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Islamic Finance

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Modern History of Islamic Finance. 1963 Mit Ghamr Egypt, based on profit sharing and concepts of mutual credit union ... Deferred payment or credit installment sale ... – PowerPoint PPT presentation

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Title: Islamic Finance


1
Islamic Finance
  • Nigel Denison
  • Bank of London and The Middle East plc

2
Introduction
  • Modern History of Islamic Finance
  • Basic Principles and Prohibitions
  • Products
  • Future of Islamic Finance

3
Modern History of Islamic Finance
  • 1963 Mit Ghamr Egypt, based on profit sharing
    and concepts of mutual credit union
  • 1975 Islamic Development Bank
  • 1975 1990 Replication of commercial banking
  • 1980 onwards Expansion of product ranges
  • 2000 onwards Rapid expansion of the market

4
Shariaa Law
  • Framework of ethical principles
  • Quran Text of God
  • Sunnah Words or acts of the prophet
  • Ijma Consensus
  • Qiyas Analogy or case law
  • Ijtihad Interpretation
  • Important choice of business style
  • Underlying Concepts
  • Wealth Creation
  • Charitable Distribution
  • Asset and Enterprise Bias
  • Risk and profit sharing

5
Prohibitions
  • Riba or Usury
  • Excess compensation from pre-agreed interest
  • Excess compensation without consideration
  • Gharar or Uncertainty
  • To unknowingly expose oneself or ones property
    to jeopardy
  • Occurs in transactions which are not to the
    benefit to one of the parties
  • Deceit
  • Maysir or Gambling
  • Games of chance
  • Does not apply to risks taken in life or business
    activities

6
Infrastructure Banks
  • Windows
  • Branches
  • Subsidiaries
  • Shariaa based banks

7
Products
  • Mudaraba
  • Partnership contract, only 1 party providing
    capital
  • Often used for clients depositing money with the
    bank
  • Musharaka
  • Partnership contract, all parties providing
    capital and expertise
  • Often used for investment in businesses or
    mortgage contracts
  • Murabaha
  • Deferred payment or credit installment sale
  • Often used for the purchase of goods on credit or
    interbank liquidity
  • Ijara
  • Financial or Operating Lease
  • Sukuk
  • Islamic Bond

8
The Future
  • The City as an Islamic Finance hub
  • Other European initiatives
  • UK Government Sukuk
  • Growth expectations
  • Future challenges

9
Questions
10
Appendix Terminology
11
Terminology
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