price, or well as profit or loss. What mistakes did you make, and what did your learns; What was your ending portfolio valuation& what can you say/do now ? Justify your claim to another US $ 100,000.00 Was there an investment strategy that worked for you; In your opinion what rules should an investor abide by; Discuss why you would like to pursue this line of career; How do you recommend one to handle pressure situation and nervous moments, caused by pathetic and impulsive gut instinct investment decisions ?

Life doesnt get better than this - GOOD LUCK! OR does it ?

Individual project II & presentation-LATE work will NOT be accepted! DONT COPY!
DO NOT plagiarize. Plagiarized work will be rejected; serious action will be taken, that may include, negative marks, assigning a grade of F, suspension, or even expulsion! I want original work. Do NOT copy from the internet. Your 8 minute presentation should be in PowerPoint. Your project must be at least 18 pages (12 Times New Roman, 1.5 spacing, reference pages, table of contents, titles, sub-titles, etc). The project should be informative, well researched and referenced. Your project should be more practically oriented (as per Shariah requirement, central/statebank requirement, technical jargon, forms, policies, etc), and based on empirical data (actual number, real data). Topics will be assigned to students on a first come basis. Each student should submit its request by lecture # 5. Along with your project report (hard copy) you are required to submit the CD with your presentation and project soft copy. Request must included names, id, topic, etc. Each student must choose a topic from the following (or submit a request for an alternative topic): 1. The impact of Riba on the society 2. Setting up an Islamic Investment Financing company 3. The Islamic Economy 4. Islamic Analysis of Pakistan 5. Islamic Analysis of Bangladesh
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6. Islamic Analysis of India 7. Islamic Analysis of Iran 8. Islamic Analysis of Libya 9. Islamic Analysis of Egypt 10. Islamic Analysis of Saudia Arabia 11. Islamic Analysis of Malaysia 12. Islamic Analysis of Turkey 13. Islamic Analysis of Somalia 14. Islamic Analysis of USA 15. Islamic Analysis of Mali 16. Islamic Analysis of Bulgaria 17. Islamic Analysis of Spain & Portugal 18. Islamic Analysis of the Russian Federation 19. Setting up a company using Islamic financing 20. Setting up a Islamic Rent-a-car 21. Setting up a business entity using Musharikah 22. A United Muslim Ummah: A natural Superpower 23. Setting up a business entity using Mudarabah 24. Setting up a business entity using Salam 25. Setting up a business entity using Istisnann 26. Islamic Finance & the plastic industry 27. Islamic Investment & the real estate development projects 28. Islamic Investment & the construction industry 29. Islamic Investment & the manufacturing Industry 30. Islamic Finance & the aircraft manufacturing industry 31. How should Muslim countries address the current interest based Jewish global financial might ? 32. The implications of an interest-free society 33. The banking paradox: Interest based progress & development 34. Global study of food & water in light of Quran & Ahadeeth: with recommendation for future trends
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35. Reasons for the recent financial collapse in America & Europe 36. Lessons to learn from Muslim experiences in Spain 37. The obstacles faced by an Islamic financing company in an un-Islamic environment 38. Recent history of interest based banking 39. Tawaruq & its applications 40. Sukuk 41. Agriculture in Islam 42. The Dynamics of Islamic Management Principles 43. The Munafiq Corporation! 44. The Mutaqee Corporation! 45. The Islamic Stock Market 46. My company: From zero to a conglomerate 47. Compare Takaful and insurance; discuss the future of Takaful; is it the Islamic alternative of insurance ? 48. Discuss the concept of the stock market from an Islamic perspective 49. Compiling the Saheeh Ahadeeth related to trade & finance 50. Satanic Trades & Professions 51. The harms of intoxicants 52. Empirical Comparison: Halal verus Haram Economy 53. Empirical Comparison: Halal verus Haram Financing 54. Muzara, Mugarasa, and Musaqah 55. Factors of success in trade 56. How Islamic are Islamic Banks ? 57. The series of steps economic and financial steps the Islamic Republic of Pakistan should have taken since 1947, and their justification ? 58. The world of Islam today from the perspective of the sahabah 59. Difference between Islamic & commercial banking 60. Case Study: Edhi Trust-A Good Example of An Islamic Organization 61. Case Study: Saylani-A Good Example of An Islamic Organization 62. Case Study: SOS Village
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63. Learning lessons from the downfall of the Mughal Empire in light of the Quran and Sunnah 64. A detailed case study of an Islamic Organization 65. The harms of pigs and related products 66. Reforms required in Islamic Finance & Banking 67. The Key To Success in Volunteer Management: The Islamic Perspective 68. Islam & Technology 69. The marketing of Islam 70. A critical analysis of the reign of Sultan Muhammad (Mehmet-II) Al-Fateh 71. The corporate future in light of the signs of the Day of Judgment 72. Reforms required in the corporate world, in compliance to Shariah requirements 73. Islamic finance & e-Business 74. The Islamic Monetary System 75. The Global Islamic Central Bank 76. Islam & Weapons of Mass Destruction 77. Islamic Analysis of the Financial Statements of Meezan Bank 78. Islam & the Universe 79. The Vanguards of Islam 80. Islam, Capitalism, & Socialism: A comparative study 81. Islam & Darwinism 82. The Islamic architecture 83. Learn from the Khulafah-e-Rashideen 84. The present, past & future: In light of the Quran & Sunnah 85. Salient features of Islamic Finance 86. The Blueprint of the Islamic (media) Channel 87. Islam & the cartoon industry 88. Reconciling to differences of opinion amongst the Madhab by using Mugnee by Ibne-Qaddama 89. Islam & human rights 90. A critical analysis of Muslim financial fiascos & failures 91. Contemporary Muslim figures of hope for the Ummah
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92. Contemporary figures of hope for Pakistan 93. Miracles in Islam 94. Islamic & sports 95. Islam & Sea Trade 96. The history of barbarians 97. The Role of women in Islamic trade & finance 98. Islam in Africa 99. Islam in Europe 100. 101. 102. 103. 104. 105. 106. 107. 108. 109. 110. 111. 112. 113. 114. 115. 116. 117. 118. 119. 120. Islam & Khurasan Islam & (Bilad) As-Sham Islam & Qoqaz Islam & the laws of physics Learning lessons from the Songhi Empire Learning lessons from the plight of Muslims in Burma A critical analysis of Usman Dan Fido A critical analysis of Ikhwan-Al-Muslimeen A critical analysis of Temur Langh A critical analysis of the concept of the Akhira A critical analysis of the sources of misguidance Islam as a trade A critical analysis of the true teachings & followers of Prophet Esa (s) Setting up the ideal Islamic Investment Consortium Islam & food trade Constructing a house within the bounds of shariah The fundamental realities of life A historical accounts of the treachery of the munafiqeen Life in outer space A critical analysis of 9/11 & its financial implication Islam & taxation

