Preview

ISLAMIC FINANCIAL SYSTEM ASSGNMNT

Powerful Essays
Open Document
Open Document
3305 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
ISLAMIC FINANCIAL SYSTEM ASSGNMNT
INTRODUCTION
Islamic finance system has its basis in great Islamic value. It is Riba-free system ( Riba means interest) which ensures the abolition of profit-sharing from the whole financial system.
Islamic Finance System (IFS) can be categorized with absence of ,
Interest based transactions
Interest based financial institution
Unethical and doubtful transactions
Companies’ stocks involved in unlawful activities
Market manipulation
And so on and so forth.
Islamic Financial System is opposite of Conventional financial System i.e system which is based on interest/Riba. The Riba based financial system has been proven as inefficient for the economic balance which is needed in any society. The conventional banking is also of 2 types ; Socialistic and Capitalistic. In Socialistic system , government gets to enjoys freedom whereas in capitalistic system, individuals get to enjoy freedom. But in the light of Shariah in Islamic finance system, restrictive freedom is allowed for both government and individuals. In Islamic finance system, solutions of economic problems are derived from Al-Qur’an and from A hadith of Prophet (S.A.W).It focuses on providing economic opportunities in the society by keeping in consideration political, social and other cultural factors.

ISLAMIC FINANCE SYSTEM
Islamic finance is defined as ;
“ A Financial service principally implemented to comply with the main principles of Sharia (or Islamic Law) “
In turn , the main sources of Sharia are the Holy Quran , Hadith , Sunnah , Ijma , Qiyas and Ijtihad. The Holy Quran is the book of revelation given to the Prophet Muhammad (S.A.W); Hadith is the narrative relating the deeds and utterances of Prophet Muhammad (S.A.W) ; Sunnah refers to the habitual practice and behaviour of Prophet Muhammad (S.A.W) during his lifetime ; Ijma is the consensus among religion scholars about issues not envisaged in either the Holy Quran or the Sunnah ; Qiyas is the use of deduction by analogy to provide an opinion on


References: 5. “ Islamic Economics – A School; of Thought and a System. A Comparative Study “ by Al-Tahavi-Ibrahim. Assembly of Islamic Research (Majma’ al-Buhuth al Islamiya). 1974 6 8. Economic of Islam : A comparative study by Shaikh Mahmud Ahmad Lahore (1952) 9 10. The feature “ Riba Was Originally Forbidden in Other Religion “ was adapted from “ Penubuhan Bank Islam “ (The History and Background of Bank Islam), 1982 11
Continue Reading
View Writing Issues

You May Also Find These Documents Helpful

  • Powerful Essays

    Mr Anees Razzak
    • 1252 Words
    • 6 Pages

    Mr Anees Razzak

    Additionally, there are certain areas which have always been a concern just like the Human Recource availability for Islamic financial institutions. When entering an Islamic bank sometimes one finds that conventional bankers are actually running Islamic banks and financial institutions. The first phase of Islamic banking and finance is about bankers who are trained in conventional traditions and have played an important role for the development of Islamic banking. However, now that Islamic banking has become…

    • 1252 Words
    • 6 Pages
    Powerful Essays
    Read More
  • Powerful Essays

    Liquidity Management
    • 7532 Words
    • 31 Pages

    Liquidity Management

    Kuran, T. (2004). Islam and Mammon: The Economic Predicaments of Islamism. New Jersey: Princeton University Press. Lewis, M. K. (1991). Theory and Practice of The Banking Firm. In C. J. Green & D. T. Llewellyn (Eds.), Surveys in Monetary Economics (Vol. 2, pp. 116-159). Oxford: Basil Blackwell. Lewis, M. K., & Algaud, L. M. (2001). Islamic Banking. Cheltenham, UK: Edward Elgar. Llewellyn, D. (1999). The Economic Rationale For Financial Regulation. London: Financial Services Authority (FSA). Nyazee, I. A. K. (2000). Islamic Jurispudence (Usul al-Fiqh). Islamabad: Islamic Research Institute Press. Pervez, I. A. (2000). Liquidity Requirements of Islamic Banks. In A. Siddiqi (Ed.), Anthology of Islamic Banking. London: Institute of Islamic Banking and Insurance. Rosly, S. A. (2005). Critical Issues on Islamic Banking and Financial Markets: Islamic Economics, Banking and Finance, Investments, Takaful and Financial Planning. Kuala Lumpur: Dinamas Publishing. Rosly, S. A., & Bakar, M. A. A. (2003). Performance of Islamic and Mainstream Banks in Malaysia. International Journal of Social Economics, 30(12), 1249-1265. Siddiqi, M. N. (1985). Partnership and Profit-Sharing in Islamic Law. Leicester, U.K.: The Islamic Foundation. Siddiqui, S. H. (2001). Islamic Banking: True Modes of Financing. New Horizon, 109(May-June). Tobin, J. (1987). Financial Intermediaries. In Cowles Foundation Discussion Papers 817. Yale: Cowles Foundation, Yale University. Wizarat al-Awqaf wa al-Shu 'un al-Islamiyah. (2005). Al-Mausu 'ah al-Fiqhiyyah (Vol. 14). Kuwait: Kuwait Ministry of Awqaf. Yousef, T. M. (2004). The Murabaha Syndrome in Islamic Finance: Laws, Institutions and Politics. In R. Wilson (Ed.), The Politics of Islamic Finance (pp. 63-80). Edinburgh: Edinburgh University Press.…

