COURSE EXPLANATIONS Dr. Hanudin Amin

PREAMBLE This course provides an overview of deposit and financing framework, standards and practices of Islamic banking operation. An Islamic worldview and its relationship to deposit and financing products will be discussed. Roles of deposit in a Malaysia dual banking framework are explained. Issues on the differences between deposit mobilization in Islamic banks and their conventional counterparts are provided. This course also offers an understanding pertinent to specific types and structures of deposit products for both systems. Elaborating within the context of Malaysia, a profound justification between trade and riba will be provided in order to provide a clear understanding to students in that Islamic financing is developed on the basis of primary sources (the Quran and the Hadith) in which these sources, to a certain extent, are not cited in the practice of conventional financing. Credit evaluation technique is also presented in order to equip students with necessary banking skills, especially when they provide consultation to customers for patronization of the products. Both quantitative and qualitative approaches are exposed to students. Various financing products are also provided like Islamic overdraft, tawarruq and Islamic pawn broking, to mention some. Islamic home financing issues are also addressed profoundly in order to give a better understanding to students about the state of the art of the product. In all, issues the rules and regulations related to financing practices.

OBJECTIVE This course aims at disseminating skills and knowledge on deposit and financing of Islamic banking. The course also seeks to distribute the concepts, analytical thinking and statistical tools that relevant for the subject matter.

COURSE OUTCOMES After completing the course, you should be able to: 1.Define deposit and financing of Islamic banking (C2). 2.Explain issues in deposit and financing of Islamic banking (CS2). 3.Evaluate the differences between Islamic and conventional banks in terms of their deposit and financing products (CTPS1:CS3, P1).

REFERENCES 1.Bank Islam Malaysia Berhad (1994). Islamic banking practice from the practitioners’ perspective. Kuala Lumpur: Bank Islam Malaysia Berhad. 2.Haron, S., & Shanmugam, B. (2001). Islamic banking system. Subang Jaya: Pelanduk. 3.Hassan, R. (2011). Islamic banking and takaful. Petaling Jaya: Pearson. 4.Iqbal, Z., & Mirakhor, A. (2007). An introduction to Islamic finance: Theory and practice. Singapore: John Wiley & Sons. 5.Ismail, A.G. (2010). Money, Islamic banks and the real economy. Cengage Learning Asia Pte. Ltd. Bank Islam Malaysia Berhad (2015). Deposit products. Available at the 9 th September

COURSE CONTENTS WeeksTopicsReferences 1.Course explanation  Synopsis, rules, attendance, participation, plagiarism and tutorial  Guidelines for assignments ~Nil 2.1-Islamic banking – an overview & Islamic worldview The candidates should be able to:  Define Islamic banks  Differentiate Islamic worldview & Islamic banking  Expound the origin of Islamic banking in Malaysia  Identify 3 phases of the Islamic banking implementation  Elaborate the so-called Golden features of Islamic banking  Elaborate the Objectives of Islamic banking  Evaluate the roles by Islamic banks  Compare and contrast the Islamic banking and conventional banking ~Haron, S., & Shanmugam, B. (2001). Islamic banking system. Subang Jaya: Pelanduk ~Bank Islam Malaysia Berhad (1994). Islamic banking practice from the practitioners’ perspective. Kuala Lumpur: Bank Islam Malaysia Berhad. 3.2-Roles of deposits in Malaysia – Islamic vs. conventional The candidates should be able to:  Expound the concept of credit creation and its role in the economy  Identify different categories of deposit types and structures  Evaluate the relationships between deposits, investments and consumption  Synthesize the deposit functions ~Haron, S., & Shanmugam, B. (2001). Islamic banking system. Subang Jaya: Pelanduk ~Bank Islam Malaysia Berhad (1994). Islamic banking practice from the practitioners’ perspective. Kuala Lumpur: Bank Islam Malaysia Berhad. 4.3-Deposits mobilisation by conventional banks The candidates should be able to:  Understand the importance of deposit mobilization within a conventional bank  Elaborate the nature of deposit mobilisation  Identify different categories of deposits, types and characteristics  Compare the discrepancies between conventional and Islamic savings accounts ~Iqbal, Z., & Mirakhor, A. (2007). An introduction to Islamic finance: Theory and practice. Singapore: John Wiley & Sons. ~Ismail, A.G. (2010). Money, Islamic banks and the real economy. Cengage Learning Asia Pte. Ltd.

