An Overview & Fundamentals of Islamic Finance & Sharia Laws August 12, 2015 ‘International Workshop on ‘Islamic Finance and Takaful’ An Overview & Fundamentals of Islamic Finance & Sharia Laws Dear Participants, Assalam Alaikum, I am Irfan Shahid completed my Islamic Education Almiyah from Jamiatul Falah, Azamgarh and after that I moved to AMU Aligarh to complete my graduation in Economics. After that I moved to Bombay, the financial capital of India to learn more about busines and economics but finally I landed up in the UK to complete my M.Sc in Islamic Banking from Loughborough University. During my stay Dept of Management MANUU Hyderabad

Table of Contents PARTICULAR SLIDE NUMBER Islamic Vision of Life 3 Key Concepts 4 Fundamental Principles of Islamic Finance 5 Islamic Finance 6 Islamic Banking 7 Islamic Insurance 8 Islamic Investments 9 Islamic Finance: Current Statistics 10-17

The Prelude Islamic Vision of Life: Importance of Halal The Purpose of Creation The Status Final Destination Importance of Halal The Body which is nourished from Haram source is bound for hellfire. On the day of judgment a person will not be able to move his feet until he has answered how he earned the money and where did he spent it. Purifying the sources of income is important requirement for acceptance of supplication.

Key Concepts Shariah Path that guides towards the original source. The understanding of Islam is an abstract form of law capable of adaptation, development and further interpretation. Source of Shariah Primary Quran & Sunnah Secondary Ijtehad, Ijma, Qiyas etc. Objectives of Shariah Protection from Harm Promotion of Public welfare Principles of Shariah Ibadaat Muamlaat

Fundamental Principles Prohibitions: Interest (Riba ) Excessive Uncertainty (Gharar) Gambling (Maysir) Harmful Businesses (Prohibited sectors) Promotions: Encouragement of profit and loss sharing Public need or necessity Charity Compulsory: Zakah

Islamic Finance Islamic finance is known by different names such as Ethical Finance, Interest-free Finance, Special Finance, Shariah Finance, PLS Finance etc. What is Islamic Finance? A Shariah based financial system which seeks to achieve economic and social justice in all financial transactions. Features of Islamic Finance It takes into account the moral consequences of financial transactions; It ensures that financial contracts are fair and equitable to all parties involved; and It guarantees that financial rewards are correlated with the level of risk and responsibility borne by all parties

Islamic Banking What is Conventional Banking? Accepting Deposit Lending It deals in interest and does not mind funding activities which are harmful for society such as alcohol, gambling, tobacco, pornography, armaments etc. What is Islamic Banking? Trading and Investing It doesn’t deal through interest and do not provide funds for activities which are harmful for society such as those mentioned above.

Islamic Insurance (Takaful) Conventional Insurance is the business of purchasing the risk by the insurance company in lieu of the premium paid by policyholders. Features of Conventional Insurance It deals in interest; It trades in risks instead of sharing it; and Its business mechanism falls within the ambit of Islamic prohibition of gharar and maysir Islamic Insurance Islamic insurance is close to conventional concept of mutual insurance where the participants instead of selling their risk to a third party jointly share the burden of risk among themselves.

Shariah Compliant Investment Investing activities that adheres to Islamic restrictions is known as Shariah Compliant investments. Basic Norms of Investments Business activities must be beneficial to the society, economy and environment; Non-serious traders must stay away from the market; Traders/investors should not participate in Short-selling, gambling, risk trading and any kind of interest-based activities; Check on debt and earnings from impure sources; and Increased Charity and public welfare activities;

Islamic Finance: Across Globe CURRENT PRACTICES AND TRENDS Islamic finance practices have spread to about 75 countries. By 2020, a major part of the Middle East economy will become Shariah-compliant. Conventional banks are converting their operations into the shariah-compliant. Even foreign financial institutions in the region are following this trend. Many western economies are trying to tap the niche opportunities. Region Banking Assets Sukuk Islamic Funds Takaful Premium Asia 203.8 188.4 23.2 3.9 GCC 564.2 95.5 33.5 9.0 MENA 633.7 0.1 0.3 7.7 Sub-Saharan Africa 20.1 1.3 1.8 0.6 Others 54.4 9.4 17 Total 1476.2 294.7 75.8 21.5

Islamic Finance: Across The Globe

Islamic Finance Assets S. No. Country Islamic Finance Assets ($ Billion) Islamic Finance Institutions 1 Malaysia 411 92 2 Saudi Arabia 269 113 3 Iran 185 44 4 United Arab Emirates 118 77 5 Kuwait 81 101 6 Qatar 71 37 7 Bahrain 47 55 8 Turkey 9 Indonesia 33 73 10 Bangladesh 17 23 11 Pakistan 13 62 12 Egypt 30 Sudan 45 14 Switzerland 15 Jordan Thomson Reuters- Islamic Finance Development Report 2012

Islamic Banking Assets S. No. Country Islamic Banking Assets ($ Billion) 1 Saudi Arabia 216 2 Malaysia 194 3 Iran 185 4 United Arab Emirates 94 5 Kuwait 72 6 Qatar 52 7 Bahrain 43 8 Turkey 34 9 Indonesia 19 10 Bangladesh 17 Thomson Reuters- Islamic Finance Development Report 2012

Islamic Bonds (Sukuk) $ Billion

Global Takaful Premium (USD Billion)

Islamic Funds

Islamic Finance: Western Countries

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