P a g e | 1

RIZVI INSTITUTE OF MANAGEMENT AND RESEARCH

Project: ISLAMIC FINANCE



BY:
NAME : ZEBA S. KHAN
CLASS : MMS
DIVISION : B
ROLLNO : 114

ISLAMIC FINANCE
P a g e | 2

ISLAM is a Holy religion revealed to human beings through the last Prophet who was called
Muhammad.
FINANCE is defined as the science of money management.
ISLAMIC FINANCE signifies financial services, mechanisms, practices, transactions, and instruments
that comply with provisions given in these fundamental Islamic texts principally implemented to
comply with the main tenets of Shariah (or Islamic law).

SHARIAH is Islamic law.

Justice, fairness and morality are values which underpin both the entire Islamic way of life
Every financial institution dealing in Islamic finance has a committee of Muslim scholars, called
"Shariah Committee", that determines whether a product or practice complies with Islamic
law.

Ethics of the Shariah Law originate from:
Qur'an is the Islamic holy book

Hadith is the narrative relating the deeds and utterances of Muhammad
The habitual practice and behavioural methods of the last prophet Muhammad
called as the Sunnah
Ijma is the consensus among religion scholars about specific issues not envisaged
in either the Holy Quran or the Sunna;
Qiyas is the use of deduction by analogy to provide an opinion on a case not
referred to in the Quran or the Sunna in comparison with another case referred
to in the Quran and the Sunna; and
Ijtihad represents a jurists independent reasoning relating to the applicability of
certain Shariah rules on cases not mentioned in ether the Quran or the Sunna.




ISLAMIC FINANCIAL SYSTEM:
P a g e | 3

Market base economy, where goods and services are exchanged freely according to the
demand and supply by barter or money with debit or credit value
Entrepreneurs are encouraged to create wealth throw employment and social activities
It is a balance between the two systems, it is emphasis both individual economic
freedom and the need to serve the common good
Islamic finance is a system of making Money ethically
Thus, Islamic finance includes banking, capital formation, capital markets and all types of financial
intermediation. Islamic financial products also covers a broad range of financial services, including
funds management, asset allocation, payment and exchange settlement services, insurance and
reinsurance, and risk management.
PROHIBITIONS IN ISLAMIC FINANCIAL SYSTEM:


SHARIAH COMPLIANT PRODUCTS:
PROHIBITION
IN ISLAMIC
FINANCIAL
SYSTEM
RIBA (Usury
or access
interest)
SHORT
SALE (Future
or goods you
do not own)
MONOPOLY
UNFAIR &
UNJUST
CONTRACTS
UNLAWFUL &
UNETHICAL
TRADE(of
goods and
services)
MONEY
TRADING
(money is
payment
mechanism)
GAMBLING
GHARAR
(Deception,
Speculation)
P a g e | 4




ISLAMIC FINANCE CONTRACTS:
Because of the importance of money to all human being, regardless of his or her beliefs Islam
has addressed this issue in general terms, and gave societies the choice to develop their own
financial systems, as long as the system is Fair & Just to everyone



ISLAMIC FINANCE CONTRACTS (TOOLS OR INSTRUMENTS):
SHARI'AH
COMPLIANT
PRODUCTS
Products that
are
exchangeable
for money
Products that
are not
prohibited in
Islam
Products are
not traded
under duress
Products that
are free from
Riba (access
interest)
Products are
traded in the
open market
Products that
are not
monopolized
by one party
P a g e | 5






WHAT MAKE ISLAMIC FINANCE A GLOBAL SYSTEM?
ISLAMIC
FINANCE
CONTRACTS
(TOOLS)
MUDARABAH
(participation
or Trust
finance)
MUSHARAKH
( Equity
financing)
MURABAH
(Cost-plus
financing)
IJARA
(Operating
lease)
IJARA WA
IQTINA
(Finance
lease)
BAI SALAAM
(Payment for
future
delivery)
ISTISNAA
(Construction
financing)
BAY
BITHAMAN
AJIL
(deferred
payment
method)
SUKUK
( Islamic
Bonds
issue)
ARBUN(Pre-
purchase of
right to
acquire)
QARD
HASSAN
(Interest free
loan)
TAWARRUQ
(opposite
Murabaha)
HOME
FINANCING
(Islamic
Mortgage)
MUSAQAA
(Aggregation)
MUZARA
(Cultivation)
P a g e | 6

Islamic Finance is an economical system based on Risk sharing (sharing profit & loss). The
system sets the relationship between RISK and Profit
The Shariah explains the ethical concept of the money and capital use ( Money is a medium of
transaction not a commodity)
The system prohibit RIBA(access interest), but also offers an alternative tools of avoiding Riba
The prohibition of GHARAR (Uncertainty) allowing all transaction to be transparent and free
from deception.
The system sets the social responsibility for the financial institution to take active part in the
economic development to create jobs and generate wealth (such as Sukuk(Islamic bond)
issuance to raise capital from small investors for new project development) not just profit
making
Prohibiting trade in Unethical products(such as Pork, pornography and alcohol) help the
economy to grow ethically
There are numerous experienced Shariah Scholars who are to advise on the Shariah compliant
activities
Over 60% of investors in Sukuk (Islamic bonds) are non-Islamic corporate investors because its
safer investment than Bonds
There are 1.7 billion Muslims around the world (23% of total world population) with annual
growth of 15% .In 2020 Muslim population expected 25% of the world population (Only 20% of
those live in Arab Countries)
GROWTH DURING THE CRISIS:
One impact of the Global Financial Crises has been the rise of Islamic Finance because its
resilience to such crises
Not one single Islamic Bank anywhere in world has needed to be bailed out by taxpayers or
Government
Islamic Banks were not caught up with exposure to the Toxic Assets (Assets has no value)
which hit the conventional banks.
Products offerings and investment of Islamic Banks are relatively secure
CONCLUSIONS:
P a g e | 7

Islamic Finance is a global financial system
Islamic Finance is an economic system based on Risk sharing
Islamic Finance is not a religious system, its open for all people Muslim and non-Muslim to take
part
Islamic finance is a system of making Money ethically
Islamic finance tools may have different terminology, the global economy apply similar tools,
but the risk have not been shared fairly between the parties