    • 7532 Words
    • 31 Pages
    Powerful Essays
    Read More
  • Good Essays

    Current Issue on Islamic Banking and Finance
    • 323 Words
    • 2 Pages

    Current Issue on Islamic Banking and Finance

    Islamic banking and finance has emerged as a financial intermediation process that is competitive and resilient and that contributes to the overall wealth creation, growth and development of our nation. In the middle of an increasingly challenging and competitive financial environment, the evolution of a comprehensive Islamic financial system seeks to meet the range of requirements of a rapidly changing economic environment, with its soundness and stability secured through the robustness of its regulatory framework supported by the strength of its financial infrastructure and the sophistication of its products and services. Indeed, the strength of the respective components of the system and the interconnections of its markets will open new frontiers in Islamic banking and finance and will maximize the potential and opportunities that it accords. In the new current issues on Islamic banking and finance have increased their product in sophistication from the deposits product to hybrid product that are able to enhance returns to depositors. Further advancement was made with the introduction of the Islamic variable rate financing mechanism that provides an alternative to the fixed rate financing. This will assist the Islamic banking institutions in mitigating part of the risk emanating from asset and liability mismatches. New innovative Islamic financial instruments such as Islamic asset-backed securities have also emerged and the financial structures underlying Islamic securities become more specifies. The rapid growth of Islamic unit trusts comprising a variety of bond funds, equity funds and balanced funds increases the efficiency and potential of the Islamic financial system as an intermediation channel by providing investors’ access to professional asset management that is based on their distinct risk tolerance levels. The issuance of new Islamic banking licenses to qualified foreign financial institutions will allow for the…

    • 323 Words
    • 2 Pages
    Good Essays
    Read More
  • Powerful Essays

    Difference Between Commercial Bank and Islamic Bank
    • 3204 Words
    • 13 Pages

    Difference Between Commercial Bank and Islamic Bank

    Islamic banking refers to a system of banking or banking activity that is consistent with Islamic law (Sharia’h) principles and guided by Islamic economics. In particular, Islamic law prohibits usury, the collection and payment of interest, also commonly called riba. Generally, Islamic law also prohibits trading in financial risk (which is seen as a form of gambling). In addition, Islamic law prohibits investing in businesses that are considered unlawful, or haraam.…

    • 3204 Words
    • 13 Pages
    Powerful Essays
    Read More
  • Powerful Essays

    Similarities and Differences Between Islamic Banking and Conventional Banking
    • 3160 Words
    • 13 Pages

    Similarities and Differences Between Islamic Banking and Conventional Banking

    Banking system plays a very important role in the economic life of the nation. The health of the economy is closely related to the soundness of its banking system. In a developing country like Bangladesh the banking systems as a whole play a vital role in the progress of economic development. Modern trade and commerce would almost be impossible without the availability of suitable banking services. Islamic Banking is an integral part of Islamic Economics and thereby an Islamic way of life. Islamic Banking is a special nature of financial intermediary which has not involve in any way with interest. The introduction of interest-free and equity-based financing by the Islamic banking system is based on the principles of Islamic economics.…

    • 3160 Words
    • 13 Pages
    Powerful Essays
    Read More
  • Powerful Essays

    Introduction to Islamic Banking System
    • 4931 Words
    • 20 Pages

    Introduction to Islamic Banking System

    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,…

    • 4931 Words
    • 20 Pages
    Powerful Essays
    Read More
  • Powerful Essays

    Pillars of Islamic Banking and Finance
    • 2107 Words
    • 9 Pages

    Pillars of Islamic Banking and Finance

    Islam emphasis justice and equity in all spheres of human society and refrains from all sorts of exploitation in financial dealings. It encourages active participation in economic activity instead of earning money on utilization of money. Islam allows freedom in economic activities with certain limitations to differentiate between Halaal & Haraam. Islamic finance is based on the principles and rules laid down by Islamic Shariah. In Islamic financing system there is greater return because there is a greater risk. Islamic financial institute invest and get the profit not the interest.…

    • 2107 Words
    • 9 Pages
    Powerful Essays
    Read More
  • Good Essays

    Differentiation Between Islamic Bank and Conventional Bank
    • 630 Words
    • 3 Pages

