Introduction to Islamic Banking System
Advanced Global Risk Management
Topic: Shariah Compliant Risk Management
Presented by:
Houda Cherrak and Bouchra Touzani
To
Doctor: David Hampton
March 27, 2008
Introduction to Islamic banking system
Islam not only prohibits dealing in interest but also in liquor, pork, gambling, pornography and anything else, which the Shariah (Islamic Law) deems unlawful. Islamic banking is an instrument for the development of an Islamic economic order.
Islamic banking, with 15 to 20% growth a year, has emerged as one of the vital pillars of the global economic system. Islamic financial institutions (IFI) are operating in over 75 countries, managing between $500 billion and $1 trillion assets.
The Islamic financial system employs the concept of participation in the enterprise, utilizing the funds at risk on a profit-and- loss-sharing basis. This by no means implies that investments with financial institutions are necessarily speculative. This can be excluded by careful investment policy, diversification of risk and prudent management by Islamic financial institutions. It is possible, that investment in Islamic financial institutions can provide potential profit in proportion to the risk assumed to satisfy the differing demands of participants in the contemporary environment and within the guidelines of the Shariah. The concept of profit-and-loss sharing, as a basis of financial transactions, is a progressive one as it distinguishes good performance from the bad and the mediocre. This concept therefore encourages better resource management.
Islamic financial industry has come a long way during its short history. The future of these institutions, however, will depend on how they cope with the rapidly changing financial world. With the advent of globalization and informational technology, scopes of different financial institutions have expanded beyond national boundaries. As a result, the financial sector in particular has become more dynamic,
Topic: Shariah Compliant Risk Management
Presented by:
Houda Cherrak and Bouchra Touzani
To
Doctor: David Hampton
March 27, 2008
Introduction to Islamic banking system
Islam not only prohibits dealing in interest but also in liquor, pork, gambling, pornography and anything else, which the Shariah (Islamic Law) deems unlawful. Islamic banking is an instrument for the development of an Islamic economic order.
Islamic banking, with 15 to 20% growth a year, has emerged as one of the vital pillars of the global economic system. Islamic financial institutions (IFI) are operating in over 75 countries, managing between $500 billion and $1 trillion assets.
The Islamic financial system employs the concept of participation in the enterprise, utilizing the funds at risk on a profit-and- loss-sharing basis. This by no means implies that investments with financial institutions are necessarily speculative. This can be excluded by careful investment policy, diversification of risk and prudent management by Islamic financial institutions. It is possible, that investment in Islamic financial institutions can provide potential profit in proportion to the risk assumed to satisfy the differing demands of participants in the contemporary environment and within the guidelines of the Shariah. The concept of profit-and-loss sharing, as a basis of financial transactions, is a progressive one as it distinguishes good performance from the bad and the mediocre. This concept therefore encourages better resource management.
Islamic financial industry has come a long way during its short history. The future of these institutions, however, will depend on how they cope with the rapidly changing financial world. With the advent of globalization and informational technology, scopes of different financial institutions have expanded beyond national boundaries. As a result, the financial sector in particular has become more dynamic,
References: Citigroup and Dow Jones launch Shari 'ah compliant index, March 20, 2006. Dow Jones Indexes, Citigroup to launch first Islamic bond index, 2006 Dow Jones Indexes And Citigroup To Launch First Islamic Bond Index, March 6, 2006 Other articles and publications: Arab Bankers Association of North America, Lisa Meyer and A. Rushdi Siddiqui, August 2007 Islamic Law benefits Amana Fund, Wall Street Journal, November 19, 2007 Shari`ah Supervision of Islamic Mutual Funds Yusuf Talal DeLorenzo, September 30, 2007. Principles Of Shari’ah Governing Islamic Investment Funds By Maulana Taqi Usmani Rulings on Debt Trading in Shariah By Ust Hj Zaharuddin Hj Adb Rahman, June 21, 2006