Department of Social and Economic Science November 5th, 2013 Islamic Finance

Fair & Just

To everyone

Global development of Islamic Finance

• Islamic Finance is fastest growing segments of the Global Financial services Industry
• Global Islamic banking assets with commercial banks reached $1.6 trillion in 2013 (2011: $1.3 trillion), representing average annual growth of 17%
• Islamic banking growth by 50% faster than overall banking sector in several core markets
• Shari’ah compliant financial assets have been growing at rate 20-25% over the last 10 Years estimated at US$ 1.8 Trillion in 2012, That represent only 1.2 % of the global financial system
• Still to small sum considering China Construction Bank hold US$ 2.6 Trillion in assets

Islamic finance contracts (Tools)
Mudarabah
Musharakh
Murabaha
Ijara Contracts, etc.
Ijara Wa Iqtina
Salam
Istisna'a
Bai be Thaman Ajil
Sukuk
Arbun
Qard Hassan
Tawarruq
Home Financing
Musaqaa
Muzara

Islamic finance contracts (Tools or Instruments)

• Musharakh( Equity financing)
• Mudarabah(participation or Trust finance)
• Murabah(Cost-plus financing)
• bay’ bithaman ajil (BBA)
• Ijara (Operating lease)
• Ijara wa Iqtina(Finance lease)
• Istisna’a(Construction financing)
• Bai Salaam(Payment for future delivery)
• Arbun(Pre-purchase of right to acquire)
• Sukuk( Islamic Bonds issue)
• Tawarruq (opposite Murabaha)
• Home Financing (Islamic Mortgage)
• Qard Hassan (Interest free loan)
• Musaqaa (Aggregation)
• Muzara (Cultivation)

RISK’s FOR conventional BANKS
OPERATIONAL
FOREIGN EXCHANGE
REPUTATION RISK
RATE OF RETURN
EQUITY INVESTMENT RISK
SOLVENCY
&
LIQUIDITY
Interest Rate Risk