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LahoreUniversityofManagementSciences

FINN441IslamicBankingandFinance
FallSemester2015

Instructor
RoomNo.
OfficeHours
Email
Telephone
Secretary/TA
TAOfficeHours
CourseURL(ifany)

COURSEBASICS
CreditHours
Lecture(s)
Recitation/Lab(perweek)
Tutorial(perweek)

Dr.SaadAzmat
SDSB413
Tuesday&Thursday (4:155:15) Othertimesbyappointmentonly
saad.azmat@lums.edu.pk
04235608417
KashifSaeed
TBA
Suraj.lums.edu.pk

3
NbrofLec(s)PerWeek
NbrofLec(s)PerWeek
NbrofLec(s)PerWeek

Duration
Duration
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COURSEDISTRIBUTION
Core
Elective
OpenforStudentCategory
CloseforStudentCategory

ACFElective

COURSEDESCRIPTION

CourseDescription: BeginningwiththefundamentalguidelinesofIslaminthearenaofdealingsandbusinesstransactions,thiscoursecovers
theapplicationofcanonicalIslamiclawstomodernfinancialtransactions.Althoughthefocusisoncommercialbanking,otheraspectsoffinancial
marketplacearealsoaddressed.

CourseFocusandModules:Asanappliedcourse,thefocusison:a)distinguishingfeaturesofIslamicEconomicandFinancialsystem
b)IdentificationofnonShariahcompliantfinancialinstruments,c)PreparationofbasicShariahcompliantfinancialcontractsd)Differentaspect
ofIslamicandnonIslamicequityinvestments

Thecourseisdividedintofollowingfourmodules:

Module1:IslamicEconomics
Module2:IslamicLawofSale,Interest,MurabahaandIjarah
Module3:IslamicBanksAssetandLiabilitySideFinancing
Module4:IslamicCapitalMarkets:SukukandEquities

COURSEPREREQUISITE(S)

LahoreUniversityofManagementSciences
COURSELEARNINGOUTCOMES(CLO)

Uponsuccessfulcompletionofthecourse,studentsshould beableto:

1)CompareIslamicandconventionalfinancialsystems
2)ExaminemodesoffinancingusedinIslamicbanks
3)AnalyzefinancialInstrumentsusedinIslamiccapitalmarkets
4)EvaluateShariahcompliantequities

UNDERGRADUATEPROGRAMLEARNINGGOALS&OBJECTIVES

GeneralLearningGoals&Objectives
Goal1EffectiveWrittenandOralCommunication
Objective:Studentswilldemonstrateeffectivewritingandoralcommunicationskills
Goal2EthicalUnderstandingandReasoning
Objective:Studentswilldemonstratethattheyareabletoidentifyandaddressethicalissuesinanorganizational
context.
Goal3AnalyticalThinkingandProblemSolvingSkills
Objective:Studentswilldemonstratethattheyareabletoidentifykeyproblemsandgenerateviablesolutions.
Goal4ApplicationofInformationTechnology
Objective:Studentswilldemonstratethattheyareabletousecurrenttechnologiesinbusinessandmanagement
context.
Goal5TeamworkinDiverseandMulticulturalEnvironments
Objective:Studentswilldemonstratethattheyareabletoworkeffectivelyindiverseenvironments.
Goal6UnderstandingOrganizationalEcosystems
Objective:StudentswilldemonstratethattheyhaveanunderstandingofEconomic,Political,Regulatory,Legal,
Technological,andSocialenvironmentoforganizations.

MajorSpecificLearningGoals&Objectives
Goal7(a)DisciplineSpecificKnowledgeandUnderstanding
Objective:Studentswilldemonstrateknowledgeofkeybusinessdisciplinesandhowtheyinteractincluding
applicationtorealworldsituations.(includingsubjectknowledge)
Goal7(b)Understandingthesciencebehindthedecisionmakingprocess(forMGSMajors)
Objective:Studentswilldemonstrateabilitytoanalyzeabusinessproblem,designandapplyappropriate
decisionsupporttools,interpretresultsandmakemeaningfulrecommendationstosupportthedecisionmaker

LahoreUniversityofManagementSciences
Indicatebelowhowthecourselearningobjectives/outcomesspecificallyrelatetoanyprogramlearninggoalsandobjectives.