    Differentiation Between Islamic Bank and Conventional Bank

    There are many differences between conventional and Islamic bank. In conventional bank, money is a product besides medium of exchange and store value. The design of conventional bank is based on interest. They are charging higher interest rate on capital. The functions and operating modes of conventional banks are based on fully manmade principles. In conventional bank, they thought that interest rate give biggest profit for them. They assume that the interest rate is lawful and valid. Conventionally, interest or the excess (increase) in loan is the consideration or compensation for the period of re-payment of loan. The difference between the maturity value of old and new debt amounts to riba. It may be noted that the conventional system of time-based compounding of debt clearly falls in this category. (Obaidullah, 2005)…

    • 630 Words
    • 3 Pages
    Good Essays
    Read More
  • Powerful Essays

    Banking Scenario in Bangladesh
    • 6815 Words
    • 28 Pages

    Banking Scenario in Bangladesh

    Hamud, Sami Hasan, Progress of Islamic Banking : The Aspirations and the Realities, Islamic Economic Studies, Vol. 2, No. 1, Rajab 1415H (December 1994), Islamic Research and Training Institute, Islamic Development Bank, Jeddah, KSA.…

    • 6815 Words
    • 28 Pages
    Powerful Essays
    Read More
  • Powerful Essays

    Potential of Islamic Banking India
    • 1853 Words
    • 10 Pages

    Potential of Islamic Banking India

    The basic principles on which the Islamic banks function are prohibition of Riba i.e. collection and payment of interest and prohibition of investment in organization involved in unethical and socially harmful activity. the profits earned by a bank from its activities and returns made by a bank to the depositors shall be (a) from sharing of risk in the project and (b) profit-share agreements and not pre-agreed fixed interest payments, which is considered as prohibited earnings because pre-agreed interest agreement has no sharing of risk of investment of money.…

    • 1853 Words
    • 10 Pages
    Powerful Essays
    Read More
  • Better Essays

    research paper on Investment system of Bangladeshi Bank
    • 2952 Words
    • 12 Pages

    research paper on Investment system of Bangladeshi Bank

    the majority of household to shy away from the system which no country can afford.…

    • 2952 Words
    • 12 Pages
    Better Essays
    Read More
  • Better Essays

    Benchmarking in Islamic Finance: Issues and Challenges
    • 1512 Words
    • 7 Pages

    Benchmarking in Islamic Finance: Issues and Challenges

    In Islam, fixing the price of commodities is not allowed as the increase of the price is caused by practice of supply and demand in the market. Hence in this case, benchmarking for the products is not allowed. It is can be reflected from of the Hadith of Prophet Muhammad S.A.W.…

    • 1512 Words
    • 7 Pages
    Better Essays
    Read More
  • Good Essays

    Main overview between Islamic Financial System and Conventional Financial System : Principles and Operation
    • 893 Words
    • 3 Pages

    Main overview between Islamic Financial System and Conventional Financial System : Principles and Operation

    When we talk about financial system, we normally refer to the banking system. The foundation of Islamic banking is based on the Islamic faith and must stay within the limits of Islamic Law or the Shariah in all of its actions and deeds. The original meaning of the Arabic word Shariah is 'the way to the source of life' and is now used to refer to legal system in keeping with the code of behaviour called for by the Holly Qur'an (Koran). Amongst the governing principles of an Islamic banking system are:…

    • 893 Words
    • 3 Pages
    Good Essays
    Read More
  • Good Essays

    Islamic Economic System Comparison with Conventional Economic System
    • 413 Words
    • 2 Pages

    Islamic Economic System Comparison with Conventional Economic System

    Islamic Economic System implies a mood of satisfying the economics needs of the members of organized society in accordance with is injection of Quran and Sunnah. It’s derived from the teachings of the Holy Qur’an and explained in his Ahadith by the Holy Prophet (SWT). This system continued in this original form till the death of the Second Caliph Hazrat Umar (RA).…

    • 413 Words
    • 2 Pages
    Good Essays
    Read More
  • Satisfactory Essays

    The Objective of Islamic Economic and Banking System

    • 518 Words
    • 3 Pages

    The Objective of Islamic Economic and Banking System

    The objectives of Islamic economics are supposed to guide the objective of Islamic banking and Finance. There are four goals of Islamic economics in prevailing the values and holistic purpose of this system. The four are to achieve the economic well-being within the framework of the moral norms of Islam, to uphold universal brotherhood and justice, to attain equitable distribution of income and to accomplish freedom of the individual within the context of social welfare. The objectives of Islamic economics have been divided into philosophical-based objectives and operational-based objectives. The philosophical-based objective is more towards vertical type relationship which exists in the representation of the word “al-falah”. Operational-based objective have been classified into six themes namely as economic-based objective, social-based objective, justice-based objective, self-based (inner-self) objective,…

    • 518 Words
    • 3 Pages
    Satisfactory Essays
    Read More

Related Topics