Islamic law and finance : religion, risk, and return / by Frank E. Vogel and Samuel L. Hayes III.

Format:

Book

Author/Creator:

Vogel, Frank E.

Contributor:

Hayes, Samuel L.

George R. Fink Memorial Fund.

Series:

Arab and Islamic laws series

Language:

English

Subjects (All):

Finance (Islamic law).

Finance--Islamic countries.

Finance.

Islamic countries.

Physical Description:

xv, 330 pages : illustrations ; 25 cm.

Place of Publication:

The Hague ; Boston : Kluwer Law International, [1998]

Contents:

What Is Islamic Banking and Finance? 1

The Origins of Islamic Finance 4

Growth in Islamic Financing Activity 5

Financial Intermediaries 6

Current Bank Products 7

The Impact of Religious Scholars 9

Government Influence 10

The Potential of Islamic Banking and Finance 13

Chapter 2 Islamic Finance as the Application of Islamic Law 19

Religious Law (Shari'a and Fiqh) 23

Relevance of the Religious Law to Banking and Finance 24

Obstacles to the Application of the Islamic Law 28

Islamic Law and Islamic Economics 29

Structure and Method of Classical Law in Theory and Practice 31

Ijtihad, or Derivation from Revealed Sources 32

Shari'a and Fiqh; Divergence of Opinion; Schools of Law 32

Four Methods of Elaborating the Law: Interpretation, Choice, Necessity, and Artifice 34

Ethical and Legal Consequences of Islamic Legal Rulings 41

The Casuistic Style of Classical Islamic Legal Reasoning 42

Modern Reinterpretations 44

The Context for Islamic Legal Developments in Islamic Banking and Finance 47

Modern Islamic Legal Institutions 47

Islamic Legal Application in a Western Legal Environment 50

Chapter 3 Qur'an and Sunna on Contract and Commerce 53

Property or Wealth 56

Trade by Mutual Consent 59

Debt 61

Usury 62

Gambling and Risk 63

Commercial Ethics 65

Fulfilling Contracts 66

Freedom of Contract 67

Chapter 4 Islamic Laws of Usury, Risk, and Property 71

Law of Usury (Riba) 72

The Qur'an; Riba al-Jahiliyya 72

The Sunna 73

The Sunna on Riba in Sales 74

The Sunna on Riba in Loans 77

Plumbing the Rules of Riba 77

Gambling (Maysir) and Risk (Gharar) 87

The Spectrum of Risks and Their Prohibitions 88

Classical Fiqh Rules on Gharar 91

Fiqh Provisions on Property (Mal) 94

Chapter 5 Islamic Law of Contract 97

Freedom of Contract 97

New Contracts 98

Stipulations 100

The Nominate Contract Scheme 102

Mutually Onerous Contracts 102

Gratuitous Contracts 105

Accessory Contracts 107

Four Principles of Islamic Contract Law Important in Modern Financial Practice 110

Non-Binding (Ja'iz) versus Binding (Lazim) 111

Risk of Loss (Daman) versus Trust (Amana) 112

Rules Governing Delay in Payment and in Performance

The Sale of Dayn for Dayn 114

The Promise (Wa'd) in Islamic Law 125

Chapter 6 The Law of Islamic Financial Institutions and Instruments 129

The Model for an Islamic Financial Institution 129

The Two-Tier Mudaraba 130

Islamic Legal Hurdles Facing This Islamic Banking Model 131

Islamic Contracts As Used in Islamic Finance 138

Mudaraba 138

Bay' Mu'ajjal, or Credit Sale 139

Murabaha, or Sale with Markup 140

Ijara, or Lease 143

Salam, or Advance Purchase 145

Istisna', or Commissioned Manufacture 146

Ji'ala, or Reward 149

Ta'min, or Insurance 150

The Problem of Insurance and the (Tentative) Solution 150

Possible Impact of Insurance on Islamic Financial Theory and Practice 153

Prospects for Islamically Valid Derivatives 154

Khiyar al-Shart, or Stipulated Option 155

'Arbun, or Down Payment 156

Prospects for Approval of the Option as a New Contract Type 164

Investment Securities and Their Negotiability 165

Primary Market Instruments Islamically Lawful 166

Primary Market Instruments Islamically Unlawful or Questionable 170

Secondary Market 172

Chapter 7 Islamic Financial Instruments: A Primer 181

Financing Working Capital 182

The Murabaha Contract 182

The 'Ina Contract 183

The Salam Contract 183

The Istisna' Contract 184

Financing Receivables 185

Long-Term Financing 188

Leasing (Ijara) 190

Revenue Bonds 191

Equity-Like Instruments 193

The Mudaraba Contract 193

The Musharaka Contract 195

Preferred Stock 196

Attitudes Toward Risk 197

Illiquidity Risk 198

Credit Risk 198

Currency Risk 199

Capital Structure Risk 199

Chapter 8 The Opportunity Rate of Capital and Islamic Capital Structure 201

Interest and Usury 201

The Islamic Cost of Capital 204

The Cost of Equity 205

Capital Asset Pricing Model 205

Arbitrage Pricing Theory 207

Equilibrium Analysis of a Profit-Sharing Agreement 209

Cost of Equity Summarized 212

The Cost of Debt 212

Murabaha 212

Salam 213

Istisna' 213

Ijara 214

Calculating the Weighted Cost of Capital 215

Choosing an Appropriate Capital Structure 215

Chapter 9 Derivatives in Islamic Finance 219

Relevant Islamic Contracts 220

Islamic Contracts and Western Financial Products 222

Forward Contracts 222

Futures Contracts 225

Call Options 226

Put Options 228

The Khiyar al-Shart Option 229

The Mudarib Call 230

Chapter 10 Innovation in Islamic Financial Products 235

The Intended Beneficiaries of Innovation 237

Capital Users 237

Capital Providers 238

Proposals Related to Murabaha (Sale with Markup) 239

Ownership-in-Transit 241

Cooperative Non-Bank Factoring Firm 244

Proposals Related to Salam 246

Parallel Salam Contracts 246

The Default Penalty Option 253

An Islamic Clearinghouse 258

Proposals for Innovations Related to Ijara (Lease and Hire) 260

Lease Pools 264

Staged Leases and Lease Pools 269

An Islamic Convertible Lease 275

Proposals for Innovations Related to Istisna' 279

Back-to-Back Istisna' Contracts 279

Options in Istisna' Contracts 281

Istisna' Contracts for Manufacturing Streams 282

Fungible Manufactures and Options 284

Ji'ala (Reward) 286.

Notes:

Includes bibliographical references (pages 305-318) and index.

Local Notes:

Acquired for the Penn Libraries with assistance from the George R. Fink Memorial Fund.

ISBN:

9041105476

OCLC:

38132724