SZABIST

ISLAMIC BANKING & FINANCE

INSTRUCTOR ANEESE AAWAN

LECTURE # 1

5TH JANUARY, 2010

Something about Instructor

• Mostly Pronounced Aneese

• Academic Qualification MBA-IBA, MBA-Islamic Banking & Finance-KU, MA-Eco-KU

M. Phil-starting in 2010-KU

• Professional Qualification CFA Level III Candidate, FRM Level 2 Candidate, Banking Diploma-IBP, PDG-IB & Finance-London

• Professional Exposure Project Financing, Corporate Banking, Portfolio Management, Islamic Banking, SME Financing, Product Development & Research, Credit &

Financial Risk Analysis

• Area of Interest Equity & Fixed Income Analysis, CF, PM, RM,Derivatives, FSA, TFM

• Teaching Exposure IBA, KU, MAJU, PAF-KIET, Greenish, Biztek

• Training Exposure SBP, IBP, ICIL, Octara

Twisting Thoughts

• Islam is a religion so what religion has to do with Banking?

• Do you think Banking was in practice 2000 years ago?

• Why not Christian or Jewish Banking?• What is the logic of religion’s involvement with

financial activities?• Where this conventional banking has come from?

6

SHARI’AHSHARI’AH

SOURCES OF SHARI’AH:

Primary Sources1.1. Qur’an - Qur’an - The book of Allah

Gives main beliefs, principles and wide-ranging directives of Allah, Allah (SWT) said:

"Verily, this Qur'an guides to that which is best, and gives glad tidings to the believers who do good that theirs will be a great reward." (17: 9)

Rulings derived explicitly from Qur’an are Fard, and its refutation is “Kufr”.

7

2. Sunnah• Sunnah includes Sayings, Practices, No-objection (Silent

Approvals) of Prophet and practices of four caliphs and other companions of holy Prophet (SAWS).

• Ahadith have rather specific meanings, it mean sayings of Prophet (SAWS). Ahadith act for Quranic teachings and directives as interpreter and explainer.

SHARI’AHSHARI’AH

8

Derived Sources

3. Ijmaa’ Scholarly consensusScholarly consensus is defined as being the agreement of all Muslim scholars on a specific issue. Given the condition that all such scholars have to agree to the ruling, its scope is limited to matters that are clear according to the Qur'an and Prophetic example, upon which such consensus must necessarily be based.

SHARI’AHSHARI’AH

9

4. Qiyaas – The analogy

• Qiyas, is reasoning by analogy. In order to apply qiyas to similar cases, the reason or cause of the Islamic rule must be clear.

• Legal analogy is a powerful tool to derive rulings for new matters. For example, drugs have been deemed impermissible, through legal analogy from the prohibition of alcohol that is established in the Qur'an. Such a ruling is based on the common underlying effective cause of intoxication.

SHARI’AHSHARI’AH

10

Concept of Impermissibility in Shari'ah

Divine Prohibitions:

Islam has prohibited some activities for human as it considers it dangerous and injurious for human society;

A specific list of these activities has been derived through primary and derived sources of Shari'ah;

No individual is allowed to modify the list except in special circumstances;Examples of these include Pork, Interest, Gambling, immorality etc.

11

Moral Prohibitions:

Islam has a great emphasis on Life Hereafter. Life in this world is temporary and there is an eternal life afterwards.

One has to make this worldly life a way to get the maximum benefit in the life hereafter.

There are certain activities which are neither banned from the Government nor they are declared impressible from any source of

Shari'ah, however, moral values may not allow them.

Similarly there are certain activities which are more rewarding than others in life hereafter.