Reference no: EM132719487
Circle the letter next to the most accurate answer.
Which of the following principles applies to Islamic banking and finance?
- Prohibition of speculative behaviour
- Only Sharia-approved activities are permissible
- All profit-making is impermissible
- a and b
Islamic banks:
- Pay interest to their depositors
- Charge interest to their lenders
- Do not provide financing without collateral
- Base their investing criteria on the investment potential of the project and not just on collateral
Which of the following is a characteristic that differentiates Islamic banks from conventional banks?
- The absence of interest in all financial dealings
- Making profit from trade
- Allocation of funds to areas that increase economic activity and benefit society
- Provide home financing via mortgages
Islamic banks:
- Base their investment decisions entirely on the collateral submitted by the client
- Base their investment decisions on the investment potential of the project and not just on collateral
- May accept interest on their liabilities but donate it to charity
- Both a and c
Applying Islamic finance principles means:
- Islamic banks cannot provide lines of credit that bear interest
- Islamic banks can make money out of money
- No restriction on speculative behaviour
- Avoiding all kinds of risks by the Islamic bank
The main objective of Islamic banks is to:
- Provide funds for Muslims
- Make maximum profits for shareholders
- Finance building of Masjids and other Muslim religious institutions
- Provide an alternative to interest-based banking
The main objective of Islamic banks is to:
- Ensure Halal activities are not financed
- Finance the building of Islamic schools and colleges
- Provide Riba-free banking products and services
- Develop the retail and consumer banking in Muslim countries
Which statement below does not apply to an Islamic bank:
- Does not charge interest on funds given as loans
- Does not pay interest to its depositors
- Provides collateral-free loans to Muslims only
- Ensures no Haram business activity is financed
Which of the following is a Shariah rule applied to Islamic banking?
- Selling money for money is permitted
- Any profits made are not permitted
- A deferred sale at a price higher than the cost is not permitted
- A deferred sale at a price higher than the cost is permitted
The main Islamic banking products are:
- Musharaka, Mudaraba and Murabaha
- Ijara and Istisna
- Salam
- All of the above
An Islamic bank is a business, and so must make profit. Which of the statements below best explains the mechanism by which the Islamic bank earns profit?
- The Islamic bank charges a low interest on loans, and thus remains profitable without overcharging its clients
- The Islamic bank charges a competitive fee on loans and most of its profit comes from the fees
- The Islamic bank finances various needs of customers, linked to assets, on the basis of sale, leasing or partnership and earns a share of the profit from the transaction
- The Islamic bank does not lend money but instead acts as an agent between seller and buyer and receives a fee for its services
Sharia-compliant sales contracts have three requirements. Which of the following is not one of them?
- Assets need to be in existence
- Sales profit should be reasonable
- Owner should own the asset
- Asset should be in physical or constructive possession of owner
Abdulla agrees to sell his house to Ahmed at the market price. Is the sale valid under Islamic finance?
- Yes, the sale is valid because it is not fair that Abdulla loses money should the market price go up. At the same time, it is not fair that Ahmed pays too much for the house should the market price go down
- No, the sale is not valid because Abdulla and Ahmed did not sign a written bilateral contract agreement specifying this condition
- Yes, the sale is valid because both Abdulla and Ahmed agree to this condition and therefore they enter into a bilateral contract agreement
- No, the sale is not valid because the specific price has to be stated under the Islamic finance contract requirements
Rafe took a loan of £10,000 from Helen for a small business. The business incurred a loss and the capital reduced to £5,000. Can Rafe ask Helen to share in the loss? Which statement below is the best answer?
- Yes, because Rafe took the loan for the growth of his small business. Rafe does not have to pay the full amount back to Helen
- Yes, because in Islamic finance two parties always share the profit and loss because it is just and fair. Rafe does not have to pay the full amount to Helen
- No, because the transaction between the two of them is that of a loan and not any form of partnership. Rafe is liable to pay £10,000 to Helen
- No, because the transaction between the two of them was not recorded by the Shariah Supervisory Board. Rafe is liable to pay £10,000 to Helen
In Badr's grocery store there is surplus flour currently. He decides not to sell it now and to do so in the future, when there is a deficit of flour, so he can make a higher profit. Is this transaction acceptable under the principles of Islamic economics? Why?
- Yes, because taking advantage of a deficit of goods will result in higher profits for Badr
- Yes, because Badr speculates for changes in commodity supply, which is a proper business risk he is taking
- No, because Badr is hoarding food, and hoarding food and other necessities is unlawful under Islamic economics
- No, Badr is making the decision based on the issues of supply and demand of flour, which is unacceptable in Islamic economics
Noor purchased 1,000 bags of sugar from Islamic Bank on credit. While transporting the bags to her factory, the sugar was destroyed by heavy rains. Choose the statement that correctly explains who bears the loss.
- Noor bears the loss because she is the owner of the goods
- Noor bears the loss because she was transporting the goods at the time of the rain
- Islamic Bank bears the loss because it is the owner of the goods sold to Noor on credit
- Islamic Bank bears the loss because the heavy rains were an act of God and nature, and there was no insurance in place to cover the loss of the goods
As per the OIC Central Bank Governors declaration of 1982, which one below is not an aspect of the relationship between central banks and Islamic banks?
- Lender of last resort
- Supervisor regarding monetary policy
- Shariah supervisory
- Clearing house
Which international IFI is based in Dubai?
The key function of the IIFM is to:
- Creat an interbank money market
- Set up accounting standards
- Mediate in IFI disputes
- Develop, regulate and promote Islamic capital and money markets