CONT’D 5.4-Deposits mobilisation by Islamic banks The candidates should be able to:  Expound the types of deposits  Elaborate Shariah principles governing deposit facilities ~Haron, S., & Shanmugam, B. (2001). Islamic banking system. Subang Jaya: Pelanduk ~Bank Islam Malaysia Berhad (1994). Islamic banking practice from the practitioners’ perspective. Kuala Lumpur: Bank Islam Malaysia Berhad. 6.5-Saving determinants The candidates should be able to:  Expound theories on savings  Explain theory of Islamic savings  Identify internal determinants  Identify external determinants  Evaluate the determinants using multiple regression analysis ~ Any suitable reading 7.6-Credit financing in Malaysia The candidates should be able to:  Understanding the meaning of credit financing  Understanding the Islamic concept of credit  Differentiate between credit and sale  Evaluate the Islamic financing behavior during economic expansion and downturn  Appreciate the role of Islamic finance in economic growth and stablisation ~Bank Islam Malaysia Berhad (1994). Islamic banking practice from the practitioners’ perspective. Kuala Lumpur: Bank Islam Malaysia Berhad. 8.7-Financing evaluation technique The candidates should be able to:  Apply qualitative method in evaluating credit proposals  Apply quantitative method in evaluating credit proposals  Use financing score model practically ~ Various sources

CONT’D 9.8- Islamic consumer financing The candidates should be able to:  Understand Islamic overdraft  Understand Islamic share, i-unit trust and i-study financing  Expound tawarruq  Explain leasing  Elaborate Islamic pawn broking  Elaborate Islamic credit card ~Bank Islam Malaysia Berhad (1994). Islamic banking practice from the practitioners’ perspective. Kuala Lumpur: Bank Islam Malaysia Berhad Islamic home financing The candidates should be able to:  Discuss the concept Islamic consumer credit  Discuss Islamic home financing products  Understand cost of funds and pricing  Highlight Islamic benchmark ~Bank Islam Malaysia Berhad (1994). Islamic banking practice from the practitioners’ perspective. Kuala Lumpur: Bank Islam Malaysia Berhad The costs of deposits The candidates should be able to:  Explain the importance of cost of deposits to a bank  Identify the components of cost of deposits  Understand the cost of deposits in Islamic banking  Evaluate the Islamic financing pricing ~ Various sources Legal framework related to financing practices The candidates should be able to:  Understand the need to regulate the Islamic banking system?  Understand the area of regulations  Understand Legal framework: Islamic Banking Act 1983  Understand Legal framework: Banking and Financial Institutions Act 1989  Understand Legal framework: Development Financial Institutions Act 2002  etcetera ~ Hassan, R. (2011). Islamic banking and takaful. Petaling Jaya: Pearson Revision weeks

GRADING No.RequirementsMarks 1.Individual assignment20 2.Group assignment20 3.Group article presentation10 4.Participation and attendance10 5.Final examination40 Total100

ORGANIZATION OF CLASS Organization of class  My class is organized in THREE sections. The first section is for lectures (i.e.1+ hour). The second section is mostly for group’s presentation (i.e. 25 minutes for presentation and 5 minutes for Q&A). The third section to be conducted separately and it is for tutorial covering both qualitative and quantitative questions/problems/cases.

INDIVIDUAL ASSIGNMENT 20% Individual assignment 20%  It is assigned as to evaluate your individual performance in completing the assignment independently. I will assign a topic or a case for the assignment. Make sure you attend my class for updates.

GROUP ASSIGNMENT 20% Group assignment 20%  Choose one (1) of the following topic (first come first serve basis): 1- Practices of deposit and financing products at the Bank Islam Malaysia Berhad (Rafhidah et al.) 2- Practices of deposit and financing products at the Bank Muamalat Malaysia Berhad (Akmal et al) 3- Practices of deposit and financing products at the Alliance Bank 4- Practices of deposit and financing products at the Bank Simpanan Nasional (Fitriani et al) 5- Practices of deposit and financing products at the Hong Leong Bank 6- Practices of deposit and financing products at the Rashid Hussein Bank (Rashid et al)

CONT’D 7- Practices of deposit and financing products at the Maybank (Juliana et al.) 8- Practices of deposit and financing products at the CIMB Bank (Thanalachmi et al) 9- Practices of deposit and financing products at the Affin Bank 10- Practices of deposit and financing products at the Kuwait Finance House (Nurul Aqilah et al.) 11- Practices of deposit and financing products at the Al-Rajhi Bank (Fadillah et al.) 12-Practices of deposit and financing products at the Bank Rakyat (Shahirah et al.) 13-Practices of deposit and financing products at the Agro Bank (Nur Syazana et al.) Tabung Haji (Shahfarhan et al.) Al Rayan Bank (Fitrah et al.)

