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Islamic Finance For Dummies


A detailed look at the fast-growing Islamic banking and finance sector

Here, you'll find clear and easy-to-understand information on how the Islamic finance industry works. You'll quickly and easily: become acquainted with the theory, practice, and limitations of Islamic banking; understand how Islamic financial firms develop products; grasp the objectives and sources of Islamic law and the basic guidelines for business contracts; learn about Islamic fund management, sukuk, and insurance; and much more.

  • Islamic finance 101 — get a crash course on the fundamentals and key principles of the Islamic finance industry
  • Get to know sharia — discover how Islamic law, known as "sharia," influences Islamic business practices and commercial contracts
  • Eye up the operations — find out how an Islamic commercial bank's function, structure, supervision, and products differ from those of a conventional bank
  • Filter funds by Islamic criteria — grasp the fairly recent development of Islamic capital markets that feature sharia-compliant equity products (and the screening process that ensures assets are compliant)
  • Consider corporate governance — get the 4-1-1 on the governance typically found at Islamic financial institutions and how it compares to a conventional firm

Open the book and find:

  • The concepts and principles of Islamic finance
  • What you need to know about Islam and the role of sharia
  • Islamic ethics in the finance industry
  • The relationship between conventional and Islamic banks
  • Financial products available from Islamic banks and other firms
  • Managing risk in Islamic financial institutions
  • Plain-English guidance on Islamic insurance

Learn to:

  • Compare and contrast this financial sector to the Western model
  • See how concepts of social justice apply to Islamic financial products
  • Grasp Islamic fund management and insurance

Faleel Jamaldeen, DBA, is the founder and editor of the Islamic Finance Expert website ( He is an Assistant Professor at Effat University, Jeddah, Saudi Arabia, where he teaches courses in conventional finance, Islamic finance, and accounting.

Introduction  1

Part I: The Basics of Islamic Finance  9

Chapter 1: Easing into Islamic Finance 11

Chapter 2: Getting to Know Islam and the Role of Sharia 27

Chapter 3: The History of Islamic Finance 43

Chapter 4: Touring the Islamic Finance Industry 55

Part II: Introducing Islamic Commercial Law  73

Chapter 5: Adhering to Islamic Commercial Ethics 75

Chapter 6: Focusing on Contracts 87

Part III: Eyeing Islamic Banking Operations  99

Chapter 7: Contrasting Conventional and Islamic Commercial Banking 101

Chapter 8: Charting the Relationship between Conventional and Islamic Banks 117

Chapter 9: Tracing the Sources and Uses of Funds in Islamic Banks 129

Chapter 10: Familiarizing Yourself with Islamic Financial Instruments 145

Part IV: Islamic Investment Markets: Equity and Bonds  163

Chapter 11: Introducing the Islamic Capital Market 165

Chapter 12: Managing Assets in Islamic Investments 187

Chapter 13: Investing in Islamic Bonds: Sukuk 207

Part V: Reporting, Corporate Governance, and Supervision  229

Chapter 14: Issuing Financial Statements 231

Chapter 15: Considering Corporate Governance 245

Chapter 16: Supervising Operations: The Sharia Board 261

Chapter 17: Managing Risk in Islamic Financial Institutions 275

Part VI: Islamic Insurance: Takaful  291

Chapter 18: Takaful: Exploring the Fundamentals of Islamic Insurance293

Chapter 19: Takaful and Retakaful Products, Structures, and Governance 305

Part VII: The Par t of Tens  323

Chapter 20: Ten Reasons the West Should Pay Attention to Islamic Finance 325

Chapter 21: Ten Economic Benefits of Following Islamic Principles 331

Appendix: Glossary  339

Index  349