ISLAMIC FINANCE IN ISLAMIC ECONOMY

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ISLAMIC FINANCE IN ISLAMIC ECONOMY by Mind Map: ISLAMIC FINANCE IN ISLAMIC ECONOMY

1. MONEY IN ISLAM

1.1. definition

1.1.1. medium as exchange

1.1.2. standard of economic value

1.2. function

1.2.1. use for transaction with the condition that it is on spot basis and for an equal amount

2. ISLAMIC FINANCE

2.1. savings of Muslim investors

2.1.1. Mit-Ghamr Islamic Saving Associations (MGISA)

2.1.1.1. provides returns but still following the Shariah

2.1.2. Lembaga Tabung Haji

2.1.2.1. encourage Muslim to

2.1.2.1.1. save gradually

2.1.2.1.2. invest in Shari’ah-compliant instruments

2.1.2.2. supporting their expenditures during the Hajj period (pilgrimage)

2.2. Principles Govern Islamic Finance

2.2.1. principle of equity

2.2.1.1. protecting the weaker contracting party in a financial transaction

2.2.1.1.1. prohibition

2.2.1.1.2. function

2.2.2. principle of participation

2.2.3. principle of ownership

2.3. Key Instruments of Islamic Finance

2.3.1. qard al hasan

2.3.2. not referred to loan

2.3.2.1. Profit-and-loss sharing (PLS)

2.3.2.1.1. type

2.3.2.2. non-PLS contracts

2.3.2.2.1. Murabahah

2.3.2.2.2. salam

2.3.2.2.3. Ijarah

2.3.2.2.4. Istina'

2.3.2.3. fee-based product

2.3.2.3.1. types of contract

2.4. FRAMEWORK OF ISLAMIC FINANCE

2.4.1. prohibits activities

2.4.1.1. alcohol

2.4.1.2. drug

2.4.1.3. pornography

3. REASON INSURANCE NOT ALLOWED IN ISLAM

3.1. insurance

3.1.1. agreement whereby an insurer undertakes (in return for the agreed premium) to pay a policyholder a sum of money (or its equivalent) on the occurrence of a specified event

3.1.2. element prohibited

3.1.2.1. gharar (uncertainty)

3.1.2.1.1. does not know whether "specified event" occur or not

3.1.2.2. maisir (gambling)

4. ISLAMIC FINANCIAL AUTHORITIES

4.1. making the financial system compliant with Shari’ah principles

4.1.1. legal framework in 1980 was amend because

4.1.1.1. allow for the operation of Shari’ah compliant profit-sharing financing companies

4.1.1.2. initiate bank finance through Islamic instruments.

5. AUDITING

5.1. Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI)

5.1.1. in issuing accounting, auditing, and Shari’ah standards for financial reporting at Islamic financial institutions

5.2. Islamic Financial Services Board (IFSB)

5.2.1. issuing supervisory and regulatory standards and guidelines

5.2.2. promotes the adoption of these standards and guidelines by relevant regulatory authorities

5.3. International Islamic Financial Market (IIFM)

5.3.1. develop guidelines for the issuance of Islamic financial instruments

5.3.2. encourage active secondary market trading

5.4. Malaysia-based International Islamic Liquidity Management Corporation (IILM)

5.4.1. issuing short-term Shari’ah-compliant financial instruments

5.4.1.1. facilitate cross-border Islamic liquidity management