Islamic banking

1
Islamic banking

• CH 3

2

• The meaning of Islamic banking are the
  ( brokerage institution) that is not
  working with interest. So that the Muslims had
  reached nearly a century of almost that bank
  interest is the essence of (Riba) is forbidden,
  because the increase of the loan is the basis of
  conventional banks work .

3

• Muslims after Independence after the occupation
  trying to establish an Islamic banking system
  which is in line with the provisions of the law.
  They have realized that financial broker it is
  very important function in the life of
  communities.

4

• As the transmission of funds from the surplus
  category process (ie individuals and institutions
  that have the extra financial resources which is
  more then what they needs) to the disability
  category group (ie the group which need financial
  resources over what now possesses) was done in
  the by using the (MOTHARABA ) method.

5

• Muslims seek to find other version for the
  traditional bank which give the support
  function for financial broker without being
  dependent on borrowing from depositors and then
  lending to the lenders and get benefits, they
  found a (MOTHARABA) a solid base in the which can
  be based on this alternative model.

6

• And the banks or any financial institutions must
  move away of all prohibited transaction in the
  law and in particular cleared of (REBA), so, any
  Islamic bank may not work with benefit, taking
  and giving may not take any action contrary to
  the provisions of Islamic law.

7

• Also, the Islamic banks must operating depending
  on the legitimacy formulas known, such as
  (MOTHARABA) ,(MOSHARAKA), ( Istisna'a)
  , futures sales and the sale of (Murabaha) and
  other developed contracts that do not contravene
  the provisions of Islamic Sharia.

8
Rules and principles work for Islamic banks

• There are a number of legal rules that the work
  of Islamic banks from other traditional banks
  because of the special nature of these banks,
  which are governed primarily Shariah, the
  following are the most important of these rules

9
Sharia rules

• (Do no harm)
• Take care for the rights and duties and to
  avoid causing harm and damage to others or their
  money.
• (ALGANM for gram)
• Any person does not guarantee the return and
  deliver a loss rests with others.

10

• Things its purposes
• That any action it is of purpose , for example
  if any contract have legal purpose so the
  contract are possible but if the contract are
  illegal purpose so the contract was invalid.

11

• The normal habit
• Any action return to custom if the lack of a
  source of Islamic law, and require that does not
  violate custom Shara or morals.
• Abscess warranty
• the owner of money get profit by using his
  money in (MOTHARABA) ,and get profit as his work.

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Banking rules

• Not dealing with benefit
• This rule is one of the hallmarks of the
  activity of Islamic banks where it does not deal
  benefit whatever its forms, taking or giving.

13

• Abide by the rules of Islamic law
• The Islamic banks provide services in the
  framework of the law, and not investments direct
  to prohibition activities.
• Each Islamic bank have Sharia Islamic Council to
  check about the extent of the bank's commitment
  to Islamic law in all its activities.

14

• Adopting the principle of participation in the
  profit and loss
• It is the basis of the relationship between
  the customer and the Islamic banks, Islamic
  banks, where investors receive funds to speculate
  with a view to making a profit which is
  distributed after inspecting "actually" between
  them and the owners of investment accounts as
  agreed. The parties also bear the loss if there
  is no default by one of the parties.

15

• Good selection for whom have a good finance
  management
• Where it is supposed that the Islamic banks
  are making the effort to choose those who manage
  the funds to ensure proper management and
  conservation of the loss with full maintaining
  the confidentiality of customer transactions.

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The concept of the Islamic Bank

• IDB monetary financial institution working to
  attract the cash resources of the members of the
  community and the main employers employ them
  effectively optimize and ensure its growth under
  stable Islamic law rules and to serve the nation
  and the people working on the development of
  their economies.

