How Did Islamic Managing An Account Framework?

Main competitive pitch of Islamic banking is in Sharia compliant and interest free. But the real business of Islamic banking is producing profit.

Recent achievements in Islamic banking do not indicate an advance in the jurists interpretation of riba. Writings on riba have been extensively concerned with the expositions of riba, but with disquisitions about riba. Thought about riba, and any other Qur’anic penetrative codes, must be a story of movements in outlook and ever-changing ideas, and developments taking place in contemporary social sciences. Its province is destined by God, may he be exalted, in a way to be determined and re-determined in the course of time by drawing insights from different branches of human science. The subject of riba, and other divine codes in Qur’an regarding dealings and transactions is such that no cohesive delineation of the scope can be regarded as final.

Becoming an expert in Islamic economics and finance field is one of my long-term goals in life. I started to organize and made a plan towards achieving that dream since senior high school. The concern towards Islamic economics and finance concept, and its application for society and the country began when I was reading a book entitled Islamic banking-theory and practice. After finishing reading the book, my interest in Islamic economic and finance topics rose and strengthen my own determination to become the expert of Islamic economics and finance. The main principle of Islamic economics and finance which offers the just and ethics in economic activity, poverty alleviation through income distribution mechanism, and prevention of economic and

Islamic banking is a structure that allows conducting banking activities and trades in line with the Islamic Shari’ah laws and principles by avoiding all the haram (prohibited) activity such as interest and financing prohibited businesses.

Riba is Arabic term defined for usury or interest. The word Riba means excess, increase or addition. According to Islamic terminology, interest means effortless profit which comes free from compensation or in the simple meaning, any excess compensation without due consideration. Any positive, fixed, predetermined rate tied to the maturity and the amount principal is considered Riba and is prohibited in Islamic financial systems. This prohibition is based on an arguments of social justice, equality, and property rights. Islam itself encourage the earning of profits but forbids the changing of interest because profits.

The banking sector is the division of society’s economy, which is devoted to managing financial assets for its people. The industry invests on the finances, leveraging them to produce more wealth as it follows the regulation of the government. The holding of people’s financial assets is done as per customers’ wish and request. It all starts with a simple account opening, which in turn involves giving full individual information including their dates of birth, full names, next of kin, national document registration numbers, residence, gender, nationality, and so on. The bank vows to keep this information secure, and the

Shahjanaz Kamaruddin begins this article by stating that Malaysia has developed into becoming a full-fledged Islamic financial system operating in parallel to its conventional counterpart. Islamic finance is based on the Islamic principle of Syariah which is relevant in today’s world. According to the Islamic Finance Development (IFD) Report 2014, Malaysia is the undisputed in sukuk(bond) with a 63% of global market share. Malaysia performs very well across 5 indicators which are quantitative development, knowledge, governance, CSR (corporate social responsibility) and

In addition, Islamic bonds are still far superior as compared to conventional binds, underpinned by the following factors: • Fairness and transparency. The financier and customer share the risks and rewards based on an agreed profit-sharing ratio. The roles and responsibilities of the parties to a contract are also explicitly disclosed and transparent. Asset-backed transactions. Islamic financial transactions must be backed by an underlying tangible asset or legitimate productive activity. This discourages over-exposure of the financing facility beyond the value of the underlying asset, and hence provides continuous security to the investors Ethical investment. Islamic finance prohibits the charging or paying of interest, and imposes restrictions on unethical and speculative financial activities

Accordingly, Islamic banks are responsible to prevent or to combat money laundering activities which are clearly not in line with the teachings of Islam.

Petrodollar flows have been among the major factors supporting the growth of the Islamic finance industry ever since the 1960s GIFF (2010). The rising petrodollar flows in global markets imply continued and increasing petrodollar investments in the Islamic finance sector. This has led to a surge of interest in the Islamic Finance sector, with more and more countries positioning themselves as strategic locations to tap into part of this abundant pool of funds. For instance, a number of countries worldwide have announced their plans to issue Sukuk (Islamic bonds) and thus meet their financing needs by attracting high net worth investors (HNWIs) and wealth from the Middle East region. HNWIs are particularly on the look-out for efficient and secure jurisdictions for investing their funds, more so in the context of the present economic downturn . Operating in a facilitative business environment and reducing cost of operations are deemed instrumental factors for market players. Accordingly, a number of jurisdictions have actively encouraged the development of their Islamic capital markets as a key strategy for attracting both HNWIs and Islamic finance businesses . In particular, it has been observed that jurisdictions from across the world are developing their Islamic capital markets by utilising the efficiency provided by Offshore Financial Centres (OFCs) to structure Shari’ah compliant products which adhere to the

AAOIFI – Introduction • Responsible for formulation and issuance of international Islamic finance standards. • Has issued 68 standards: 25 accounting standards; 5 auditing standards; 6 governance standards (incl. on Shari’a supervision); 2 codes of ethics; and 30 Shari’a standards (rules for application of

It regulates public and private behaviors and actions of people” (Mulcahy). Sharia law consists of an exceptionally broad topic span and has been interpreted many ways, especially on unclear points. Mulcahy said “Although the word of Sharia cannot be altered, like any other religious text it should not be interpreted word for word. This has obviously not been the case and has led to religious extremism and a strong split between Muslims”. The rules of Sharia are single-handedly what distinguish Islamic Accounting from other methods.

Despite of increased attention on Islamic banks, recent studies have evidenced mixed result on the stability of Islamic banks over its conventional counterparts (Belouafi et al. 2013; Kassim & Abd. Majid 2010; Rokhim & Gamaginta 2009; Bourkhis & Nabi 2013). Thus, indicates that there is non-consensus on the stability of Islamic banks over its conventional counterparts.

The gale of economic liberalization currently sweeping across the globe provides another reason for looking into the efficiency of Islamic banks since it poses a further competitive challenge to the Islamic banking institutions. It is expected that by the year 2007, trade liberalization will require Malaysian domestic banks to compete with other global players on an equal playing field. Such a change implies that local Islamic banking institutions will have to be efficient, innovative, competitive and resilient players in the market. This is particularly important since foreign banks that are arguably more efficient may also offer Islamic banking products to take advantage of brisk demand for Islamic banking products.

Islamic finance refers to the provision of financial services in accordance with the Shari’ah Islamic law, principles and rules. The principles of which “emphasise moral and ethical values in all dealings have wide universal appeal” - (Institute Of Islamic Banking And Insurance - What Is Islamic Banking) Shari’ah does not permit the use of Riba (Interest), "gharar" (excessive uncertainty), "maysir" (gambling), short sales or financing activities that it considers harmful to society. The purposes and use of Islamic banks are similar to conventional banks, the only difference is that, Islamic banking is in accordance with the rules of Shari’ah which can also be known as ‘Fiqh al-Muamalat. Charging customers interest and fees for their services runs conventional banks. Islamic Banking is now well established, and heavily institutionalized in some 76 countries (Ariff and Iqbal). The existence of modern Islamic financial institutions was first recognized in 1960s and now has spread to a large number of Muslim countries including GGC (Gulf Cooperation Council), Arab, South and South East Asia, North Africa, and some of the west countries including UK, France, Denmark, etc. number