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Islamic Banking & Takaful: Course Outline (MS MGT and MBA)

Islamic banking or Islamic finance (Arabic: مصرفية إسلامية‎‎) or sharia-compliant finance is banking or financing activity that complies with sharia (Islamic law) and its practical application through the development of Islamic economics.

Course Outline

Course Overview:    

The course has been designed to enable the students to understand and explain the philosophy, principles and operations of Islamic finance including Islamic banking, Islamic financial instruments and Takaful and how they are different from the conventional banking and financial system.

Learning Outcomes:

On completion of this course students will be able to:

  • Explain the role of Shari’ah in Islamic finance;
  • Explain the meanings of finance and financial system
  • Understand the philosophy and principles of Islamic finance.
  • Examine the distinguishing features of Islamic Finance
  • Explain the major prohibitions in Shari’ah- compliant commercial transactions and their impact on banking business;
  • Evaluate the implications of prohibition of Riba, Gharar and gambling on individuals, financial institutions and societies;
  • Understand the essentials of all basic modes of business.
  • Understand the difference b/w insurance and Takaful
  • Evaluate the role of risk-based and equity finance comparing with the risk free finance.
  • Apply Islamic principles of Islamic finance to the needs of present day businesses on the basis of modes and procedures in practice.
  • Analyse the modes of business and financing in use of Islamic banks to find out the Shariah related issues and suggest possible Shariah compliant solutions. 
  • Evaluate the operations and practices of Islamic financial institutions in the light of Shariah principles
  • Understand and explain Takaful as an alternative to Insurance
  • Evaluate the differences between conventional banking and Islamic banking
  • Develop a few products for fulfilling the needs of businesses using the basic categories of contracts discussed in Islamic law of contracts.

Course Outline and scheme of study


Contents to be Covered


Introduction: Finance as a Business; Meanings of finance and financial system; Objectives of Business and Finance in Islam; The concept of intermediation and its basis in the conventional and Islamic framework


Philosophy of Islamic finance; Riba, Qimar / Maysir and Gharar and how their prohibition affects various businesses and contracts


Introduction to various categories of contracts, law of contracts, Qard and Dayn in Islamic finance, Implications of Trade, Lease and Shirkah based contracts


Takaful: Need, Bases and Models


Shirkah based modes – Musharaka and Mudaraba;


Workshop on deposit management;

Ijarah – lease based financing


Introduction of Diminishing Musharaka; Principles and application for Housing finance; Workshop on how pricing is made in housing finance


Trade based modes – Credit sales – Murabaha, Musawamah


Mid term test and Murabaha / Musawama (Contd…)


Salam; principles and application


Istisna‘a –principles and application


Accessory Modes- Jualah, Kfalah, Hawalah, Wakalah


Differentiating the functioning of conventional banking and Islamic banking and marketing Islamic finance products


Takaful as an alternative to Insurance – Need, basis, Models and how it is different from insurance


Islamic Finance in Nutshell- Revision


End of the term Exam