4-Topics for discussion

As a guide, the following topics will be discussed. Although some of the topics are a bit technical, we shall try to explain and express the same with simple examples.

1.0 INTRODUCTION

 Why Islamic Banking?
 Islamic Banking in Malaysia
 Doctrine of Usury (Riba)
 Usury - Historical Overview
 Sources of Syariah Law
 Syariah Requirement & Prohibitions
 Essential Elements and Necessary Conditions in Contract
 Types of securities allowed under Syariah Law
 Why the need of separate Banking System for Muslim?
 Common questions raised by those who do not understand Islamic Banking!
 Is Islamic Banking for Muslim Only?
 Syariah Qualification (how to determine whether a company is doing “halal” business)

2.0 SOURCE OF FUNDS

 Shareholders’ Equity
 Customers Deposits (detailed comparison between conventional and Islamic account deposits, inclusive brief outline on deposits offered by commercial banks)
 Al-Wadiah savings
 Al-Mudharabah – General Investment Account
 Al-Mudharabah – Specific Investment Account
 How Islamic banks fund its operation via Islamic Interbank Money Market (IIMM)
 IIMM mechanism and types of IIMM products

3.0 APPLICATION OF FUNDS

(Types of financing facilities – comparative approach between conventional & Islamic banking and practical application)

 Murabahah/Al-Bai Bithaman Ajil/Commodity Murabahah (Tawarruq transaction?)
 Cash line facility (Overdraft)
 Al-Murabahah (inclusive revolving credit/Vehicle Floor Stocking)
 Al-Mudharabah (Trustee Joint Venture Financing)
 Al-Musyarakah (Joint Venture Financing)
 Al-Ijarah Thumma Al-Bai' (AITAB-Islamic Hire Purchase)
 Al-Kafalah (Bank Guarantee)
 Al-Qhardul Hassan (Benevolent loan)
 Istisna Ijarah Mawsufah Fi Zimah (Order Sale and Forward Leasing)
 Al-Ijarah Muntahiya Bitamlik (Leasing ending with ownership)
 Al Rahnu (pawn broking)
 Brief overview on Islamic Structured products & Islamic Capital Market (including Islamic REITS)

4.0 HOW IS PROFIT CALCULATED AND SHARED BETWEEN BANK AND CUSTOMERS?

 Income recognition method and formula use by Islamic banks;
 Understand profit distribution table (common format for profit distribution between Bank and the Customer);
 Transfer pricing via inter-branch profit distribution/incentive.

5.0 ISLAMIC BANKING ACCOUNTING

 Examples of Accounting entries;
 Islamic banking treatment on General Provision (GP)
 Islamic banking treatment Non-Performing Accounts (BNM GP3 guidelines)
 Loss Write-Off

6.0 OPERATIONS

 Price structure e.g. multi-tier profit rate, step-up/step-down profit rate.
 Types of progressive disbursement – average method, lump sum and scheduled method.
 Reschedule of payment and treatment on partial payments;

7.0 BRIEF OVERVIEW ON ISLAMIC LEGAL DOCUMENTATION

 Types of Agreements (market practice)
 Common flaws in legal documentation(to detect usual flaws in legal documents drafted by lawyers)
 Court Jurisdiction – Shariah or Civil Court
 Some past legal cases and legal precedence (focus on Zulkifli Vs Affin Bank)
 Special Courts & Tribunal

8.0 WHICH IS CHEAPER & PROFITABLE – COMPARATIVE STUDY BETWEEN CONVENTIONAL AND ISLAMIC BANKING BUSINESS
 Consumer point of view! (to prove Islamic Banking facility is cheaper than conventional facility)
 BLR trend for last 24 years – fixed versus variable interest rates (as benchmark for Islamic banking pricing?!)
 Impact of 1997 currency crisis in banking industry i.e. on conventional and Islamic banking system and customers.
 Bankers point of view (to prove some of the Islamic Banking products are more profitable than conventional banking products although technically cheaper???)
 Effective Return comparison between Islamic and conventional banking

9.0 CHALLENGES

 Challenges, Future direction and industry trend
 Past Performance & Industry Statistics on Islamic banking.

10. TRUE ISLAMIC BANKING

 What are the true Islamic banking products? The writer point of view
 Why Muslim scholars continue arguing this and that product is non-Islamic or more Islamic?
 Why are we moving backward i.e. trying to emulate conventional products like derivatives and name the product as Islamic derivative?

Other topics that the writer will examine are Takaful and Capital Market Product (including sukuk, structured products).
Please take note that some of the topics that will be discussed above, may not be the general view of Islamic bankers, regulators or even Islamic banking scholars. In addition, the writer may also write his own view based on the writer's own experience on the operation and practical aspects of the Islamic banking business.


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