17

• It is for this definition is clear to us that
  there are several key elements adhere to Islamic
  banks, including the commitment of stable Islamic
  law rules the IDB should adhere to the
  provisions of Islamic sharia law in all of its
  business dealings in to and only has the elements
  of existence, credo Islamic provide a
  comprehensive and integrated system governs
  everything in the economy represented in the
  production activities, distribution, consumption,
  savings and relate to other non-economic
  activities are associated with them

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• and their acts of worship to make Islam our
  valuable be a proper not tainted or done wrong in
  the hands of his successor, not in front of it,
  and that the correlation banking Islamic economic
  thought religion reinforced blessed verses in the
  book of Allah and the Sunnah of His Messenger,
  peace be upon him cleared and assumptions that
  distinguished scientists, and that the economic
  rules governing the banking business and the
  clear and explicit should the Islamic Bank
  pursued and cherished. The most important of
  these rules include

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A) commitment in its dealings Halal and away
removed from the fields and the Grand doubtful

• Since the Islamic Bank derives its legitimacy
  from the embodiment of Islamic thought, it is
  fully committed to the application and Haram
  muslim base in all his dealings, and adherence to
  the ethics and etiquette of Islam in these
  transactions totalitarian in nature, which
  extends to all areas of human activity by the
  bank to deal with it.

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• It can not be for the Bank to offer his services
  to the activities included in the prohibition
  circuit because of the serious damage to society,
  such as the liquor industry activities, and
  tables, gambling, drugs, prostitution and
  industries that are based on the rearing and
  slaughter and sale of pork or dead or blood,

21

• and stay away from any activity that involves
  dealing in which the Lord, deceit or fraud or
  monopoly or fraud or exploitation to the needs of
  the people or the solicitation or tricked or
  facilitator or a bribe or corrupt receivables and
  vandalism for souls or any activity tainted the
  sanctity,

22

• and then all bank transactions within the muslim
  circle be, taking into account severely
  principles of religion religion there is no
  unfairness or injustice in wages for workers and
  the confiscation of their livelihoods or
  servitude in exchange for slaves to feed them and
  clothe them.

23

• Islamic Bank is is based on the Islamic faith and
  draws them of his being the intellectual and the
  elements of the banking deal has or become
  transactions, all in the context of this
  intellectual entity that is that God is the
  creator of the universe,

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• and that the property in this universe to God
  alone, God is the owner of all existing in it
  Almighty effecting and that King owner and humans
  Mstkhalaf it and then the use of these assets,
  including money made under the terms of the
  succession and for this it is necessary that the
  products and services

25

• that the bank deals with or funded projects in
  the muslim circle, he may not be the supplying
  plant for the production of wine, or to mobilize
  pork company not permissible for him to fund a
  nightclub or a club gambling, but confined to his
  mission in this world architecture, he says he
  brought you forth from the land and Astamrkm
  (61) (Hud) Hence accommodate all bank
  transactions to include all aspects of economic
  activity and is necessary for the economic age of
  the earth.

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(B) not to deal with riba

• Not dealing in riba are characteristic of the
  Islamic Development Bank in order to cleanse the
  money from the suspicion of injustice and
  exploitation, which is a key feature of usurious
  loans attributes carried out by the Non-Islamic
  banks.

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• This does not mean that the Islamic bank does not
  aim to make a profit, but it aims to him and work
  on augmentation, but in the context of specific
  Islamic controls is determined by which the
  source of profit, and that profit is just not
  inordinate, flawless exploitation, not be the
  source of any unfairness and the monopoly, but
  through a truly Islamic Investment formats where
  all the production elements synergize
  effectively.

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C) good selection of their money management

• The IDB should all necessary efforts to make sure
  good selection of individuals who will manage
  funds both among its staff, or among the
  customers who will be making the funds available
  to them to manage it, where you must not entrust
  the management of these funds is anyone who is
  not fit to do the job.

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(D) openness and honesty and clarity in
transactions

• Islamic Bank is committed in its dealings with
  honesty and candor, clarity and full disclosure
  between the bank and its clients, as well as
  dealers as long as these transactions were
  private and not the same customer to other
  customers.
• Hence, it is not intended and openness and
  disclosure statement is the client of the
  secrets, but Islamic banks maintain the privacy
  of their customers transactions does not seek to
  harm them and their interests in the context of
  religious and legal legitimacy of the ruling
  system for banking transactions.

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• There Sharia Supervisory Board of Islamic Bank
  are selected members of senior Muslim scholars
  and some scholars of Islamic economics is
  following up on all the bank's business to make
  sure it takes place within the framework of the
  provisions of Islamic Sharia

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(E) Not to lock up money and blocked from trading
.