PROGRAMLEARNINGGOALSAND
OBJECTIVES

COURSELEARNINGOBJECTIVES

COURSEASSESSMENTITEM

Goal1EffectiveWrittenandOral
Communication

Studentsgetanumberof opportunitiesto
demonstratetheirabilitytocommunicate
effectively(CLO#23)
Ethicalperspectivesinsomeofthecase
studiesarehighlighted(CLO#1)
MajorGoal: Analyticalthinkingand
problemsolvingskillsareessentialfor
successinthiscourse(CLO#14)
Applicationofinformationtechnologyin
preparingcasesanalysesandassignments
(CLO#2)
Studentsworkingroupsof3 personsto
workontheirgroupproject.(CLO#14)
Developstudentsunderstandingofthe
impactoffinancialsystemsonthe
economy(CLO#1)
MajorGoal: Comprehensivecoverageof
topicsinIslamicBankingandFinance
(CLO#14)
NA

CP,ProjectandExams

Goal2EthicalUnderstandingand
Reasoning
Goal3AnalyticalThinkingandProblem
SolvingSkills
Goal4ApplicationofInformation
Technology
Goal5TeamworkinDiverseand
MulticulturalEnvironments
Goal6UnderstandingOrganizational
Ecosystems
Goal7(a)DisciplineSpecificKnowledge
andUnderstanding(SubjectKnowledge)
Goal7(b)Understandingthescience
behindthedecisionmakingprocess

ProjectandExams
CP,Quizzes,Project,andExams

Project,Cases

Project
CP,Quizzes,Assignments,andExams

CP,Quizzes,AssignmentsandExams

NA

GRADINGBREAKUPANDPOLICY
Thecoursegradeisbasedonthefollowingcriteria:
Source
%ofTotal
ClassParticipation+Attendance
10
Quizzes/Assignments
15
GroupProject
20
MidTerm
20
Final
35
Total
100

ClassParticipationandAttendance:Studentsareexpectedtoattendallclasses.Ifyouarenotpresentatthebeginningofaclassor
leaveclassduringthesessionwithoutinstructorspriorpermission,youwillbeconsideredabsentfortheday.Youmustreviewthe
assignedmaterialsinadvanceoftheclassinordertocontributemeaningfullytoclassdiscussions.

Quizzes:quizzeswillbegivenontheassignedmaterial(readings,cases,assignments,etc)duringtheterm.Nomakeupquizzeswill
begiven.However,thelowestquizgradeincludingazeroforamissedquizwillbedisregarded.

AssignedCasePresentationandWrittenReport:Studentsarerequiredtoformgroupsof3each.

Examination:ThefinalexaminationwillcompriseablendofMCQsandopenendedquestions,caselets,oranintegrativecasefor
analysis.

LahoreUniversityofManagementSciences
EXAMINATIONDETAIL

Midterm
Exam

FinalExam

Yes/No:Yes
CombineSeparate:
Duration:
PreferredDate:
ExamSpecifications:

Yes/No:Yes
CombineSeparate:Combined
Duration:2Hours
ExamSpecifications:

COURSEOVERVIEW
WEEK/
LECTURE/
MODULE

TOPICS

RECOMMENDED
READINGS

Module1:IslamicEconomics

PreliminariesandOverview

IntroductiontoIslamicEconomics
MBGCh.13

ComparisonofWesternandIslamicEconomic
MBGCh.13
Systems
Azmat(2009)onMuslimSpain

SESSIONOBJECTIVES

Introductionandpreliminary
reflectiononIslamicEconomicand
FinancialSystem
DevelopbuildingblocksofIslamic
EconomicandFinancialSystem
Understandthedistinguishing
featuresofIslamicEconomicSystem
andcomparethemtoCapitalismand
Communism

Module2:IslamicLawofSale,Interest,MurabahaandIjarah

5
6

IslamicLaw&LegalTheory

CanonicalContractsinIslam

UnderstandingTimeValueofMoney

7&8

RibaAlQard

RibaAlFadl

10

Sale(Bai)inIslam

Murabaha/BaiMuajjal

Mudarabah/Musharakah

11&12

13

ReadingssetonIslamic
Jurisprudence

IntroduceIslamiclegaltheoryand
derivationofIslamiclaw.

