Vortrag Islamic Finance by Dr. Kohorshid

8/17/2019 Vortrag Islamic Finance by Dr. Kohorshid

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Department of Social and Economic Science

November 5th, 2013

Islamic FinanceIs It an Economic OR Religios

S!stem"#!

Dr$ %l! &horshid'niversit! of Reading, I()% (entre, *enle! #siness School

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Economic S!stem• Is a s!stem of the prodction trade and consmption of

goods services$

• -he economic agent can be individal, bsinesses, or.overnment

• -ransaction occr /hen t/o or more parties agree to thevale or price of the transacted goods or service in anagreed crrenc!

• -he crrenc! or mone! is a medim of echange )one!/as created b! the ancient Eg!ptian approimatel! 2000!ears #(

• )aret base econom! /here goods and services areechanged freel! /ithot interference according to thedemand and sppl! b! barter or echange of mone!

4%dam Smith dened econom! as the prodcts o6ered at anational price generated b! the se of competition , /hile.overnments shold onl! reglate for abse and controlmonopol! , -ransparenc! and information is essential element

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Di6erent Economicss!stem

• Capitalism

• (ompetition is on free maret the price, prodction and consmption ofgoods based on demand and sppl!, the trade privatel! o/ned andmanaged for prot$

• No regards to nemplo!ment, social gro/th

• Communism

• %ll propert! and capitals are o/ned and managed b! the state inclding

economic activities, enterprise, labor, prodction and consmption$

• Emplo!ment is the state to provide, /ages are set b! the state accordingto the national otpt

• Islamic System

• )aret base econom!, /here goods and services are echanged freel!

according to the demand and sppl! b! barter or mone! /ith debit orcredit vale

• Entrepreners are encoraged to create /ealth thro/ emplo!ment andsocial activities

• It is a balance bet/een the t/o s!stems, it is emphasis both individaleconomic freedom and the need to serve the common good

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Religion

• Religion is an organi:ed collection of beliefs, faith,cltral s!stem, ethics, moralit! and /a! of life

• %lmost all religion believe in .od

• -he global sensor 2012 reports that the /orld

poplation has reached ;$< #illion of /hich 2$0 #illion31= (hristians, 1$> #illion 23= )slims, 13$? )illion0$2= @e/s and 5


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(an Econom! andReligion mi

• -he practice of religion is bet/een the person andhis .od in forms of pra! or meditations, and indail! life sch as marriage, fnerar! service,pblic service and charities

• Economic s!stems are manmade s!stem toreglate and reform tradeC -hro/ histor! economic s!stems have taen a form

of tr!ing and testing of /hat to prodce" *o/ toprodce" ho gets /hat is prodced"

Ecac!, gro/th, libert! and eFalit! are obGectivesto achieve in good economic s!stems

In capitalist economic s!stem prodction carried otto maimi:e prot, /hile in socialist s!stems laborand Gobs is the goal

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IslamH -he /ord Islam means

4sbmission7 or 4total srrender7 to .od,

H Islam is a *ol! religion that came to the /orld some1AA3 !ears ago in the !ear 5>?$

H -here are 1$> billion )slims in the /orld 23= oftotal /orld poplation /ith annal gro/th of 15= in2020 )slim poplation epected 25= of the /orldpoplation ,

maing it 2nd largest religion after (hristianit!$ nl!20= of those live in %rab (ontries$

• .od Revealed the JrKan to people throgh his lastmessenger, 8rophet )ohammed 7#8'*7$

• -he JrKan is the holl! boo$

• )ohammedKs /ords and deeds are called SnnahL

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Islam

• -he ve pillars of IslamC

1$ Shahabad profession of faith

2$ Salat pra!er

3$ Maat giving of alms

A$ Sa/m Ramadan fasting dring the month

of Ramadan5$ *aGG pilgrimage to )ecca for those /ho

are able ph!sicall! and nanciall!

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• -here are 1$> billion )slims in the /orld 23= of total /orldpoplation /ith annal gro/th of 15=

• in 2020 )slim poplation epected 25= of the /orld poplation

• nl! 20= of those live in %rab (ontries$

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ShariKah la/ Justice, fairness and morality

• %re vales /hich nderpin both the entire Islamic/a! of life$

• Shariah gives gidance as to /hat is, and /hat is not,acceptable behavior in all areas of a )slims life

• Shari'ah is developed b! Shari'ah scholars &no/n asSchools of thoghts, Safaai, *ana, *anbali, )ali,Sheaat ,etc$ over 1000 !ears ago over A00 !earsafter Islam

• -he recent Scholars no/n as Shari'ah advisors orShari’ah board has stdied OiFh %lB)aamlat able toeplain Shari'ah la/ for recent bsiness dealings$

• -he principal base of the Shariah Pa/ isC

the permissibility, the prohibition is exceptional


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hat is Islamic Oinance"

• Islamic #ans Started in 1A in Eg!pt /ith the rst Islamic#an 4Nasser social ban7 follo/ed b! Islamic developmentban in 15, no/ there are over ;00 Islamic #ans globall!

