Islamic Banking and Finance

Sunday 11:45 – 14:45

NAME: KIRAN ZULFIQAR HASNANI

REGISTRATION#: 50543

PART1)
Q1) Different between circulation and concentration of wealth
ANSWER) CIRCULATION OF WEALTH : According to the Islamic concept wealth is
considered as an endowment or gift of god and human are considered as trustee on Allah’s
resources on earth. When Muslim pay zakat he or she plays a role of circulating of wealth,
rolling of the money is there in circulation of wealth

CONCENTRATION OF WEALTH: Concentration of wealth directly indicate to Haram

earning or that earning which is earn by ( NA HAQ ) illegal ways. Which involves interest.
Gambling, gharar, hoarding etc. In this situation people /firms/bank gets excessive amount of
money by lending/investing the principle amount.

Q2) what is the ultimate objective of Islamic economic system

ISLAMIC ECONOMIC SYSTEM: Economy activity with its social justice and for the
betterment of mankind is known as Islamic economic system.
eliminates interest transactions which includes equal distribution
reduce social division between poor and rich
work according to quran and sunnah
Q3) Explain that detailed procedure / mechanism to achieve that ultimate
objective
1) Avoidance of concentration of wealth will surely achieve the ultimate objective of Islamic
economic system. Concentration example: ( Gambling, Interest, Gharar ) concentration such
as gambling interest will not safe guard the objective of Islamic economic system.
There are some Islamic aspect which should be there, the procedure of this ultimate objective is
into 3 parts
AQIAD , AMAL & MUAMLAAT
AQAID : refer to have faith in deen
AMAL is the practice of human being on regular basis
MUAMLAAT is further divided into 2 part
Political, economic and social.
Economic is further divided into 2 parts
Trade and economic and finance
These procedure is known as mechanism of ultimate objectives of Islamic economic system
which is the well being of mankind.

Part2)
Q1) Explain Riba Al Nasiah.
Answer) Riba Al Nasiah also known as Riba Al Jahalyya and Riba Al Quran. Nasiah mean
Loan. It is define as excess, Which reserve from predetermined interest ( SOOD ). Lender
receive over and above principle amount ( refer to the interest on loan ). It is the premium that
has to paid by the borrower over principle amount.
RIBA AL NASIAH have certain condition
1) The transaction should be of loan
2) Interest can be in cash form or non cash
3) It should be preconditioned or market practices.

Q2) Justify how conventional banking is based on Riba al Nasiah

Answer) Bank provides loan to receive interest on laon and pays interest on deposit. Interest on
loan is the main source of income of the bank. As deposit is the main source of the fun for bank
interest the provided to attract funds. Everything we part in this world gas an opportunity cost. It
is the value of replacement cost. Money has time value and interest represent it. Suppose we
deposit money in non Islamic bank we part liquidity and bank invest that money in other uses.
Bank gives us interest for the sacrifices we make by parting with liquidity( return on
conventional bank deposit ). Similarly if we borrow from bank, bank chages higher than deposit
interest paid by them. Conventional bank TDR: if you want to get interest on your fixed deposit
after short time period you have to deposit under tdr scheme. Prize bonds is provided by the bank
which promotes injustice in a society because the amount given to bond holder is interest given
on laon. For example: suppose 10 people bought a $10 fund and only one got the prize of 100$
and other didn’t get anything, it is unjustice to other 9.