Introduction to CTU351 Fundamentals of Islamic Banking

1. ISLAMIC
BANKING AND
FINANCE
Mahyuddin Khalid
emkay@salam.uitm.edu.my
INTRODUCTION TO CTU351

2. 2
COURSE BACKGROUND
Course code : CTU351
Course name : Fundamentals of Islamic Banking
Level : Diploma
Credit hour : 4
Contact hour : 4
Part : 5
Status : CORE
Prerequest :

3. COURSE OUTCOMES
 At the end of this course, students should be
able to:
1. Explain the essentials of Shariah-compliant
banking system.
2. Differentiate Islamic Banking System (IBS)
against the conventional system.
3. Evaluate the modus operandi of Shariah-
compliant investments/instruments and
financing facilities under the Islamic Banking
System.
3

4. COURSE DESCRIPTION
 This is an introductory course to Islamic Banking
for students to understand the fundamentals of
Shariah-compliance banking system.
 Students will be introduced to the concepts and
principles adopted/adapted by Islamic banks to
comply with the Shariah requirements.
 The course will equip students with the basics to
distinguish between Islamic and conventional
banking system, expose students to the modus
operandi of selected facilities/instruments offered
by Islamic banks and assist them in evaluating
the value proposition promoted by Islamic
Banking System.
4

5. SYLLABUS CONTENT
 Overview of Financial System
 Financial Markets and Institutions
 Roles of Banks as Financial Intermediaries
 Framework of Islamic Financial System
 Islamic Banking, Takaful, Islamic Capital Market
(ICM) and Islamic Interbank Money Market (IIMM)
 Historical Development of Islamic Banking
 Structure of Islamic Bank
 Compliance to the Scheme of Shariah Laws
 3.1 Primary and Secondary Sources of Shariah
Laws
 3.2 Aqidah, Akhlaq, Shariah ( Ibadat & Muamalat )
 3.3 Ethics in Islamic Financial System
5

6. SYLLABUS CONTENT
 Principles of Islamic Banking
 Investment and Financing of Halal (Permissible) Activities
 Profit and Loss Sharing vs. Lender-Borrower
Relationship
 Trade-based Financing vs. Interest-based
Investments/Loans
 Prohibition of Riba, Gharar (unnecessary risk) and Maysir
(gambling / speculation)
 Payment of Zakat
 Sources of Funds - Savings/Investments and the
underlying Shariah Concepts
 Al-Wadiah/Al-Mudarabah Savings Accounts
 Al-Wadiah/Al-Mudarabah Current Accounts
 Al-Mudarabah General Investment Accounts (MGIA)
 Al-Mudarabah Special Investment Accounts (MSIA)
6

7. SYLLABUS CONTENT
 Application of Funds - Financing Facilities and the
underlying Shariah Concepts
 Home/Property Financing (Bai’ Bithaman Ajil / BBA)
 Home/Property Financing (Musharakah)(Musharakah
Mutanaqisah)
 Motor Vehicle Financing (Al-Ijarah) (Al-Ijarah Thumma al-
Bai’)
 Personal Financing (Bai’ al-Inah)
 Credit Cards (Al-Wadiah)( Bai’ al-Inah)(Qard al- Hasan)
 Project Financing (Al-Mudarabah) (Al-Musharakah)
 Acquisition of Assets (Al-Bai’ Bithaman Ajil)
 Working Capital Financing (Al-Murabahah )
 Letter of Credit (Wakalah) (Musharakah) (Murabahah)
 Islamic Accepted Bills (Bai` al-Dayn)
 Islamic Export Credit Refinancing (IECR)
7

8. SYLLABUS CONTENT
 7. Treasury
 Islamic Inter-Bank Money Market
 Foreign Exchange Trading
 Other Services
 Agency (Al-Wakalah)
 Guarantee (Al-Kafalah)
 Commission (Ju’alah)
 Fee (Al-Ujr)
 Remittance (Al-Hiwalah)
8