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121. 122. 123. 124. 125. 126. 127. 128. 129. 130. 131. 132. 133. 134. 135. 136. 137.

Global resource management: The Islamic perspective Islamic business directives for the era of Fitan From Khaibar to Ludd, the plots of the Jews History of the terrorists of the world Answering the skeptic comprehensively The ideal Muslim personality of era In search of the Sufyani In search of the Qahtani A critical analysis of Imam Mahdi Al-Muntazar (s) The System of Kufr setting the stage for Dajjal Life as a good Muslim in the 21st Century The strategy of Shaitan Applications of the discoveries of Ibn Sina in our time Applications of the discoveries of Al-Bayruni in our time Research article (see me) Book (see me) Other topic (see me)

Dealing with students of different intellectual levels While it is not possible to justly deal with students with different levels of intellect, the approach adopted enhances to a certain level the understanding which by most standards is acceptable. The instructor relies primarily on comprehensive tests, backed by infrequent assignments and class work (if and when needed). It has been observed that the initial tests are not taken seriously by student, with average marks of about 30%-35%. However, average marks for midterms are about 70%, while those of the final are 75%-80%. A final average assessment of 75%-80% reflects a good overall understanding; weak student score over 60% (at times even over 75%); good students score in 85%+ range. Further, students claim retention of concepts even months after completing the course. Repeated testing enhances students test taking skills, apart from improving drafting and composing answer techniques.

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