Programme
ELEMENT 1: Introductionto Islam
The principles and concepts which underpin Islam; the placing of banking and finance within Islam; the sources and nterpretation of Islamic law; introduction to the role of the Shariah Supervisory Board.
- Know the place of Shariah in Islam
- Know the sources of Islamic law
- The Quran
- The Sunnah
- Ijma’
- Qiyas
- Ijtihad
- Know the authorities responsible for interpreting the Quran and Sunnah
- The Scholars within the Schools of thought
- The Islamic Fiqh Academy
- The Scholars
- Know the role of the Shariah Supervisory Board
ELEMENT 2: Introduction to Islamic Banking and Finance
The basis of Islamic banking and finance; the development of the Islamic finance and banking industry; the main components of the Islamic banking industry and its operating structures.
- Know the main sources of understanding for the application of Islamic guidance to commerce:
- Quran
- Sunnah
- Shariah
- Fiqh
- Understand the concepts underlying Islamic finance:
- Moral guidance governing property and wealth given through the Quran, ahadith and custom
- Why riba (interest) is forbidden
- The obligation to make charitable distributions: zakat (obligatory) and sadaqat (voluntary)
- The role of trade and investment in wealth creation
- The avoidance of riba through profit and loss sharing in an enterprise or negotiated price in sale or lease transactions
- Know the historical development of modern Islamic finance and banking:
- The beginnings of Islamic banking
- Islamic banking in the GCC countries
- Islamic banking in Southeast and South Asia
- Islamic banking in Europe and America
- Know the regulatory bodies overseeing Islamic finance and banking:
- The Regulators (central banks or other authorities)
- The standard-setters (AAOIFI and IFSB)
- Other Institutions supporting the development of Islamic finance and banking
- Know the components of the Islamic finance and banking industry:
- The banks
- The Shariah – compliant equity markets
- The market for Sukuk (Islamic bonds)
- The Islamic insurance companies – Takaful
- The waqf properties (Islamic charitable trust)
- The zakat funds (funds constituted of charitable obligatory tax)
- Know the operating structures and organisational forms adopted by Islamic financial institutions:
- The windows model
- Branches
- Subsidiaries
- Independent Islamic banks
- Know the constraints / challenges on the development of the Islamic banking and finance industry
ELEMENT 3: Islamic Law of Contracts
Principles of Islamic business including the avoidance of riba and gharar; the concept of Wa’d (promise); the elements of a valid contract; the different types of contract; the purchase and sale of currencies.
- Understand the ethical underpinning to Islamic finance
- Know the Islamic teachings relating to business
- Know the major prohibitions in Islam (Riba, Gharar)
- Understand the difference between Riba an-Nseeyah and Riba al-Fadl
- Understand the nature of Gharar, its cause and its impact on contracts
- Understand the concept of Wa’d (promise) and the conditions which make a commercial promise binding
- Know the nature of a Muwaada (bilateral promise agreement)
- Understand the components of A’qd (contact):
- The contracting parties
- Subject matter
- Offer and acceptance
- Know the nature of Aqd’ Al Wakala (agency contract)
- Understand the classification of contracts with respect to their effect:
- Valid (Sahih) including Nafiz and Mawqoof contracts
- Voidable (Fasid) contracts
- Invalid (Batil) contracts
- Know the types of contract: unilateral and bilateral with respect to their underlying purpose
- Understand the elements and conditions of a contract of exchange
- Know the problematic sales contracts
- Know the nature of the contract of Ijara
- Know the nature of the partnership contract of Mudaraba
- Know the nature of the partnership contracts of Musharaka and Diminishing Musharaka
- Know the nature of the security contracts:
- Hawala
- Kafala
- Rahn
- Know the issues associated with the debate regarding the purchase and sale of currencies
- Know AAOIFI’S approach regarding the sale of currencies
ELEMENT 4: Financial techniques
The nature of Islamic current accounts; the nature of the major contracts – Mudaraba, Musharaka, Murabaha, Ijara, Salam, Istisn'a; the use of letters of credit and guarantees in Islamic finance contracts.
