Wealth in Islam is divided into two categories: First the public wealth (public utilities and natural resources) that is not owned by individuals, but rather they are the property of the entire nation. In general, anything which does not involve much human effort or cost to make it useful can be concluded, should be belong to society at large.
Saturday, February 27, 2010
Regulatory bodies which govern the financial systems and institutions in Malaysia.
The Malaysian financial system and landscape have undergone a major transformation in this recent decade. The financial sector reforms, with the Asian financial crisis acted as catalyst, have evolved a complex financial system. The rapid growth in the volume of financial transaction and the interdependence to global economy has resulted in greater potential vulnerabilities and risks to the stability of the financial system.
ISSUES IN BAY’ AL-‘INAH AND BAY’ AL-DAYN AND PROPOSAL FOR OTHER CONCEPTS AVAILABLE IN ISLAMIC COMMERCIAL LAW TO BE EMPLOYED AS ALTERNATIVES IN CONTEMPORARY ISLAMIC FINANCE
ABSTRACT
The application of bay’ al-‘inah (sale and repurchase back) and bay’ al-dayn(sale of debts) is making the Islamic financial industry lost its identity. The issues are serious to the Islamic financial market movement, as it is not about minor details of religious practices (furuq) but sadly dealing with the fundamental (usul) of religion. This time it is riba or usury. Its application in Islamic financial market is partly caused by the lack of knowledge in riba that is both definite and decisive. For this reason, it is critical to put things straight and get to the basics again. This project paper endeavours to explore the critical issues in regard to both instruments and other concepts available in Islamic commercial law that can be employed as alternatives.
Rationality of decision making by market players is by itself ethical. As such there is no need to regulate a market that is functioning efficiently. Do you agree? Discuss.
I disagree because there were many cases that shown the market players try to take advantage in the loop holes of the system for example insider dealing. The regulations to control the market are needed because eventually, fraud will happen in the market. This happen because there is incentive, coming from greed intensity, will lead that to happen. There is also an opportunity for it to happens and it is hard for unethical people for not to make bad things. These are some of the justifications for the needs of laws and regulations to be in place in order to prevent it. There are also the needs for protection of interest of the market player for their rights and to preserve justice and equality.
The issue of moral hazard and adverse selection issues in musharakah contracts and proposal for risk mitigation.
1.0 Introduction
Commonly, business ventures start off with a loan. For Muslims, loans cannot be made or accepted according to traditional banking methods because this invariably entails the payment and receipt of interest and therefore is not permissible. Islamic banking allows prospective clients to borrow money while still adhering to Shariah law through profit-and-loss sharing scheme of financing; mudarabah[1] and musharakah contracts. Musharakah (partnership) is the second basic Profit and Loss Sharing (PLS) concept in Islamic banking.
The Islamic legal maxim “al-ghorm bil ghonm” that is, “no reward without risk” is an important principle in Islamic finance. Discuss why this is so?
The explicit Quranic verse (Al-Baqarah : 275) says that “Allah hath permitted trade and forbidden riba (usury)....”, to counter back the claims made by the Meccan pagans that the trade (al-bay) is like usury. For them, the excess return over the loans provided to debtors are exactly the profits gained from the trade. However, when one looks closely to the nature and function of riba, it is, in fact, an extremely oppressive business activity.
In an Islamic hire purchase scheme, suppose an Islamic bank is required to purchase a car before leasing it to the customer. Discuss how this could affect the bank’s profit and loss?
Accounting and Auditing Organisation For Islamic Financial Institutions (AAOIFI) was formed to undertake responsibility for issuing accounting standards that adhere to the requirements of Shariah. In Shariah, it recognises the application concept of ‘substance’ and the ‘form’ and does not particularly endorsed to the concept of ‘substance over form’.
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