ANSWERS TO SOME FREQUENTLY Dissertation Example | Topics and Well Written Essays - 1000 words

ANSWERS TO SOME a great deal - Dissertation Example2. WHAT IS THE SCOPE OF TRANSACTIONS TO WHICH THE BAN ON RIBA IS APPLICABLE? DOES THE TERM APPLY entirely TO THE INTEREST CHARGED ON CONSUMPTION LOANS OR DOES IT ALSO COVER PRODUCTIVE LOANS ADVANCED BY BANKING AND FINANCIAL INSTITUTIONS? The Shariah clearly states that riba al-nasiah, the fixing in advance a positive return on a loan as a reward for waiting is prohibited. Hence it could be understood as a ban on interest as commonly used today. Muslim jurists, the fuqaha, state in no unclear terms that all manifestations of riba are forbidden. So it does not matter if the context is usance or business and also whether the loan in issued or availed. It is also irrelevant whether the refuge in question is a commercial bank, government agency, business enterprise or an individual. 3. DOES THE PROHIBITION OF RIBA APPLY evenly TO THE LOANS OBTAINED FROM OR EXTENDED TO MUSLIMS AS WELL AS NON-MUSLIMS? The Moslem Fiqh Academy (IFA), wh ich is the leading authority on financial transactions, mentions that there is no leniency in the application of Shariah laws even if one society of a financial transaction is non-Muslim. ... IS SUCH A SCHEME ACCEPTABLE FROM AN ISLAMIC POINT OF get a line? In economies with high rates of inflation, restrictions imposed by Shariah laws can undermine value of investments. To hide for such a loss, a method of indexation is usually employed. There is no consensus yet among the fuqaha, as to the compatibility of indexation practices with Islamic scriptures. So far the Fiqh Academy has permitted indexation in cases pertaining to wages and contracts fulfilled over a period of clock and has disallowed in cases pertaining to monetary debts. Similarly, for debts in a specific currency, due in installments, the parties may agree to even up the installments due in a different currency at the prevailing rate of exchange on the date of settlement. 5. WHAT ARE THE MAJOR MODES OF FINANCING USE D BY ISLAMIC BANKS AND FINANCIAL INSTITUTIONS? Islamic banking system has invented a few ingenious elans of financing in order to comply with Shariah principles. The counterbalance mode is based upon sharing of both profits and losses incurred by investments, respectively the mudarahab (passive partnership) and musharakah (active partnership). The second mode operates on the basis of credit offered durig the purchase of goods and services and uses such financial concepts as murabahah (sales contract at a profit markup), ijarah (leasing), salam and istisna (contracts). These modes are unique to Islamic finance and have been approved by fiqh officials. by from being consistent with Islamic precepts, these modes incentivise direct investments, thereby contributing to economic growth of the bank/institution/country. Yet, improvements need to be done in order to integrate Islamic financial system into worldwide