• The IDB should work on the development of money
  and excitement as Mstkhalafa where and agent for
  the owners and employed effective employment for
  the benefit of society, originally as one of the
  assets that need to be developed, not withheld
  and depriving society and individuals who need
  it.

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(F) The Supervision of Islamic Banking internal
and external

• The external construction through a Shari'a Board
  are selected members of the established in the
  science of religion are known for their high
  integrity and diligence.

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(G) pay of Zaka imposed Sharia on all bank
transactions and business results

• Islamic banks collects the distribution of Zakat
  funds from bank transaction and their clients
  whom want paing the ZAKA from Muslims, Islamic
  banks are spending it in the legitimate recipients

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(H) Achieve a balance between the different JOB
OF DISTRIBUTED THE MONEY.

• The balance is between the areas of short-term
  and the medium-term and long-term, and between
  different distributed money areas, where
  geographical balance is achieved, accordance with
  Islamic priorities
• - Necessities.
• - Needs.
• - Luxuries.
• - And the balance between social return and ROI
  physical

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HISTORY OF ISLAMIC BANKING

• The islamic banking came to meet the desire of
  Muslim societies in finding a formula for dealing
  banking away from the REBA and without use of
  interest rate.

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• The first attempt to create an Islamic bank in
  1963, came where he was the establishment of the
  so-called local savings banks, which was held in
  Egypt, which was founded by and this experience
  lasted around three years.
• Then after that create the Nasser Social Bank,
  where is the first bank in Egypt created on the
  non deal with beneficial taking or giving of the
  law, and the nature of the bank's transactions
  social activity and not banking job.

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• The real interest of the establishment of Islamic
  banks operating in accordance with the provisions
  of Islamic law in the recommendations of the
  Islamic Foreign Ministers Conference in Jeddah,
  Saudi Arabia in 1972.

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• in 1974 began the Islamic Development Bank
  activity in 1977 in Jeddah, Saudi Arabia, and is
  characterized by the bank that the governments of
  the Bank does not deal with individuals in the
  banking aspects.

39

• The creation of the first fully fledged Islamic
  bank to deal in accordance with the provisions of
  Islamic law in 1975, a Dubai Islamic Bank, where
  the Bank offers all banking and investment
  services to individuals in accordance with the
  provisions of Islamic Sharia.

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The properties of Islamic banks,

• Islamic banking has many of the characteristics
  of conventional banks which including
• 1 Follow of the provisions of Islamic Sharia in
  all banking and investment transactions.
• 2 - The application process for participation in
  the profit or loss in transactions.
• 3 - Commitment qualities (development,
  investment, positive) in the investment and
  banking transactions.

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• 4 - Apply Brokerage, based upon the method of
  participation.
• 5 - application of Islamic values ??and ethics in
  the banking business.
• 6 - As Islamic banks is characterized by
  providing a range of activities not offered by
  traditional banks, namely
• 1 - The Hassan loan.
• 2 - Zakat Fund.
• 3 - Cultural banking activities.

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The goals of Islamic banks

• In order to achieve the message of the Islamic
  bank, there are many goals that lead to the
  achievement of that message we will talk about
  one of important goal

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financial goals

• The Islamic bank in the first place an
  institution shall carry out the role of financial
  intermediation principle of participation, they
  have many financial goals that reflect how well
  they perform this role in the light of the
  provisions of Islamic law, and these goals are

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• Bring the deposits
•  This is the goal of the most important goals of
  Islamic banks as it represents the first part of
  the financial broker process.

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• The importance of this goal it is applied to the
  base of legitimacy and it is the divine not to
  disrupt the money and investing them in returning
  profits to the Muslim community and its members,
  and is the main source of deposits for the
  sources of funds in the Islamic Bank, whether in
  the form of deposits to invest, or demand
  deposits current or savings accounts and
  deposits a mixture of current accounts and
  deposits investment.

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• Investment Money
•      Represents the investment of money the
  second part of the financial broker process,
  which is the main objective of Islamic banks, and
  there are many legitimate investment formulas
  that can be used in Islamic banks to invest
  shareholders' and depositors' money,

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• To get Profit
•      Profits are earned resulting from the
  activity of the Islamic bank, which is the result
  of investment banking operations that are
  reflected in the form of dividends distributed to
  shareholders and depositors process, add to this
  that the increase in bank profits lead to
  increased market value of the shares of
  shareholders.