VHCh.5(TheNominateContract
Scheme);MBGCh.9

ExplaintheinjunctionsofIslamic
financialtransactionsandexamine
rulesforconditionsandstipulations
Handouts
Explainthebuildingblocksoffinance
andtheconceptoftimevalueof
money.
Pg256SupremeCourtJudgment/
UnderstandtheIslamicconceptof
Interestanditsapplicationto
moderndaybanking.
VHCh.4(IslamicLawofUsury,Risk& UnderstandtheIslamicconceptof
Property)
RibaAlFadlanditsapplications.
MTU(SomeBasicRulesofSale)
Evaluatetheconditionsforboth
MBGCh.10&11
bindingandvoidIslamicsales
contracts

Discussthedistinguishingfeaturesof
GuestSpeaker
Murabahaanditsuseontheasset

sideofIslamicbanks

Usmani(1999)

Islamicconceptofpartnershipandits
useonboththeassetandliability
sideofIslamicbanks

LahoreUniversityofManagementSciences
Module3:IslamicBanksAssetandLiabilitySideFinancing

14

MusharkahandtheIdealIslamicFinancing
Model

Khan(2010);Usmani(2010)

15

16

MT

Ijarah

DiminishingMusharakah;Comparisonbetween
MM,IjarahandDM

SalamandIstisna

MTUp.157181;

AssetandLiabilitySideManagementofIslamic
Banks
PanelDiscussiononIslamicFinance

CaseStudyofBankIslamiand
MeezanBank
GuestSpeaker

17

18

19
20

Examinetheidealnatureof
MusharkahandMudarbahand
analyzetheimpedimentsintheir
implementation.

Discussthedistinguishingfeaturesof
Islamicleasing

MBGCh.15

Discussthedistinguishingfeaturesof
DManditsuseinIslamichouse
financing

MTUp.185200;
AlAmine(2001)

Examinethedistinguishingfeatures
ofSalamanditsuseinagriculture
financing.Alsodiscussthe
characteristicsofIstisnaandits
applicationtoprojectfinancing
Analyzetheassetandliabilityside
featuresofIslamicbanks

Module4:IslamicCapitalMarkets:SukukandEquities

21&22

23&24

25

26

27

EquityInvestmentsandIslamicEquityFunds

SukukI(IslamicBonds):

CaseofDJIM

UnderstandingIslamicequity
screeningcriteria

Ali(2005)

DiscussIssuesrelatedtoSukuk
structuring
EvaluateAAOIFIversusnonAAOIFI
compliantSukuk
UnderstandhowIslamicfinancecan
beimplementedinasecularlegal
setting.
ExplainIslamicprohibitionof
derivatives
Analyzetheimpactofthesubprime
financialcrisisontheIslamicfinancial
industry
Discussthefuturedirectionthe
Islamicfinancialindustrymighttake.

CaseStudyofMuslimBank
CaseStudyofMuslimFund
ImplementingIslamicfinancialsolutions
IslamonDerivatives

IslamicFinanceandtheCurrentFinancialCrisis

GuestSpeaker
Usmani(2010)
Brunnermeier(2009)

28

FutureofIslamicFinance

TEXTBOOK(S)/SUPPLEMENTARYREADINGS
MuftiTaqiUsmani,AnIntroductiontoIslamicFinance(MTU).
MuftiImranUsmani,MeezansBanksGuidetoIslamicBanking(MBG)
Vogel,F.E.andHayes,S.L.IslamicLawandFinance:Religion,RiskandReturn(VH)

RECOMMENDEDREADING:
MuhammadAyub,UnderstandingIslamicFinance