Summarized Course Outline (Fall 2010), Essentials of Islamic Finance (01-05-

0432/0476), for MBA/BBA

Course Facilitator: Farhan Mehboob

Lecture Contents of Lectures
1-2 Course Introduction (Group project assigned)

Simplified history of Islamic banking

IQ
Fundamentals of Islamic Jurisprudence (brief overview of fundamentals)
• Sources of Shari’ah
• Interpretation of Qur’an
• Science of Hadith
• Reasons for differences amongst the Fuqaha

1-2 Riba Exposed

• Definition of Riba – interest
• Riba: Haram in Islam (Qur’an & Hadith)
• Types of Riba
• Consequences of Riba in the Hereafter
• The fundamental problem with interest
• Will Riba continue to dominate global economy ?
• Riba in a controlled environment
• Effects of Riba in the society (positive or negative ?)
• Resent history of interest based finance & banking
• Comparison of the current situation, with the early period in Madinah
• Misconceptions about Riba

1-2 Islamic Economy

• The concept, applicable in the 21st Century ?
• The Role of the government
• Abhorred practices
• Macroeconomic variables
• Fiscal Policy
• Monetary Policy
• Failure of Capitalist and Socialist economies
• The future of Islamic Economy

1 Introduction to Islamic law of contracts

Course Outline (Fall 2010): Essential of Islamic Finance (by Farhan Mehboob, at IUGC)
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 • Types of contracts in Islam
• Basic elements of a contract in Islam
• Law of contract and its scope

Four basic prohibitions in Islamic Finance

Basic Islamic modes of financing

• Sale & purchase – trade-based modes of financing (Bai’-tijaraat)
 Types of sale
• Lease & tenancy – rental-based modes of financing (Ijarah –Kirayah dari)
 Types of lease
• Partnership (Shirakah – shirakat dari)
 Type of Skirakah – partnership

Application of law of contract into sale and other modes of financing

Mid-Term Midterm Examination

1-2 Trade-based modes of financing

• Introduction to trade-based modes of financing
• Types of sale
 Murabahah
 Explanation, rules & regulation
 Application in banking
 Musawamah
 Explanation, rules & regulation
 Application in banking
 Salam
 Explanation, rules & regulation
 Application in banking
 Istisnann’
 Explanation, rules & regulation
 Application in banking

1-2 Rental-based modes of financing

• Lease & its types
• Ijarah & its explanation
• Types of Ijarah
• Difference between Ijarah and lease
• Rules and regulations
• Application in the banking sector

Participatory modes of financing

• Participation & its explanation
• Shirakat (partnership) and its meaning
• Types of Shirakah (partnership)
• Musharakah
 Explanation, rules & regulations
 Application in the banking sector
• Mudarabah
 Explanation, rules & regulations
 Application in the banking sector

Course Outline (Fall 2010): Essential of Islamic Finance (by Farhan Mehboob, at IUGC)
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2-4 Advanced topics in Islamic banking:
• Islamic banks & the concept of profit & loss sharing
 Some confusion and misconceptions
 Fixation or non-fixation of return
 Meaning of profit and loss sharing
 Credit sales and price differentiation – Time value of money (does
time have any value in Islamic finance)
• Treasury operations in Islamic banks
• Deposit management in Islamic banks
• Currency trading & its rules & regulations
• Stock market in Islamic Finance
• Central bank & its role – relation between state bank & Islamic banks
• International trade & finance, & Islamic banking
• Interest rate benchmarking in Islamic banking
• Relationship between Islamic & conventional banks
• Sukuk – Islamic bonds
 Theory & application
• Takaful – Islamic insurance
 Explanation, rules & regulations
 Difference between Takaful and conventional insurance
 Application

1 Islamic Finance & Banking: threats, opportunities, weaknesses & strengths

• Implications of an interest-free economy
• The problems with contemporary Islamic Banks
• Islamic Banking – Halal or Haram ?
• The future of Islamic finance & banking

0-2 Project Submission & Presentation (No late work will be accepted!)
Final Final Examination
Course Instructions
Important note:
• Students are required to research the topic of Tawaraq. It will not be covered in class, but will be included on
the mid-term examination. This is a self study, research assignment.
• Students are required to research the topic of Sukuk, Mugarasa, Muzara, and Musaqah. They will not be
covered in class, but included on the final examination. . This is a self study, research assignment.