- Understand the operation of current accounts under Shariah conditions
- Understand the distinction between a traditional bank intermediary and an Islamic intermediary, including the relationship between the bank and its clients
- Understand how funds are used by Islamic banks
- Understand the Islamic model and the challenge it presents
- Be able to apply the Mudaraba contract in practice
- Understand the roles of and the returns received by the Rab al Mal and Mudarib under an Mudaraba contract
- Know the nature of a Two Tier Mudaraba contract
- Be able to apply the Musharaka contract
- Understand the nature of the Diminishing Musharaka contract
- Be able to apply the Murabaha contract
- Understand the Shariah conditions for a valid Murabaha contract
- Understand the use of Murabaha in export finance
- Know the difference between a Murabaha sale and a loan of money
- Know the nature of Murabaha to the Purchase Orderer
- Know the main components of Commodity Murabaha transactions
- Know how Arbun is used to synthesise option behaviour
- Understand the operation of Bai al Inah and Tawarruq>
- Be able to apply the Ijara contract
- Understand the redemption of a lease through Ijara wa Iqtina / Ijara Muntahia Bitamleek
- Understand the use of Ijara Mawsoofa Bil Thimma
- Be able to apply the Salam contract
- Understand the documentation associated with a Salam contract
- Understand the use of Parallel Salam in managing bank assets acquired under a Salam contract
- Be able to apply the Istisn’a contracts
- Understand the reasons for Parallel Istisn’a contracts
- Understand the differences between Istisn’a and Salam contracts
- Know the use of Letters of Credit and guarantees in Islamic finance contracts
- Know the Islamic contracts used in stock brokerage an money transfer services
ELEMENT 5: Financial Statements for Islamic Banks
The framework of International Financial Reporting Standards; contents of the main financial statements; the need for specific Islamic accounting standards; and the role of AAOIFI and IFRS.
- Understand the conceptual framework for IFRS/IAS:
- The aims of IAS/IFRS
- The objectives of financial statements
- The qualitative characteristics required of financial statements
- The general principles governing decision making and presentation of financial data
- The fundamental accounting assumptions underpinning financial statements
- Know the main financial statements prepared by companies to report their financial performance
- Know the purpose and main contents of the balance sheet
- Know the purpose and main contents of the profit and loss account
- Understand the need for Islamic accounting standards
- Know the responsibilities of AAOIFI
- Understand the conceptual framework of AAOIFI financial accounting statements:
- The qualitative characteristics of accounting information
- Understand the application of the accrual method of accounting to Islamic banks:
- The conditions realising recognition of revenue
- Know the basic accounting treatment of the main Islamic contracts:
- Murabaha
- Mudaraba
- Musharaka
- Salam
- Parallel Salam
- Ijara
- Ijara Muntahia Bitamleek
- Know the key issues involved in accounting for Islamic Investment Accounts:
- The different accounting interpretations of the IASs used with Islamic Investment accounts
- Know the methods of calculating Zakat and the accounting treatment
ELEMENT 6: Islamic Corporate Governance
The different approaches to corporate governance; additional challenges presented by Islamic banks; the role of the Shariah Supervisory Board and corporate governance issues in Takaful.
- Know the origins and nature of Corporate Governance
- Know the Corporate Governance mechanisms available to stakeholders to exercise their rights
- Know the different approaches regarding the identities and rights of stakeholders
- Understand the reasons for banks presenting special Corporate Governance challenges
- Understand the reasons for Islamic banks presenting different Corporate Governance challenges to conventional banks
- Know the role of the Shariah Supervisory Board in the Corporate Governance of an Islamic bank
- Understand the distinction between the rights of Restricted Investment Account Holders (RIAH) and Unrestricted Investment Account Holders (UIAH)
- Understand the nature of Restricted and Unrestricted Investment Account
- Understand the distinction between information rights, control rights and cash flow rights for RIAH and UIAH
- Understand the Corporate Government issues facing the Takaful industry
ELEMENT 7: Islamic Asset and Fund Management
The purpose of investment in Islam; prohibited industries; replicating conventional deposit structures using Murabaha and Mudaraba; investment funds using Ijara; the Islamic stock selection process and the role of the Shariah Supervisory Board.
