Case Studies in Islamic _ Banking and Finance _

Transcription

1 Case Studies in Islamic _ Banking and Finance _ Case Questions & Answers Brian Kettell A John Wiley and Sons, Ltd., Publication

2 Preface Introduction About the Author xiii xvii xxiii 1 Case Study 1: Ijara Contract Learning Outcomes Role of Ijara in Islamic Finance The Ijara Contract as a Mode of Islamic Finance What is the Ijara Contract? What is Car Ijara? In what Sense is Car Ijara Interest Free? What is the Difference between a Conventional Lease and an Islamic Lease? The Meezan Bank Car Ijara Scheme Appendix: Ijara Fatwa Case Study Questions 9 Case Study 2: Musharaka Contract Learning Outcomes Role of Musharaka in Islamic Finance Summary of Musharaka Sharia 'a Rules for Profit and Loss with Musharaka Distribution of Profits Sharing of Losses Management of Musharaka Sharia 'a Rules for Musharaka Case Questions Case Questions 17

3 Case Study 3: Diminishing Musharaka Contract Learning Outcomes Diminishing Musharaka as a Mode of Islamic Finance Summary of Diminishing Musharaka Sharia 'a Rules for a Diminishing Musharaka Contract What is the Difference between Ijara Wa Iqtina and Diminishing Musharakal Applications of Diminishing Musharaka House Purchase Service Sector Case Assumptions Sharia 'a Considerations to be Noted Practical Shape of the Transaction Case Study Questions 23 Case Study 4: Mudaraba Contract Learning Outcomes Mudaraba as a Mode of Islamic Finance Mudaraba and PLS - Pure Islamic Banking Mudaraba - Profit Sharing Agreement Sharia'a Rules for Mudaraba Case 1: Sharia'a Islamic Bank Case 1 Questions Mudaraba Contract with Various Partners Case 2 Questions Case 3 Questions Case 4 Questions Case 5 Questions Case 6 Questions 32 Case Study 5: Murabaha, Musharaka, Ijara and Ijara wa Iqtina Contracts Learning Outcomes Case 1: Murabaha Contract Case 2: Musharaka Contract Musharaka with Profits Musharaka with Losses Case 3: Ijara: Operating Lease Contract Case 4: Ijara Wa Iqtina: Finance Lease Contract Case 5: Mudaraba with Murabaha Contracts Car Mudaraba with Murabaha 36 Case Study 6: Islamic Home Finance Learning Outcomes Sharia 'a-compliant Mortgages Sharia'a-CompWant Structures for Islamic Home Finance Murabaha Ijara wa Iqtina 38

4 6.3.3 Diminishing Musharaka What is the Difference between Ijara wa Iqtina and Diminishing Musharakal Applications of Diminishing Musharaka Istisna 'a Contract Appendix 1: Manzil Home Purchase Plans (Murabaha) Murabaha ('Deferred Sale Finance') How does the Manzil Home Purchase Plan Work? Appendix 2: Devon Bank Residential Murabaha Purchase Agreement Appendix 3: Manzil Home Purchase Plans (Ijara) Ijara ('Lease-to-Own') How does it Work? Appendix 4: Devon Bank Residential Ijara Sale and Lease Transaction Appendix 5: Meezan 'Easy Home' Diminishing Musharaka Agreement Islamic Financing on a Diminishing Musharaka Basis What makes 'Easy Home' Sharia'a Compliant and how does it Differ from a Conventional Mortgage? Why is the Profit Margin Charged by Meezan Bank Correlated to Conventional Mortgage Market Trends? Is the Profit Rate Variable or Fixed? What if a Customer Fails to Pay Monthly Instalments? Case Study Questions 46 Case Study 7: Sources of Finance for Islamic Banks Learning Outcomes Where do Islamic Banks get their Money from? Sources of Funds for Islamic Banks Current Accounts Savings Deposits Investment Deposits Case Study Questions 53 Case Study 8: Financial Statement Analysis for Islamic Banks Learning Outcomes How do the Financial Statements of Islamic Banks Differ from those of Conventional Banks? Case Study Activities Case Study Questions 77 Case Study 9: Islamic Investment Prohibitions Learning Outcomes Muslims have Strict Rules about what they are Allowed to Invest in Islamic Investment Prohibitions The Prohibition of Interest (Riba) 81

5 9.5 Zakat and Islamic Prohibitions Who can Receive the zakat? How is zakat Connected with Islamic Prohibitions? Issues Regarding zakat, Tamlik and Sadaqah Case Study Questions Case Study 10: Opening an Islamic Bank within a Western Regulatory Framework Learning Outcomes First Islamic Bank in the European Union Issues in Creating an Islamic Bank Within a Western Regulatory Framework Background to the Creation of the Islamic Bank of Britain (IBB) The FSA's Approach to Banking Authorisation IBB and the FSA Islamic Financial Products Offered by IBB How does IBB Ensure that its Products are Sharia 'a Compliant? Financial Statements for 2005 and Case Study Questions Case Study 11: Leverage and Islamic Banking Learning Outcomes Leverage and Islamic Banking What is Financial Leverage? What is the Debt to Equity Ratio? Financial Terminology: a Guide Earnings Before Interest and Taxes (EBIT) Earnings before tax (EBT) Earnings after tax (EAT) Return on equity (ROE) Earnings per share (EPS) Case Study Assumptions Case Study Questions Case Study 12: Impact of Non-performing Loans on Islamic and Conventional Banks Learning Outcomes Islamic Banking Principles Involve Risk Sharing, which should make them Less Vulnerable than their Conventional Counterparts Equity-Based Versus Debt-Based Banking Case Study Assumptions Case Study Questions 117

6 xi Case Study Answers 119 Glossary Bibliography 157 Index 165