• Islamic #ans started as interest free ban to help the smallentrepreners to start bsiness, the costs of managing the

ban charged the stac holder as epanses• -he frame/or of an Islamic nancial s!stem is based on

elements of ShariKahIslamic Pa/ /hich prohibit Riba'sr! and .harar Deception and permit Ris sharing

• -he fndamental concept is that the mone! has no inherent

vale and shold be sed as a measre of /orth• Shariah compliant investment are strctred on the

echange of o/nership in tangible assets or services /ithmone! acting as the pa!ment mechanism to e6ect thetransfer of o/nership 10

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Shariah Pa/

• Recent Islamic scholars /ho from time to time reBeamine the ShariKah principals have strctredne/ nancial instrments

• -hose instrments mst compl! /ith principals of

-he of ShariKah la/• Ethics of the Shariah Pa/ originate fromC

The Qur'an

The Sunnah,

Imaa ! consensus amon" the urists,Qiyyas # analo"y

Itihad ! reasonin"

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8rohibitionsIn Islamic nancial s!stem

• 8rohibition of 'nfairness 'nGst

• 8rohibition of Riba sr!

• 8rohibition of .harar Deception Speclation

• 8rohibition of .ambling

• 8rohibition of )onopolies

• 8rohibition of Short Sales

• 8rohibition in mone! trading )one! is a medimnot a commodit!

• 8rohibition of Dealing in 'nla/fl or 'nethical.oods or Services

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ShariKah (ompliant8rodcts

• 8rodcts that echangeable for mone!

• 8rodcts are not prohibited in Islam

• 8rodcts are not traded nder dress

• 8rodcts that are free from Riba

• 8rodcts are traded in the open maret

• 8rodcts that are not monopoli:ed b! onepart!

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Islamic Oinance (ontracts

• #ecase of the importance of mone! to all hmanbeing, regardless of his or her beliefs

• Islam has addressed this isse in general terms,and gave societies the choice to develop their

o/n nancial s!stems, as long as the s!stem is

Fair Just To everyone

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.lobal development of IslamicOinance

• Islamic Oinance is fastest gro/ing segments of the.lobal Oinancial services Indstr!

• .lobal Islamic baning assets /ith commercialbans reached Q1$; trillion in 2013 2011C Q1$3

trillion, representing average annal gro/th of 1>=• Islamic baning gro/th b! 50= faster than overall

baning sector in several core marets

• Shariah compliant nancial assets have been

gro/ing at rate 20B25= over the last 10 ears

estimated at 'SQ 1$? -rillion in 2012, -hat representonl! 1$2 = of the global nancial s!stem

• Still to small sm considering (hina (onstrction#an hold 'SQ 2$; -rillion in assets 1>

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Islamic nance contracts-ools or Instrments

• )sharah EFit! nancing

• )darabahparticipation or -rst nance

• )rabah(ostBpls nancing

• ba! bithaman aGil ##%

• IGara perating lease

• IGara /a IFtinaOinance lease

• Istisnaa(onstrction nancing

• #ai Salaam8a!ment for ftre deliver!

• %rbn8reBprchase of right to acFire

• S Islamic #onds isse

• -a/arrF opposite )rabaha• *ome Oinancing Islamic )ortgage

• Jard *assan Interest free loan

• )saFaa %ggregation

• ):ara (ltivation

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RIS&s OR conventional #%N&S

OPERATIONAL

FOREIGN

EXCHANGE

R$%&TTIO( RIS)

RATE OF

RETURN

$Q&IT*I(+$ST$(

T RIS)

SO-+$(C* &

LIQUIDITY

Interest Rate

Risk

MARKET

CREDIT

RISK

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Riss Oor Islamic #ans

OPERATIONAL

FOREIGN

EXCHANGE

R$%&TTIO( RIS)

RATE OF

RETURN

$Q&IT*I(+$ST$(

T RIS)

SO-+$(C* &

LIQUIDITY

SHARIAH COMPLIANCE

MARKET

CREDIT risk

sare!

RISK

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hat mae Islamic Oinancea .lobal s!stem "

• Islamic Oinance is an economical s!stem based on

Ris. sharin" sharing prot loss

• -he Shariah eplains the ethical concept of the mone!and capital se )one! is a medim of transaction not acommodit!