Important advice:

Only those student are advised to take this course who:

• Have access to a reliable and secure pc, connected to the internet;
• Have a decent command of the English language;
• Are ready to put in at least 6 hours per week of relevant dedicated “work”.
• Are not afraid of learning what they don’t know, and in some cases may not see the technology
applied in Pakistan.

Attendance policy
• Attendance once marked will NOT be changed.
• NO excused absence at all. NOT present in class (for whatever unavoidable reasons) means ABSENT.
• 4 absences means a grade of FAIL!
• LATE means absent.

Course Outline (Fall 2010): Essential of Islamic Finance (by Farhan Mehboob, at IUGC)
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 • Class disruption or any other nuisance that disturbs the discipline of the class will result in negative class
participation marks. Prolonged class distraction will result in suspension from class.
• With regards to the above issues DON’T bother me. NEVER call me!

Assignments:
Students are responsible for all class work and assignments according to the schedule, even in case
of absence. No late work will be accepted. Students should be expecting assignment every week.
Assignment will be assigned in class or available on the course network folder. Assignment are
designed to give student hands on practical experience.

Comprehensive Tests
Four comprehensive test scheduled during the semester, to clarify concepts and help students
judge their level of preparation before the midterm and final.
A from 88% Your target
B+ from 81% Very achievable
B from 74%
Standard University Grading Policy (What you C+ do, is what
from 67% you will get!)
C from 60%
Mid-term 30% FAIL below 60% 59% = FAIL
Final 45%
Tests, Project & Presentation 25%
Total 100%

Group project & presentation-LATE work will NOT be accepted!

A maximum of 2 students can work as a group. DO NOT plagiarize. Plagiarized work will be rejected;
serious action will be taken, that may include, negative marks, assigning a grade of “F”, suspension, or even
expulsion! I want original work. Do NOT copy from the internet. Your 8 minute presentation should be in
PowerPoint. Your project must be at least 18 pages (12 Times New Roman, 1.5 spacing, reference pages,
table of contents, titles, sub-titles, etc). The project should be informative, well researched and referenced.
Your project should be more practically oriented (as per Shariah requirement, central/statebank requirement,
technical jargon, forms, policies, etc), and based on empirical data (actual number, real data). Topics will be
assigned to groups on a first come basis. Each group should submit its request by lecture # 5. Along with
your project report (hard copy) you are required to submit the CD with your presentation and project soft
copy. Request must included member names, id, topic, etc. Each group must choose a topic from the
following (or submit a request for an alternative topic):
1. The impact of Riba on the society
2. Setting up an Islamic Investment Financing company
3. The Islamic Economy
4. Islamic Analysis of Pakistan
5. Setting up a company using “Islamic” financing
6. Setting up a Islamic Rent-a-car
7. Setting up a business entity using Musharikah
8. A United Muslim Ummah: A natural Superpower
9. Setting up a business entity using Mudarabah
10. Setting up a business entity using Salam
11. Setting up a business entity using Istisnann’
12. How should Muslim countries address the current interest based Jewish global financial might ?
13. The implications of an interest-free society
14. The banking paradox: Interest based progress & development
15. Global study of food & water in light of Qur’an & Ahadeeth: with recommendation for future trends
16. Reasons for the recent financial collapse in America & Europe
17. The obstacles faced by an Islamic financing company in an un-Islamic environment
18. Recent history of interest based banking
19. Tawaruq & its applications
20. Sukuk
21. The Dynamics of Islamic Management Principles

Course Outline (Fall 2010): Essential of Islamic Finance (by Farhan Mehboob, at IUGC)
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22. The Munafiq Corporation!
23. The Mutaqee Corporation!
24. The Islamic Stock Market
25. Compare Takaful and insurance; discuss the future of Takaful; is it the Islamic alternative of insurance ?
26. Discuss the concept of the stock market from an Islamic perspective
27. Satanic Trades & Professions
28. Empirical Comparison: Halal verus Haram Economy
29. Empirical Comparison: Halal verus Haram Financing
30. Muzara, Mugarasa, and Musaqah
31. Factors of success in trade
32. How Islamic are Islamic Banks ?
33. The series of steps economic and financial steps the Islamic Republic of Pakistan should have taken since 1947,
and their justification ?
34. The world of Islam today from the perspective of the sahabah

Course Outline (Fall 2010): Essential of Islamic Finance (by Farhan Mehboob, at IUGC)
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