Principles of Islamic banking and finance/PIBF201/Introduction/Video signpost
In this video, Dr. Shamim Sidiqui from Hamdan Bin Mohamed Smart University, provides an overview and contextual background of Islamic banking and finance.
We invite learners to share their thoughts on this video by posting a WeNote comment below, for example:
- The most important message of this video is ....
- I think that ...
- I didn't realise that ...
Note: Your comment will be displayed in the course feed.
Video transcript
This section provides necessary background for studying Islamic banking and finance. As the name suggests, Islamic banking and finance was introduced in Muslim countries to meet the aspirations of their masses to conduct their commercial dealings in accordance with Islamic business ethics. During the colonial period many economic and financial institutions were established in Muslim countries including commercial banks and insurance companies. The most serious issue with these institutions was their dependence on interest. When Muslim countries became independent after the second world war, there was a widespread desire to reorganize these institutions on the basis of alternative modes of financing.
In order to study Islamic banking and finance, it is, therefore, important to have a reasonable understanding of the nature of Islamic law or Shari'ah. One also has to recognize that the financial system of an economy is a sub-system of a broader economic system. It facilitates in achieving the goals and objectives of the economic system. Islamic banking and finance, should be studied with a knowledge of the contours of an Islamic economic system. Second section of this unit deals with this topic.
Section 3 discusses the rationale for Islamic banking and finance which is to avoid 3 things: riba or interest, gharar meaning unnecessary ambiguity in financial contracts, and mysir meaning gambling like financial transactions.
The last two sections of this unit explain alternative modes of finance that were evolved in attempts to avoid the three prohibited elements mentioned above.