• -he s!stem prohibit RI#%, bt also o6ers an alternativetools of avoiding Riba

• -he prohibition of .*%R%R 'ncertaint! allo/ing alltransaction to be transparent and free from deception

• -he s!stem sets the social responsibilit! for the nancial

instittion to tae active part in the economicdevelopment to create Gobs and generate /ealth sch as

S issance to raise capital from small investors forne/ proGect development not Gst protmaing

• -he s!stem sets the relationship bet/een RIS& and 8rot22

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hat mae Islamic Oinancea .lobal s!stem

• 8rohibiting trade in 'nethical prodctssch as 8or,pornograph! and alcohol help the econom! to gro/ethicall!

• -here are nmeros eperienced Shariah Scholars /hoare to advise on the Shariah compliant activities

• ver ;0= of investors in S are nonBIslamiccorporate investors becase its safer investment than#onds

• %lthogh their their are di6erent Schools of thoghtsapplied in di6erent parts of the .lob, bt all Schools

agree on the same principals 4di6erent opinions benetthe people7

4 for Eample Shariah interpolation in )ala!sia based onShae School and other parts of the /orld prefer antherSchool , bt overall all Schools follo/ the same path7

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.ro/th Dring the (risis

• ne impact of the .lobal Oinancial (rises has beenthe rise of Islamic Oinance becase its resilience tosch crises

• Not one single Islamic #an an!/here in /orld has

needed to be bailed ot b! tapa!ers or .overnmentDespite some diclties in Dbai real estate

• Islamic #ans /ere not caght p /ith eposre tothe 4-oic %ssets7 %ssets has no vale /hich hit theconventional bans

• 8rodcts o6erings and investment of Islamic #ansare relativel! secre

• -he Festion heir to as isC

old the .lobal crises have occrred if Islamic nanceprincipals had been follo/ed"

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(onclsions

• Econom! and Religion do not mi

• Islamic Oinance is a global nancial s!stem

• Islamic Oinance is an economic s!stem based on

Ris sharing

• Islamic Oinance is not a religios s!stem, its openfor all people )slim and nonB)slim to tae part

• Islamic nance is a s!stem of maing )one!

ethicall!• Islamic nance tools ma! have di6erent

terminolog!, the global econom! appl! similartools, bt the ris have not been shared fairl!bet/een the parties

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2 6

THANK YOU

THE END

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hat case the credit crises

2>

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ideoC What is the Credit crisis?

sorceC httpC++///$!otbe$com+/atch"vTlA&


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/r0 ly )horshid Islamic Oinance Scholar Shariah (onsltantisiting Oello/ of Islamic Stdies

I()% (enser, Reading 'niversit!, '&

Dr$ &horshid has been involved /ith nancial instittions for over 2 decades /ith comprehensivesills and no/ledge in Islamic nance, isiting Oello/ I()% centre *enle! bsiness school'niversit! of Reading, (E of Islamic nance /ith Elite *ori:on economic consltanc!, his roleincldes Strctring, Endorsing and advising on Shariah complaint prodcts /ith particlareperience in (apital and stoc maret prodcts, *e is eperienced in condct comprehensive DeB

diligences on nancial instittions to identif! potential investment opportnities$

Dr$ &horshid has 8hD on Islamic stdies and economics from the 'niversit! of Peeds '&, stdiedOiFh and Shariah at %lB%:har 'niversit! Eg!pt, )aster degree in managements '&$ *is8blications incldes, Islamic Insrance “A modern Approach to Islamic Banking” , and theEnc!clopaedia of Islamic nance, Dictionar! of Islamic Oinance, (orporate .overnance in IslamicOinance, 4 % -ENDER 8ER7 Novel instigates Islamic Oinance for la!man /ithin ction action lovestor!, *e also has man! articles pblished on Islamic nance$

Dr &horshid is a trstee member of %cadem! '& International, member of the institte ofmanagement consltanc! '&, and former visiting lectrer in ElB%:har 'niversit! 4Eg!pt7 andUS%S 'niversit! of Pondon on Islamic nance$ *e is a reglar speaer on Islamic nance isses atconferences and -$

(ontactsC EmailC a$horshidVicmacentre$ac$

al!horshidVmac$com)obilC WAA>>>

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mailto:[email protected]:[email protected]:[email protected]


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%l! &hrshid, 8hD

Peading (onsltants Development

%dvisor! Services on %cademic and

Instittional

Specialised on Islamic #aning andOinance

Eperienced in )anagement and

leadership in commercial and academicenvironment

%thors of more than 5 boos and over >0 Gornal and conference papers

Shariah Scholar, board member inseveral nancial and academicinstittions

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Vortrag Islamic Finance by Dr. Kohorshid

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