Download Islamic finance

The Islamic finance
Architecture
Tariqullah Khan
The architecture of the financial
system comprises of a number of
vital and permanent principles and
components
---- just like the foundations, pillars, ceiling
etc., are critical elements of a building’s
architecture
Financial infrastructure comprises of
the resources, facilities and utilities
that make the use of architecture
beneficial for building an inclusive,
dynamic and resilient financial system
----- just like the water, electrical, lightening,
heating, communication, furniture etc., in a
building that make the utilization of the building’s
full capacity possible
Financial architecture has to be
stable and could NOT be
subjected to frequent changes
------ just like the foundations, pillars and ceiling of
a building that cannot be changed
Financial infrastructure is work in
progress and must be subjected to
continues improvement
----- just like the water, electrical, lightening,
heating, communication, furniture etc., in a
building that need maintenance and improvement
The objective of the Islamic financial
architecture is to ensure that the
financial system operates inclusively,
efficiently and soundly in a
sustainable and resilient manner and
according to the aspirations of the
individuals, society and all
stakeholders in compliance with
international best practice principles,
guidelines and standards
the architecture - foundations,
pillars and roof of Islamic
finance
Individual
motivations
❶
Prohibited &
condemned:
Interest-Riba-based
transactions
not-for-profit & charitable
motivations
for-profit and commercial
motivations
Permitted & safeguarded:
legitimate trading;
charitable lending & debt
rescheduling
the architecture - foundations,
pillars and roof of Islamic
finance
Markets and
property rights
❷
In contracts
there should
not be any
room for
ambiguities
Ownership of an asset has
intertwined risks and benefits
What is not
owned should
not be sold
The risks and
benefits of an asset
shall not be
separated and
traded separately
the architecture - foundations,
pillars and roof of Islamic
finance
Social ideals
❸
Rights of future
generations
Preservation of
faith
Objectives of the legal
system
Preservation of
intellect
Human rights &
dignity
Preservation of
wealth
the architecture - foundations,
pillars and roof of Islamic
finance
Financial rate of return is
subject to moral standards
Moral standards
❹
Documentation
and disclosure
standards
Principles based
internal Shariah
supervision
Shariah
screening of
products
the architecture - foundations,
pillars and roof of Islamic
finance
Internationally credible &
comparable
Best practice
standards
❺
Ownership risk and
capital adequacy
Governance &
stakeholders'’
rights &
responsibilities
Internal control
& risk
management
Transparency &
disclosures
Products &
services
the architecture - foundations,
pillars and roof of Islamic
finance
Innovation &
renovation
❻
Guided freedom for
innovation
All is permitted that is
not expressly
prohibited