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Islamic finance contracts

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TRANSACTIONS (ISLAMIC JURISPRUDENCE) , INVESTMENTS , FINANCING , CONTRACTS , ISLAMIC BANKS , ISLAMIC ECONOMICS , SILENT PARTNERSHIP , PROFITS , OWNERSHIP

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Published by
Published 01 January 2013
Reads 1
EAN13 9796500082219
Language English
Document size 19 MB

Legal information: rental price per page 0.0412€. This information is given for information only in accordance with current legislation.

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COPY RIGHTS MONZER KAHF© January 2013 THE AUTHOR IS THE ONLY OWNER OF COPY RIGHT NO PART OF THIS BOOK MAY BE REPRODUCED IN ANY FORM WITHOUT PRIOR APPROVAL OF MONZER KAHF 22 MARBLEHEAD, IRVINE CALIFORNIA 92620 USA
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Thanks and Appreciation At the outset of this new book, I like to extend my thanks and appreciation to all those who helped me make it available to my readers. Special thanks to mycolleagues, the professors at the Master’sProgram in Islamic Finance in the Qatar Faculty of Islamic studies for the continuous discussion and dialogue which helpedcrystallize and formulate my ideas as put forward in this book. Special thanks and appreciation to my wife Mayssun al Mubarak for her patience seeing me indulged with my computer for many hours, days and nights for over three years. Thanks also to my daughter Noma who has also borne the inconvenience of leaving her alone with her mother while working on my computer. My thanks should also go to those who helped me among the assistants in the Qatar Faculty of Islamic Studies especially Marwa al Azb who helped transcribing and typing several early draft of most of the ďook’s chapters. Also Isŵail Yahaya, who also helpedinserting many of the attention boxes insert texts in the book. I should confess that I’ŵ the soul responsiďle person for any mistakes which still exist in the book. Finally, this book is a product of research, discussions, training and teaching over a period of more than thirty years. I present it by the grace and blessing of Allah who helped me reach this stage of making this book available to my readers. Irvine, California, th The 27 of Jan, 2013 th (corresponding to the 10of Raďi’ 1, 1ϰϯϰh.
Prof. Dr. Monzer Kahf Coordinator, MSc. Islamic Finance Program Qatar Faculty of Islamic Studies-Hamad Bin Khalifa University Doha, Qatar
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CONTENTS
INTRODUCTION1Chapter 1:MᾹL, OWNERS(IP AND S(ARI’A(9Introduction11ͳ.ͳ Kinds of Māl13 Angle No. 1: Criteria of Hurtfulness13 Angle No. 2: Protected and Non-protected Māl15 Angle No. 3: Free or Non-free Māl17 Angle No. 4: Standardized (م) Non- or Standardized Māl ȋمق)18Angle No. ͷ: Estate and Personal Māl20Angle No. ͸: Fixed Māl and Mobile Māl20Angle No. ͹: Tangible and Intangible Māl21Angle No. ͺ: Mute Māl versus Income/Increment Generating Māl22 ͳ.ʹ Ownership and Authority over Māl or Property23Usufruct (م) and the Right to Benefit (عتا )25Inaccessible Property (رما لم)26 ͳ.͵ Acquiring a Māl27ͳ.Ͷ Objective of Shari’ah ȋرا دم)33 Chapter 2:WHAT ARE THE ISLAMIC FINANCE CONTRACT? 37  Introduction39 Definition and Components of Finance Contracts41 Definition of Finance44 The General Conditions of Islamic Financial Contracts46 Aptitude or Qualification of Parties Who Give Consent47 Balance50The Moral Commitment57Shari’ah Permissibility59Realism62Categories of Islamic Finance Contracts68
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According to their Nature68According to their Features or Characteristics69 Chapter 3:73RETURN IN ISLAMIC FINANCE Why is Riba Prohibited75 What Justifies Earning in Islamic Finance?76 Ownership and Risk77Ownership of Added Wealth and Other People’s Rights80 Does Capital Have a Claim on Return?82 Islamic Finance and the Debt Economy86Does the Shari’ah Prefer Taking Risk88Necessary Condition and Sufficient Conditions for Earning93Methodologies of Islamic Finance95Added Conditions into Islamic Finance Contracts96Delinquency Fines97The Third Party Guarantee99Ceiling on Profit105 Conversion of Conventional into Islamic Finance107 Chapter 4:SALE-BASED ISLAMIC FINANCE  CONTRACTS 109Introduction111 Sale-based Nominate Finance Contracts113 Deferred-payment Sale113 Salam Contract120 Definition of Salam and its Main Features120 Conditions of Salam120Conditions of Success of Salam Finance125Istisna’ Contract127 Chapter 5:IJARAH (LEASE CONTRACT) 131Definition133 Responsibilities of Contracting Parties136 Responsibility of the Lessor136 Responsibility of the Lessee139 Characteristics of Ijarah142 Why Take Ijarah Contract?148Issues in Ijarah Applications150
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Sale of Lease Contracts152 Discounting150 Securitization 152 Chapter 6:SHARING FINANCE CONTRACTS155Introduction157 Sharikah158 Principle159 Definition159 Types of Sharikah160Sharikat al-Milk (Co-ownership)160Sharikat al-ǮAqd ȋContractual SharikahȌ162 Definition163 Characteristics of Musharakah163Muzara’ah and its Derivatives168 Principle168Definitions168 Characteristics168Mudarabah172 Definition172 Mudarabah Application175  Conditions of Mudarabah Contract178Financing Elements in All Sharing Finance Contracts179 Chapter 7:LOAN AND OTHER CONTRIBUTORY  CONTRACTS 183Introduction185 Overview of Contributory Contracts186 Lending and Loan Contract188 Definition188 Characteristics of the Loan Contract189 Effect of Loan Characteristics191Components of Loan Contracts193Documentation Loan 196 Some Other Rulings of the Loan Contract196 Application of Loan Contract in Islamic Banking199  Current Accounts199Loans to Customers202 Loans as Employees’ Fringe Benefit203 The Gift Contract (با د)203
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Important Rulings of the Gift Contract204  Application of al-Hibah in Islamic Finance207 The Waqf Contract (قوا د)210 Components of Waqf Contract210 Objectives of Waqf212  Kinds of Waqf 213  Characteristics of Islamic Waqf216  Application of Waqf in Islamic Finance: Waqf and  Trust220 Chapter 8:SALE ON ARBUN 225Introduction227Shari’ah Ruling and Foundation of Arbun Sale228 Disapproval of the Arbun Sale228 Approval of the Arbun Sale229 Characteristics of Arbun Sale230 Application of Arbun in Contemporary Islamic Finance232Arbun and Margin of Seriousness233Arbun in DzIslamic Mutual Fundsdz235 Arbun and Short Sale of Shares, Commodities and  Currencies236 Arbun and Options238 Chapter 9:HYBRID CONTRACTS 241Introduction243 How Did It Start?245 Definition of an Islamic Bank246 Differences between Islamic and Conventional Banks247 Implications of Financial Intermediation and Wakalah  (Agency) for Islamic Finance Contracts247 Traditional Hybrid Islamic Finance Contracts249Financing Murabahah249 Definition250 Objective250 Characteristics250  Risks in Murabahah252Suitability of Murabahah to Bank Financing253 Mechanism and Sequential Steps of Murabahah  Financing253 Alternative to Murabahah: Musharakah with a First
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