UNIVERSITY OF NAIROBI
SCHOOL OF BUSINESS
MASTER OF BUSINESS ADMINISTRATION
SEPT – DEC 2013
TOPIC: ISLAMIC FINANCE
TABLE OF CONTENTS
LIST OF ABBREVIATIONS
BACKGROUND AND EVOLUTION OF ISLAMIC FINANCE
THEORY REVIEW OF ISLAMIC FINANCE
2.2 Monetary and Macro Theory
2.2.1 Behavior of Credit Markets
2.2.3 Equity Considerations
2.3 Banking Theory
2.4 Islamic Financial Transactions
2.4.1 Bai’al’inah (Sale and buy- back agreement)
2.4.2 Bai’bithaman ajil (Deferred payment sale)
2.4.3 Bai’muaijal (Credit sale)
2.4.7 Bai Salam
2.4.8 Hibah (Gift)
2.4.11 Ijarah thumma al bai (Hire Purchase)
2.4.13 Musharakah (Joint Venture)
2.4.14 Qard Hassan/ qardul Hassan (Good Loan/ benevolent loan)
18 2.4.15 Sukuk (Islamic Bonds)
2.4.16 Takaful (Islamic Insurance)
2.4.17 Wadiah (safekeeping)
2.1 Differences between Islamic Finance and Conventional Banking
20 2.2 Relationship between Islamic Banking & Economic Growth
20 2.3 Relationship between Liquidity Risk Management and Financial Performance of Islamic banks
21 2.4 Effect of foreign presence on Islamic bank’s performance
22 2.5 Efficiency in Islamic Banking
2.6 Comparison of Technology between Islamic and Conventional Banks
23 2.7 Impact of monetary policy shocks on the conventional and Islamic banks in a dual Banking System
23 2.8 Islamic Banks and Financial Stability
UNRESOLVED ISSUES IN ISLAMIC FINANCE
3.1 Deposit Mobilization – How does it affect Islamic ideals?
25 3.2. Financial distress in Islamic Banks
LIST OF ABBREVIATIONS
Accounting and Auditing Organization for Islamic Financial Institutions CBK
Central Bank of Kenya
Costly State Verification
Data envelopment Analysis
First Community Bank
Furqaan Institute of Quranic Healing
Gulf African Bank
Islamic Development Bank
International Financial Reporting Standards
Islamic Financial Services Board
Kuwait Finance House
Middle East and North Africa
Oversea-Chinese Banking Corporation
Organization of Islamic Conference
Return on Equity
Return on Asset
South Eastern Asia
Vector Auto Regression Methodology
Islamic finance refers to a system of banking or banking activity that is consistent with Islamic law (Sharia) principles and guided by Islamic economics. Just like conventional financial systems, Islamic finance features banks, capital markets, fund managers, investment firms, and insurance companies. However, these entities are governed both by Islamic laws and by the finance industry rules and regulations that apply to their conventional counterparts. Contrary to popular belief, Islamic finance or banking is not just for Muslims. It aims to lay the foundations of an ethical and fair financial system, which consequently affects the socio-economic conditions of the market it is implemented in. Islamic financing, hence, can aptly service everyone irrespective of religious beliefs, wealth, ethnicity, caste or creed. The most distinguishing feature of the Islamic economic system is the prohibition of interest. Usury, Interest and Riba are synonymous terms but they have different technical meanings. Usury refers to the consumption loans given on higher rates and thus causing exploitation of...
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