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The main trammels which facing the Islamic
banking sector

• a lot of clients say that there no differences
  between Islamic and other products and customers
  feeling the lack of religious commitment among
  some workers in the financial banking
  institutions may be the reason for this is that
  85 of workers in the Islamic financial
  institutions have backgrounds work in the
  traditional sector.

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• The limited number of qualified Shariah scholars
  around the world to assess the ration of new
  products, the lack of the necessary competencies
  of scientists is an obstacle to innovation and
  new product development.
• Demand for financial products conforming to
  Islamic law significantly exceeds supply,and the
  number of subscribers are more then available
  instruments .

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• The absence of standards and harmony between
  fatwas legitimate bodies, contrast, difference.
• The absence of market for financial activities
  for Islamic banking which help Islamic banks to
  Provide financial resources .

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Actions required to develop and improve the
performance of Islamic banks

• More intensive and sophisticated cooperation
  between the authorities and regulators and
  financial institutions in the market.
• The need to expand and innovate to put more
  financial products compliant with the provisions
  of the law, so as to accommodate the large
  liquidity available with Islamic banks.

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• The establishment of a financial system that have
  experience and flexibility has efficiency and
  competitiveness, which strongly contributes to
  the growth process.
• Training and qualification of human resoures to
  assume leading positions 

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• That there should be uniform standards for
  Islamic fatwas and so determined the role of the
  Fatwa banks over matching cases presented with
  internationally agreed standards.
• Should the Islamic financial institutions to
  offer their financial reports to the public
  inquiry for financial transparency.
• The need for a new legislation unifies standards
  followed by the Islamic financial market to
  contribute to its more vital role at the global
  level

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THE Sources of Islamic banks

• Sources of Islamic banks are divided into two
  sourcesInternal sources include internal
  sources of funds in Islamic banks on
  shareholders' equity (capital and reserves and
  retained earnings), and provisions, and some
  other sources, including, for example, funding
  from shareholders at the disposal of the capital
  increase, and interest-free loans from
  shareholders.

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• Foreign sources external sources of funds in
  Islamic banks include1 - demand deposits,
  current accounts2 - savings deposits accounts3
  - Deposits investment accounts

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• 4. investment instruments.5 - Islamic savings
  books.6 - Deposits Islamic financial
  institutions.7 - instruments Muqarada common or
  custom.8. Certificates of Deposit.9. investment
  funds.

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Islamic investment methods

• The most important activities practiced by the
  Islamic bank is to open investment accounts and
  deposits and operate on the basis of MOTHARABA as
  well as the sale and leasing which make economic
  activities  

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• A - Funding for traders by goods and equipment
  through the sale of Murabaha and the postponement
  of the price, taking into account the legitimate
  conditions of the original statement of the price
  or cost, profit, and for acquisitions prior to
  the sale.

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• B - The Bank also enable owners of agricultural
  and industrial activities from obtaining raw
  materials and equipment for the road to peace was
  held, where to buy their products with the
  postponement of delivery, and accelerates the
  price to obtain the liquidity that allows them to
  continuing their farming activities or industrial

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• also doing some investment activities,
  including  1 - International sales in the
  goods.  2 - trading in foreign currencies.  3 -
  International investment in real estate.  4 -
  establishment of companies and participation in
  their capital.

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• C - The Bank funded fixed to provide equipment
  and devices to the owners of the industrial
  activities of assets through the Capital Leases,
  he held a lease established by the bank with the
  client after it acquires the bank equipment,
  gives the tenant the right,

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• by dating to own those paid equipment at the end
  of the lease period or in during which a price is
  known to be agreed upon with a commitment to the
  provisions of the lease throughout the
  establishment, and not to require the sales are
  even dating him only.

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• D - as the Islamic Bank is also financing fixed
  assets, as referred to with the bank's commitment
  to the installation of the hardware and run it
  through the contract (operating lease), which may
  also end up with ownership the former style.

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• E - The Bank financed the construction of
  buildings, factories, exploited real estate, by
  holding Istisna'a (contract) terms to be agreed
  to establish a so by the bank, custom-tailored
  and deferred ... and the bank in turn uses
  contractors to set up the account and
  relationship separate from the first contract and
  without tying them.