Islamic Financial Instruments

This module aims to introduce the student to the principles of Islamic financial instruments and how they are practised in the current Islamic banking experience focusing on specific examples such as sukuk, assest valuationand innovation and risk management practides in accordance with Shariah.

Core Module for MA Islamic Banking, Finance & Management

None

None

• Principles of Islamic financial instruments
• Murabaha and Ijarah financing modes
• Islamic financing modes for future delivery
• Securitisation and the structure of sukuk
• Valuation and pricing of Islamic investment assets
• Financial derivatives and challenges of Islamic financial innovation

Knowledge and Understanding

On successful completion of this module students should be able to:

1. Appreciate the principles and operation of Islamic financial instruments in the current banking experience.
2. Understand the structure and operation of sukuk through a background of securitisation methods as practiced in modern markets.
3. Appreciate the area of Islamic asset valuation and pricing.
4. Understand how time affects Islamic financial instruments.
5. Examine how dangerously manifest is prohibited gharar in modern financial derivatives.
6. Appreciate how innovation and risk management may be practiced in accordance to Shariah.

Skills

By the end of this module students should have developed skills to enable them to:

1. Develop the ability to handle a range of Islamic financial instruments within the banking sector
2. Critically evaluate the effectiveness of the structure and operation of Islamic financial instrument
3. table.MsoNormalTable { font-size: 10pt; font-family: "Times New Roman"; } Contribute to the debate on Islamic versus conventional banking against today’s financial climate.

Each student should participate in 150 hours of study, including lecturers (6 hours), seminars (6 hours), tutorials (6 hours), plus personal guided study (132 hours)

Examination (2.5 hours standard closed)

One assignment of 2,500 words Presentation 10%

Main Text

• Accounting and Auditing Organisation for Islamic Financial Institutions (2008). Shariah Standards. Manama: AAOIFI.
• Al-Zuhayli, Wahbah. (2003. Financial Transactions in Islamic Jurisprudence, Vol. 1 & 2. Damascus: Dar Al-Fikr.
• Ayub, Muhammad. (2007). Understanding Islamic Finance. Chichester: John Wiley & Sons Ltd. ISBN 978-0-470-03069-1.
• Chapra, Umar and Habib Ahmed, (2002) Corporate Governance in Islamic Financial Institutions, IRTI, IDB, Jeddah.
• El-Gamal, Mahmoud A. (2006). Islamic Finance: Law, Economics and Practice. Cambridge: Cambridge University Press.
• Kabir, Hassan and Lewis, M. (2007), Handbook of Islamic Banking; Edward Algar, ISBN-978 1 84542 083 3.
• Khan, Tariquallah and Habib Ahmed, (2001) Risk Management and Analysis of Issues in the Islamic Financial Industry, IRTI, IDB, Jeddah.
• Obaidullah, Mohammad (2005). Islamic Financial Services (1st ed.), Islamic Economics Research Centre, King Abdulaziz University,
• Schoon, Natalie. (2009). Islamic Banking and Finance, London: Spiramus Press Ltd.
• Vogel, Frank and Hayes, Samuel. (1998). Islamic and Finance. Cambridge: Kluwer Law International.

Supplementary Books:

• Haron, S., Shanmugam, B. (1997). Islamic Banking System: Concepts & Applications, Kuala Lumpur: Pelanduk Publications
• Khir, K., Gupta, L., & Shanmugam, B. (2008). Islamic Banking – A Practical Perspective. Kuala Lumpur: Pearson Longman
• Usmani, M.T. (1998). An Introduction to Islamic Finance, Karachi: Idaratul Ma’arif .