Chapter 1: Overview of financial system. Mohammad Salleh Bin Abdul Saha ISB 300 Centre for Islamic Thought and Understanding University Teknologi MARA Terengganu. What is financial system ?. The processes and procedures used by an organization management to exercise financial
Mohammad Salleh Bin Abdul Saha
Centre for Islamic Thought and Understanding
University Teknologi MARA Terengganu
organization management to exercise financial
control & accountant ability. These measures
include recording , verification, and timely
reporting of transactions that affect
revenues, expenditures, assets and liabilities.
money, credit and finance. (the three terms
are intimately related yet are somewhat different
from each other)
What is credit/loan?
Who is financial intermediaries ?
What is islamic banking ?
of fiqhmuamalat came from the Quran and the Sunnah, and other secondary sources of Islamic law such as opinions collectively agreed among Shariah scholars (ijma’), analogy (qiyas) and personal reasoning (ijtihad).
Banking Industry in Malaysia
Note - This listing is far from being exhaustive.
prohibits transactions featuring extreme gharar.
~ The main feature of the Islamic model is that it is based on a profit-sharing principle, whereby the risk is shared by the bank and the customer.
~ This system of financial intermediation will contribute to a more equitable distribution of income and wealth.
~ Follow the profit and loss-sharing principle to mobilize resources and are less likely to face any sudden run on deposits.
~ As such, they have a minimum need for maintaining high liquidity.
~ Financing and deposits are extended under the profit and loss sharing arrangement. The banks are likely to know their fund users better in order to ensure that the funds are used for productive purpose and vice-versa for investors.
~ It will develops better relations between the financial intermediary and the fund providers or consumers.
~ Also promote productive economic activities and socio-economic justice.
~ Islamic banks do not have fixed obligations such as interest payments on deposits. Therefore, they are able to allocate resources to profitable and economically desirable activities.
~ Also holds good for Islamic financing, as the payment obligations of the entrepreneur is associated with the revenue.
~ Strong ethical and moral dimensions of doing business and selecting business activities to be financed, play an important role in promoting socially desirable investments and better individual or corporate behavior.
~ Although based on Syariah principles to meet the financial needs of Muslims, it is not restricted to Muslim only and is available to non-Muslims as well.