9. COURSE ASSESSMENT
 Continuous Assessment
50%
 Test 15%
 Assignment 15%
 Presentation 20%
 Final Exam 50%
 Total 100%
9

10. REFERENCES
 Main Reference:
 Rosly, Saiful Azhar. 2005. Critical Issues on Islamic Banking
and Financial Markets. Kuala Lumpur: Dinamas Publishing.
 Additional References:
 Haron, Sudin & Shanmugam, Bala. 2001. Islamic Banking
System: Concepts & Applications. Malaysia: Pelanduk
Publications.
 Islamic Banking Practice from The Practitioner’s Perspective.
1994. Kuala Lumpur: Bank Islam Malaysia Berhad.
 Usmani, Muhammad Imran Ashraf. 2002. Meezanbank’s Guide
to Islamic Banking. Karachi: Darul Ishaat.
 Gafoor. A.L.M, Abdul. 2005. Interest, Usury, Riba and The
Operational Costs of a Bank. Kuala Lumpur: A.S.Noordeen
 Shanmugam, B., Perumal.V., & Ridzwa.A.H. (Eds.). 2004.
Islamic Banking: An International Perspective. Serdang:
Universiti Putra Malaysia Press.
10

11. 11
FORMAT OF ASSIGNMENT
 Font:
 Use Times New Roman
 Size: 12
 Spacing:
 Double
 10-15 pages
 Primary references:
 THREE books or
 FIVE articles from journal

12. 12
REFERENCING
 Use the APA (American Psychological Association)
referencing system.
 References in the text should include author’s name,
publication year and page number if available.
 Examples of citations in text :
 One author (Bean, 1992, p. 33); two authors (Graham &
Krugman, 1989); more than two authors (Bernanke et al., 1999)
or
 Bean (1992, p. 33), Graham and Krugman (1989), and
Bernanke et al. (1999).
 In the case of more than two authors, the first citation
includes all the last names of the co-authors. The above
examples only apply for subsequent citations.
 References must be listed in alphabetical order of first
author at the end of the paper.

13. 13
REFERENCING - EXAMPLE
 Article in Journal:
 Dornbusch, R. (1976), Exchange Rate
Expectations and Monetary Policy, Journal of
International Economics, 6, 231-44.
 Chapter in Book:
 Dornbusch, R. (1977), The Theory of Flexible
Exchange Rate Regimes and Macroeconomic
Policy, In J. Herin, A. Lindbeck & J. Myhrman
(Eds.),
 Flexible Exchange Rates and Stabilization Policy
(pp. 123-43), Boulder, CO: Westview Press.

14. 14
REFERENCING - EXAMPLE
 Books:
 Helpman E., & Krugman, P. (1985). Market Structure and
Foreign Trade. Cambridge: MIT Press.
 Mishkin, F.S. (2004). The Economics of Money, Banking and
Financial Markets (7th ed.). Boston: Addison Wesley
 Electronic Sources:
 Electronic reference formats recommended by the American
Psychological Association. (2000, October 12). Retrieved
October 23, 2000, from http://www.apa.org/journals/webref.html
 Eid, M. & Langeheine, R. (1999). The measurement of
consistency and occasion specificity with latent class models: A
new model and its application to the measurement of affect.
 Psychological Methods, 4, 100-116. Retrieved November 19,
2000, from the PsycARTICLES database
 *If information is retrieved from an aggregated database,
and the name of the database is provided and sufficient, no
address is needed (as in the second example for electronic
sources)*

15. 15
TABULATION OF MARKS
 Introduction = 1%
 Facts = 3%
 Explanation = 3%
 Conclusion = 1%
 Reference = 2%
 Total = 10%

16. 16
FORMAT OF PRESENTATION
 Format:
 Power point presentation
 Time of presentation:
 30 minutes
 Q & A session:
 20 minutes

17. 17
TABULATION OF MARKS
 Explanation of facts = 4%
 Q & A = 4%
 Creativity = 1%
 Time management = 1%
 Total = 10%

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