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Islamic Banking and Takaful: Course outline (IBF-401)

Course description

This course is focusing on Islamic Financial Instruments and covers both their theoretical as well as practical domains. In this course, students are trained to deal with some major contracts.  They are given an overview of all participatory modes of financing, sale based modes of financing, and leased based modes of financing, debt creating modes and sub-contracts. Students then learn the design, operational mechanism, management, documentation, contracts, Sharia ruling and issues related to some major contracts, including Murabahah, Musharkah, Mudarba, ijarah, Diminishing Musharkah, Salam, Isisna etc as discussed by Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI).  Wakalah, Jua´lah, Tawarruq, Kafalah, Rahn, Hawalah, Istijrar, Amanah, Wadiah, Hibah are also discussed. A resort also made to the work of classical as well as contemporary jurists for the better and critical understanding of Islamic Finance. Moreover, the views of proponent as well as of opponent of Islamic Finance are discussed critically. It is to be noted that research component is an essential part of this course.         The main purpose of this course is to make the students familiar with Islamic Financial System in its true spirit. It is endeavored in the course to pave a way for the critical study of existing Islamic Financial System and to suggest improvements in this regard. At the end of the course the student will be able, to compare both conventional and Islamic Financial System in term of their main concepts, philosophies, mechanism, contracts, documentation and etc.

Course content


Introduction of the Course, History of Banking, Direct and Indirect Financing, Financial intermediation, Types of Financial Institutions, Functions of Commercial Banks Meanings of finance and financial system;


The concept of financial intermediation and its basis in the conventional and Islamic framework. Financial intermediation, Types of Financial Institutions, Functions of Commercial Banks, Nature of Contracts in Islamic Finance.


Realisation of Maqasid Al-Shari'ah (Objectives of Islamic Law),

Case Studies on Maqasid


Early Contracts, Rules of Sales (Bai) and Evolution of Islamic Commercial Law


Riba: Loan vs Debt, Riba al-Dayn: types, reflections from Quran and Sunnah

Riba in sale transactions: bai al-Sarf, al-Enah, Tawarruq, installment sale, Trading of gold and silver and money Exchanging, principles and practices, Riba in present day businesses. Riba and modern day businesses and banking


 Gharar and its involvement in modern day businesses, conditional sale before possession, insurance, Qimar, Maysir………


Deposit (Liability) side of Commercial Banks, Deposit side of Islamic Banks, Different contracts of Islamic banking for opening of Accounts, Musharaka and Mudaraba, Qard, Wakalah

Related books

Course content


Asset (Financing) side of Islamic Banks, Partnership, Trade, Lease and Hybrid contracts used in Islamic Banking, Implications of Shirkah, Musharka, Mudarbah,


Mid term, Murabahah, Salam used in Islamic Banks


Istisna, Ijarah


Accessory Modes- Jualah, Kafalah, Hawalah, Wakalah


Takaful;  Conventional Insurance, History of Insurance, Risk and Uncertainty in Insurance, Classification of Insurance Business, Fundamental Legal Principles Governing Insurance Contract


Nature of Insurance Contract, Insurance Pricing, A General Model of Insurance. Opinion of Scholars from Arab World about Insurance, Scholars of the Sub – continent on Insurance.


Introduction of Takaful,  Concept and Nature of Islamic Insurance (Takaful), Comparison between Takaful and Insurance, Different Models of Takaful, Working of Wakalah Model


Working of Waqf plus Wakalah Model.

Text books