HOW DO I EVALUATE YOUR GROUP ASSIGNMENT? The assessment of the group assignment will be based on the following criteria: 1.Introduction (2 marks) 2.Deposit of the bank (5 marks) 3.Financing of the bank (5 marks 4.Your observations to the bank’s deposit and financing products (5 marks) 1.Practices of deposit and financing products at the Kuwait Finance House 2.Based on our analysis, we find that the bank provides a very interesting gold saving account. This product is not available in the other banks, for example, Bank Muamalat Malaysia Berhad. This is due to the fact that the product has a number of difficult features that making the product is not available in the bank. This also provides an indication that the bank can win the gold segment in the banking industry by leveraging the importance of gold saving account. In all, the product provides a new competitive advantage to the bank. 5.Concluding remarks (2 marks) 6.References (1 mark)

CONT’D Further, the following will help you to prepare the research proposal and the research project report: 1.The language for the assignment is English 2.Allow top margins of 1” for pages, bottom margin of 1”, left margin of 0.7” and right margin of 0.7” 3.Allow typewritten single-spaced on one side of white A4 paper 4.Allow font type Times New Roman 5.On the cover page, please write down your title (at the top), the names of the group members (in the middle of the page) while at the bottom you may write the date of submission. Nevertheless, some of you may add anything such as UMS logo to beautify of your cover page. It’s your call. 6.Please take note that please use font size 14 bold for the title (UPPER CASE), use font size 12 for the names of the group members (UPPERCASE). Use font size 11 for the text which include abstract, body and references

GROUP J. ARTICLE PRESENTATION Group journal article presentation 10%  Presentation should be made possible in Power Point format or any other electronic software. As mentioned earlier, your presentation should be made possible in 25 minutes plus 5 minutes for Q&A. Grades will be awarded on use of language, contents and depth of ideas, format, structure, style, clarity and development of argument as well as group management. For the purpose, your slides must be submitted to at least 2 days before the actual date of the presentation. No report is required only slides needed for assessment REMARKS: EACH GROUP SHOULD CONSIST OF 10 MEMBERS. IT IS YOUR DESCRETION TO CHOOSE YOUR GROUP MEMBERS. IT IS FAIR GAME TO YOU.

NoProposed topicGroup nameWeek of presentation 1.Group journal article presentation topic #1: “Understanding the objectives of Islamic banking: a survey of stakeholders’ perspectives” (by Asyraf Wajdi Dusuki) 2. Group journal article presentation topic #2: “Factors influence depositors’ withdrawal behavior in Islamic banks: a theory of reasoned action” (by Muhamad Abduh, Jarita Duasa & Mohd Azmi Omar) 3. Group journal article presentation topic #3: “Risk-return analysis of Islamic banks’ investment deposits and shareholders’ fund” (by Saiful Azhar Rosly & Mohammad Ashadi Mohd Zaini) 4. Group journal article presentation topic #4: “The influence of religiosity, income and consumption on saving behaviour” (by Naziruddin Abdullah & M. Shabri Abd. Majid) 5. Group journal article presentation topic #5: “Determinants of Islamic and conventional deposits in the Malaysian banking system” (by Sudin Haron & Wan Nursofiza Wan Azmi) 6. Group journal article presentation topic #6: “Al Bay’ Bithaman Ajil (ABBA) financing: impacts on Islamic banking performance” (by Saiful Azhar Rosly). 7. Group journal article presentation topic #7: “Consumer credit from the Islamic viewpoint” (by Aidit Ghazali) 8. Group journal article presentation topic #8: “Maqasid al-Shariah and Islamic financial products: a framework” (by Habib Ahmed) 9. Group journal article presentation topic #9: “Shariah parameters reconsidered” (by Saiful Azhar Rosly) 10. Group journal article presentation topic #10: “How ‘Islamic’ is Islamic banking” (by Feisal Khan) 11. Group journal article presentation topic #11: “Diversity in the regulation of Islamic financial institutions” (by El-Hawary et al.) 12.

PARTICIPATION & ATTENDANCE 10% Participation and attendance 10%  Giving ideas, asking questions and giving suggestions are considered class participation. Attendance is part of class participation.

FINAL EXAMINATION 40% Final examination 40%  It covers of all topics include in the course. Please be advised that both qualitative and quantitative questions are tested for the final exam. Nevertheless, it is my discretion to discuss some hints prior to the final examination. GOOD LUCK, then.

WE ARE THANKING YOU, YA ALLAH AZZA WA JALLA