Shariah Contracts & Islamic Banking

Shariah Contracts & Islamic Banking -...

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Shariah Contracts in Islamic  Banking and Finance Hassan O. Ahmed Managing Director DAYAX ISLAMIC BANK Seminar and Workshop on Islamic Banking and Finance Presented By  
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2 Introduction Generally Islam permits trade and commerce and the contracts that are applied thereto are termed muamalat in the Shariah. Muamalat are civil contracts and all civil contracts can be used in Islamic banking and finance. Thus in the concept of Islamic banking and finance the mobilization  of  deposits  is  through  contracts permissible by the Shariah and the application of funds is also through contracts permissible by the Shariah. Bism il-Lah ir-Rahman ir-Rahim
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3   I slam Aqidah (Faith and Belief) Shariah (Practices and Activities) Akhlaq (Moralities and Ethics)
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4 Shariah Requirements Shariah  aspects  of  Islamic  banking  and  finance  revolve  around Shariah requirements which refers to:  - avoidance of prohibitions, and - ensuring  that  the  contract  have  all  their  essential  elements with their necessary conditions
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5 Shariah Requirements The prohibitions are:  - Producing and trading of impure materials, - Producing and trading of materials which are of no  use, - Gharar, - Riba and - Involvement of gambling
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6 Gharar is divided into two namely: 1 - Gharar yasir, i.e. minor or slight gharar, and 2 - Gharar fahish, i.e. major or serious gharar The Gharar that causes a contract to be invalid  is  major gharar . In general terms major gharar is: - an  uncertainty  which  is  so  great  that  it  becomes  unacceptable, or - it is so vague that there is no means of quantifying  it. Gharar
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7 More  specifically  major  gharar  arises  out  of  one  of  the  following: - Asset or merchandise does not exist; - Asset or merchandise cannot be delivered; or - Asset or merchandise is not according to  specifications Gharar
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8 Riba means extra and it is of four kinds. Two kinds are sub- divisions of riba duyun and the other two are sub-divisions of riba buyu’u. 1. Riba duyun (riba out of lending and borrowing)  This kind of riba is the extra amount of money over and above the principal of the loan either: imposed  by  the  lender  upon  the  borrower  in  the contract; or promised by the borrower in the contract. Riba
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Riba Duyun  is sub-divided into:  1.1. Riba qardh i.e. riba is imposed from the  beginning. 1.2. Riba  jahiliyah  i.e.  there  is  no  riba  at  the  beginning;  riba  is  imposed  only  after  default. Riba
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This note was uploaded on 09/09/2010 for the course ACCOUNTING 2345 taught by Professor Dr.ijueh during the Spring '10 term at twsu.edu.

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Shariah Contracts & Islamic Banking -...

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