- Understand the constraints applying to Islamic investmentUnderstand the replication of conventional deposit markets through the use of Murabaha and MudarabaUnderstand the use of Ijara contracts in replicating conventional investment funds
- Understand the growth in types of Islamic investment products to respond to clients’ risk/ reward profile
- Be able to apply the Islamic stock selection process through the Industry and Financial Screens
- Understand the approaches used to handle non-compliant stocks in a stock selection
- Know approaches used to manage the market risk of portfolios and equity funds
- Know the issues fund managers face in applying liquidity strategic to Islamic funds
- Know the issues relating to origination and distribution of Islamic investments funds
- Know the functions of the various components of an Islamic mutual fund structure
- Know the role of the Shariah Committee in Islamic fund management
- Know the issues influencing financial disclosure for managed funds
- Know the developments taking place to expand the range of Islamic investment funds
ELEMENT 8: The Islamic Bond Market – Sukuk
The nature of Sukuk compared with conventional bonds; issuing Sukuk; different types of Sukuk; AAOIFI standards for Sukuk and rating Sukuk issues.
- Know the difference between conventional and Islamic securities
- Understand the responsibilities of the different parties to a Sukuk
- Know the reasons for the lack of financial guarantees for Sukuk
- Know the differences between managing Sukuk and managing conventional securities
- Understand the basic processes involved in the issuance of Sukuk
- Be able to apply the Mudaraba Sukuk
- Be able to apply the Musharaka Sukuk
- Be able to apply the Ijara Sukuk
- Be able to apply the Salam Sukuk
- Be able to apply the Istisn’a Sukuk
- Know the AAOIFI Sukuk standards
- Understand capital market considerations relating to Sukuk:
- Rating the issue
- Distribution
ELEMENT 9: Islamic Co-operative Insurance – Takaful
The nature and structure of Takaful compared with conventional insurance; remunerating the insurance operator and
Shariah governance of Takaful undertakings.
- Understand the position of Islam regarding insurance
- Understand the origins of Islamic insurance:
- The characteristics of mutual insurance
- The nature of conventional mutual insurance
- The nature of as Takaful undertaking and the need to avoid gharar (uncertainty) through Tabarru’ (donation) and Riba (interest) through the use of non-interest bearing assets
- The structure of Takaful undertakings: non-profit and commercial
- Know the two types of Takaful: general and life (family) including the nature of Family Takaful using “endowment” type policies
- Understand the differences between conventional proprietary insurance, conventional mutual insurance and Takaful
- Understand the structure of Takaful:
- Separation of participants’ funds from those of the Takaful operator
- The role of Qard (interest free loan)
- Be able to apply the three models for underwriting and managing the investments of the Takaful fund:
- Wakala
- Mudaraba
- The combined model
- Know the contracts of Fiqh al Muamalat used in Islamic insurance
- Understand the rules on distribution of underwriting surpluses in Takaful:
- The definition of an underwriting surplus
- The nature and allocation of technical provisions
- The rules for distributing underwriting surpluses
- Understand the risks associated with Takaful claims and their migration:
- The nature of technical provisions for general Takaful
- Implications of the size of the risk pool
- The nature of the underwriting and investment fund in Family Takaful
- Internal risk pooling arrangements
- Know how reinsurance operates in Islamic insurance:
- The funding of reinsurance
- The place of ReTakaful
- Know the responsibility of the Takaful operator for Sharia’a compliance