CHAPTER 3 - FUNDAMENTALS, PHILOSOPHY AND FEATURES OF ISLAMIC BANKING AND FINANCE
PRINCIPLES OF ISLAMIC FINANCE
FEATURES OF ISLAMIC BANKING & FINANCE
1) Avoiding interest (RIBA)
1) TAUHID - Menguatkan akidah & menyedarkan manusia, maka sistem kewangan juga memerlukan individu yang bertauhid.
PHILOSOPHY OF ISLAMIC FINANCE
3) KONSEP TOLONG MENOLONG - Amat penting & harus sentiasa diamalkan. Tidak sepatutnya bersaing dalam segala perkara tanpa tujuan yang jelas.
2) KONSEP HARTA - Harta kekayaan di dalam Islam perlu difahamkan dari 2 segi. Setiap unit harta yang digunakan/dikumpul menjadi tanggungjawab. Contohnya, Islam menggalakkan Waqaf.
3) Avoiding gambling & games of chance
2) Avoiding Gharar
4) Avoiding financing principle
4)PENALTY - Change in the form of compensation or penalty for charity.
1) FUNCTIONS & OPERATING MODES - Based on Shariah rules & principle.
3) INVESTMENT & FINANCING PORTFOLIO - Subject to Shariah restrictions. Must be constructive & beneficial to the Ummah.
2) INTEREST-BASED TRANSACTIONS - Absence of interest-based (RIBA) transactions.
5) BANK - CUSTOMER RELATIONSHIP - Partners, Investors & Traders, Buyer & Seller.
6) ETHICS - Must follow Shariah guideline.
7) ZAKAT - Not Necessary.
1) FUNCTIONS & OPERATING MODES - Based on man-made principles.
6) ETHICS - No religions based guideline.
FEATURES OF CONVENTIONAL BANKING
4) PENALTY - Impose penalty & compounded interest in case of defaulters.
2) INTEREST-BASED - Most of the activities are interest-based.
5) BANK-CUSTOMER RELATIONSHIP - Creditor & Debtor.
3) INVESTMENT & FINANCING PORTFOLIO - No restriction.
7) ZAKAT - Must pay Zakat.
8) UNDERLYING ASSET - No need for underlying asset because they can create money with money.
9) TERMINOLOGIES (REQUIREMENT ON COMMUNICATION) - Interest, penalty based on interest, loan & premium.
8) UNDERLYING ASSET - Compulsory because any benefit/earning from loan is prohibited.
9) TERMINOLOGIES (REQUIREMENT ON COMMUNICATION) - Profit (Sale & Purchase) = Ta'Widh, Financing, Cover & Contribution.