Module Title: Islamic Banking & Finance
Module Director: M. Iqbal Asaria, CBE
Elective Module : All Routes
This module provides an insight into the key features of Islamic Banking & Finance. The module will look at topical issues relating to Islamic banking products and financial instruments and related risk management issues. The module includes the operational features of Islamic banks and financial
institutions, focussing on their performance and how they compete with conventional interest-based banks. It also examines issues relating to financial contracting, instruments and various intermediation issues. Finally the module will outline contemporary challenges for Islamic banking business.
Module Aims & Objectives:
On completing this module students will be able to:
- Explain the implications of the application of Islamic principles in banking and financial intermediation
- Distinguish between Islamic principles and conventional practices based on interest
- Understand the implications of the traditional Islamic concepts of musharakah and mudarabah for the practical commercial operations of banks and financial institutions
- Apply the principles of Islamic finance to a range of investment and portfolio management issues
- Draw comparisons between the conventional and Islamic banking business models
- Apply appropriate techniques for the evaluation of the financial performance and efficiency of Islamic banks;
- Design financial instruments that satisfy requirements for Shari’ah compliance, and the correct application methods.
- Identify the challenges currently facing the Islamic banking sector and the prospects and opportunities for future growth and development.
- An Introduction to Islamic Finance – Theory & Practice Zamir Iqbal & Abbas Mirakhor - Wiley
- Islamic Finance – Why it Makes Sense Daud Vicary Abdullah & Keon Chee - Marshall Cavendish International (Asia)
Means of Assessment:
This module is assessed by means of a single mini-project of 5,000 words in length.
Unit One covers:
This unit will explore the development of Economics and Finance in Muslim Societies and also relate them to parallel developments in faith based societies. We will look in detail at the sources of Islamic commercial law and how these translate into the various financial contracts now in use by Islamic Financial Institutions. The key Intermediation and Financing contracts are discussed and we show how these combine to make up Islamic Banks servicing the requirements of customers. It will enable students to understand the demand side – i.e. Intermediation and financing - of the activities of Islamic Financial Institutions.
Unit Two covers:
In Unit 2 we will look at the Savings and Investment functions in Islamic Finance. The Unit will look at the extent of availability of all relevant asset classes to users of Islamic Finance i.e. at short term liquidity and cash investments, equity investments, property investments, investments in Sukuks (“Islamic Bonds”) and investments in alternative assets. The Unit will examine in detail the development of Shariah screening of stocks. The screened stock universes form the basis of the equity class for asset managers. They provide the building blocks for equity funds, exchange traded funds, private equity funds and Real Estate Investment Funds (REITS) amongst others. We also look at structuring and using Sukuks to raise finance and create tradable financial instruments to mirror the “bond” markets in conventional finance.
Unit Three covers:
Here we will explore governance, regulatory, accounting and taxation issues relating to Islamic Financial
Institutions. Shariah Governance and the role of Shariah Scholars and Shariah Supervisory Boards also will be examined. The role of the IFSB (Islamic Financial Services Board) and AAOIFI (Accounting and Auditing Organisation for Islamic Financial Institutions) in providing regulatory oversight and liaison with regulatory bodies in different jurisdictions will also be discussed. The differing treatment of various Islamic financial contracts under AAOIFI and IFRS (international Financial Reporting Standards) standards and their implications are explored. The nature of Islamic Financial contracts also creates a host of issues where taxation and accounting practices and conventions present challenges to create “level playing fields” in jurisdictions where both Islamic and conventional financial products are present. Finally, Unit 3 looks at the challenges and issued faced by Islamic Finance and Banking as it becomes a major component of many countries’ banking and financial systems. It is Unit 3 is supported by an extensive range of Special resources posted on Blackboard. These form a vital part of the Unit.
Tutor Biography - Mr Mohamed Iqbal Asaria
Iqbal is a trained Economist and Accountant. He has worked as an Investment Analyst in the City of London for several years. He has been involved in consultancy on financial product structuring and niche marketing services to faith and ethnic communities in the UK. As part of these services he has advised many banks and insurance companies in the UK on their launch of Islamic financial services.
A member of the Governor of the Bank of England's working party set up to facilitate the introduction of Shariah compliant financial products in the UK market - Iqbal teaches various MSc, MA and MBA courses in Islamic Finance, Accounting, Banking and Insurance at CASS Business School, Aston Business School and Bangor Business School. He also teaches the Islamic Economics and Islamic Finance and Banking modules for the CASS Business School EMBA in Dubai. Iqbal is a regular contributing tutor to Durham University’s Summer School on Islamic Finance. He was awarded the CBE in the 2005 Queen's Honours List for services to international development.