Exam 1: Islamic Banking and Finance: Principles and Practice

Islamic finance products were initially based on the idea of equity partnership or partnership modalities in general.

__________ is not a major component of the Islamic banking and finance industry.

The acceptance of the practices of Islamic banking and finance has brought new non-Muslim experts, professionals, and financial institutions to Islamic banking and finance.

Any form of interest-free banking based on ethical ideals of financial transactions will be recognized as Sharī'ah -compliant.

Explain briefly how Islamic banks mobilize their funds.

List some of the prohibited transactions prevalent during the early days of Islam.

Describe the key functions of the Islamic Development Bank IDB..

In Islamic law, financial products are restricted to profitable dealings. Non-profitable dealings may not be designed as financial products.

While riba al-nasi'ah relates to trade, riba al-fadl relates to loans.

While the gold dinar was the Persian currency, the silver dirham was the currency of the Roman Empire.

Discuss the economic reforms undertaken by the second Rightly Guided Caliph, Umar ibn Al-khattab.

The Islamic finance industry has more than tripled in size since 2006.

Within the modern context, the interest element in banking and finance is replaced with profit-sharing through certain Islamic financial products such as mudarabah and musharakah.

Takaful is the Islamic alternative to reinsurance where it is structured in a Sharī'ah -compliant model.

The Islamic finance products are designed in a way to preserve the true nature of Islamic financial transactions without considering the needs of the conventional markets.

It has been established that both interest rates and interest-free banking contribute to inflation.

Describe the major economic problem that the first Caliph, Abu Bakr encountered and how did he deal with such a problem.

According to a 2010 estimate, there are more than 430 Islamic banks and financial institutions spread across over 75 countries in the world.

Islamic non-bank financial institutions play a facilitative role in the Islamic society to ensure economic development by supporting the liquidity needs of the major agents in the economy.

As opposed to takaful, conventional insurance is based on principles of mutual cooperation, common welfare and general good of the society.