Introduction to Islamic Banking and Finance by Brian Kettell

By Brian Kettell

Introduction to Islamic Banking and Finance is a succinct advisor to the main features of Islamic banking highlighting how those range from traditional banking. This certain booklet illustrates how Islamic banking is in line with the Sharia'a, a key section of that's the prohibition on accumulating and paying curiosity. This crucial spiritual principle looks to rule out such a lot features of recent finance however it does let funds for use for buying and selling tangible resources and enterprise, which may then generate a revenue. Brian Kettell's publication appears to be like in any respect points of Islamic banking, together with chapters on its production and evolution via to particular discussions of the problems fascinated with the Sharia'a contracts of Murabaha, Mudaraba, Musharaka, Ijara, Istisna'a, and Salam. Islamic coverage (Takaful) is usually lined. eventually the booklet takes a glance at Sharia'a legislation and Sharia'a forums, indicating the jobs and tasks that include club.

Islamic banks were working in locations resembling Bahrain, Saudi Arabia, Malaysia and Dubai for a while. traditional bankers have commonly seen the field as a small, unique area of interest yet fresh years have noticeable a dramatic surge in recognition. a couple of Western funding banks have set to work with Muslim clerics to create new levels of economic items designed for religious Muslims, a wide and becoming industry. even though estimates of the scale of the Islamic finance fluctuate drastically, every body concurs that it's increasing speedily and this can be the precise publication for a person trying to comprehend the industry.

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It will highlight the key characteristics of Islamic banking that differentiate it from conventional banking. Islamic banking is not about smoke and mirrors. It is in fact about banking based on Islamically-ethical principles which are, in many ways, very different indeed from conventional banking principles. So what exactly is Islamic banking all about? Islamic financial institutions are those based, in their objectives and operations, on Qur’anic principles. They are thus set apart from conventional institutions, which have no such religious preoccupations.

The complexity of Islamic banking comes from the variety (and nomenclature) of the instruments employed, and in understanding the underpinnings of Islamic law. 2 SIX KEY ISLAMIC BANKING PRINCIPLES Six key principles drive the activities of Islamic banks: • • • • • • predetermined loan repayments as interest (riba) is prohibited; profit and loss sharing is at the heart of the Islamic system; making money out of money is unacceptable: all financial transactions must be asset-backed; speculative behaviour is prohibited; only Sharia’a-approved contracts are acceptable; contracts are sacred.

5 Ijtihad The Arabic word Ijtihad literally means an effort or exercise to arrive at one’s own judgement. In its widest sense, it means the use of human reason in the elaboration and explanation of Sharia’a law. It covers a variety of mental processes, ranging from the interpretation of texts of the Qur’an and the assessment of the authenticity of the Ahadith. Qiyas or analogical reasoning, then, is a particular form of Ijtihad, the method by which the principles established by the Qur’an, Sunnah and Ijma are to be extended and applied to the solution of new problems not expressly regulated before.

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