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Islamic Banking

A two- day introductory program

Islamic finance in its modern form is barely 40 years old yet it remains a rapidly growing part of the financial sector and has survived the recent global banking crisis almost untouched. The size of the market is huge and demand for Islamic services exists wherever there is a significant Muslim community. It is reckoned that 600 financial institutions in more than 50 countries practice some kind of Islamic finance and the market continues to grow. The main attraction of Islamic finance is that it offers Shariah compliant banking to its clients and is the closest yet that any banking institution has managed to get to genuinely ethical and moral banking. It is underpinned by pure principles, with integrity at the forefront and a genuine sharing of profit and losses as its credo. This has all been achieved with remarkable speed and the sector’s popularity continues unabated.

Learning objective

This workshop style course explains in clear terms the basic principles of this increasingly important sector and shows how these and its products differ from the conventional banking models. It is designed to teach delegates the principles of Islamic Banking and to highlight the differences between Islamic and conventional banking. It explores the different products and services commonly found in both the GCC and the Islamic market globally and it assesses the relative advantages and disadvantages of each. By the end of the course delegates will have a full understanding of the products and principles involved in Islamic Banking and how they differ from Western banking models.

Who should attend

Anyone seeking a basic understanding of the nature and form of Islamic Banking.

Teaching methodologies

Classroom lectures and interactive practical workshop format intended to affirm the learning objectives. There will be an examination to test delegates understanding of the course.

Learning pre-requisites

None although a basic knowledge of conventional banking and the financial services sector would be helpful.

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The course is delivered in 11 sessions which are outlined below

Session 1: Introduction to Islamic Banking

  • History of Islamic Banking
  • Basic Principles
  • Sharia Law
  • The Quran, Sunnah and Hadith
  • Sources of Islamic jurisprudence
  • The role of Islamic Scholars and the Islamic Board
  • The meaning of Riba, Gharar, Maysir, Haram, Halal, Fatwa
  • Waqf & Zakat…Charitable giving and charitable tax

Session 2: The principles of Islamic finance

  • The prohibition of Riba
  • Key Islamic principles and their application to Islamic Finance
  • The principles of Islamic trade
  • Introduction to financial instruments
  • Mudaraba
  • Musharaka
  • Murabaha
  • Ijara
  • Salam
    • Istisn'a
    • Mutual funds
  • What is each product?
  • How do these differ from the equivalent Western products?
  • Introduction to Waqf & Zakat

Case Study:  Consider the implications of key Islamic rulings on banking products and how these have shaped the products currently available?  What are the key matters that you should consider when designing Islamic products

Session 3: What is an Islamic Bank

  • Definition - Fatwa
  • Source of funds
  • Use of funds
  • Contractual relationships
  • Profit and loss sharing
  • Banking Services
  • Other Services
  • Types of Islamic Bank; wholly Islamic, windows or branches approach

Exercise: We will construct a typical Islamic balance sheet highlighting the key differences, especially the contractual and profit/loss sharing element.

Session 4: Sources of Funds ­ “Investments”

  • Islamic current accounts
  • Amanah, Wakala, Wadia ­ what are they?
  • Investment accounts ­ Mudaraba
  • Restricted and Unrestricted Mudaraba
  • Musharaka
  • How are investors rewarded
  • Shareholders funds
  • Trading & Investments

Exercise: Although moral hazard probably makes this academic, consider who bears what losses in each of the different sources of Islamic funds
Case study: Explain the main differences between an Islamic bank and a conventional bank

Session 5: Use of funds ­ Most common products

  • Murabaha, definition, description, examples, risks, challenges.
  • Ijara as above.
  • Istisn’a ditto
  • Compare each product with their conventional banking counterparts

Exercise: You have a client looking to replace commercial vehicles and not wishing to lay out substantial cash up front, how might this be achieved using Islamic banking techniques.

Session 6: Use of funds ­ Other common products

  • Mudaraba., definition, description, examples, risks, challenges
  • Musharaka. As above
  • Salam ditto
  • Islamic mortgages ditto
  • Islamic credit cards ditto
  • Two tier Murabaha
  • Two tier Mudaraba
  • Compare each product with their conventional banking counterparts

Exercise: Why is Musharaka not more popular given that it enshrines Islamic principles completely?

Session 7: Islamic Asset & Fund Management

  • Investors’ Objectives
  • Capital preservation
  • Maximise yields
  • Incorporation of Islamic doctrines
  • Link to Sharia precepts & ethics
  • Legitimate goods
  • Moral behaviour & social objectives

Exercise: Taking into account all of the above, name areas where you feel investment activity is unacceptable or prohibited.

Session 8: Islamic Bond Market (Sukuk)

  • Difference from an Investment Bond
  • Investment process
  • Share of assets not right to revenues
  • Profits & losses
  • Proof of ownership
  • Ownership costs
  • Term matches project
  • Lack of guarantee
  • Key Sharia rules

Exercise: Using Dubai as an example, consider how the recent problems might impact this important

Session 9: Islamic Insurance (Takaful)

  • What is Takaful
  • How does Takaful work.
  • Re-Takaful
  • Takaful products
  • Takaful models

Exercise: Takaful is a controversial subject amongst some scholars. Why is this?
Exercise: What is the difference between a Mudaraba and Wakala arrangement in a two tier Takaful model?

Session 10: Course Wrap Up, summary & open Forum



Session 11: Short Multiple Option Test



Session 5: Basel and Islamic Finance

Case Study: What are the key issues faced by Islamic institutions in implementing the Basel Accord?  How can these be overcome?

About Us

Learning through action - every program we deliver is highly practical and addresses real live issues.  We use simulations, exercises and case studies and all our methods are based on the latest neuroscience and positive psychology research findings.  Everything we deliver and challenge our participants to think about leads back to one simple question ­ “what am I going to do differently back at work and how?”.

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Hampshire SO41 0TN
United Kingdom

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