Deck 1: Islamic Banking and Finance: Principles and Practice

Question 1

The existing mediums of exchange currencies. during the advent of Islam in the Arab region were the dinar Gold. and dirham Silver..

Answer 1

True

Question 2

At present, the membership of the Islamic Development Bank IDB. consists of 65 countries.

Answer 2

False

Question 3

Within the modern context, the interest element in banking and finance is replaced with profit-sharing through certain Islamic financial products such as mudarabah and musharakah.

Answer 3

True

Question 4

The resolution of Islamic Fiqh Academy is considered one of the main sources of Al Sharī'ah Islamic law. that constitute the basis of Islamic banking and finance

Question 5

The form of riba prohibited in the Qur'an is riba al-fadl, the exchange of superior goods with more inferior ones.

Question 6

It has been established that both interest rates and interest-free banking contribute to inflation.

Question 7

While the gold dinar was the Persian currency, the silver dirham was the currency of the Roman Empire.

Question 8

The enormous development of Islamic banking and finance industry means that there no room for improvement to meet modern challenges facing the industry.

Question 9

Any form of banking and financial institution that is consistent with the principles of the Sharī'ah can be referred to as Islamic bank or financial institution.

Question 10

The embryonic stage of modern Islamic banking and finance is best identified with the 1960s pockets of experiments in Islamic banking in Egypt, Malaysia, and Pakistan.

Question 11

Islamic state originally issued its first Islamic dirham, contained the crescent, the star and bismillah across its margins during the Umayyad era.

Question 12

The first Caliph, Abu Bakr, was the first to introduce a centralized and permanent bait al-mal which is simply known as the Treasury House.

Question 13

While riba al-nasi'ah relates to trade, riba al-fadl relates to loans.

Question 14

The first modern financial institutions were created in the early 1900s as profit-maximization institutions.

Question 15

Among the prohibited transactions which were common during the prophet's era include excessive risk or speculation.

Question 16

Any form of banking and financial institution that is consistent with the principles of the Sharī'ah can be referred to as Islamic bank or financial institution.

Question 17

The first full-fledged world Islamic commercial bank was established in Jeddah/Saudi Arabia in 1975.

Question 18

The first Muslim coins were struck during the Caliphate of Umar, which ushered in a new economic regime in the Islamic state.

Question 19

The significance of zakat is largely attributed to its effectiveness as a distributive tool in the process of wealth circulation and social security.

Question 20

Any form of interest-free banking based on ethical ideals of financial transactions will be recognized as Sharī'ah -compliant.

Question 21

Takaful is the Islamic alternative to reinsurance where it is structured in a Sharī'ah -compliant model.

Question 22

The Islamic finance products are designed in a way to preserve the true nature of Islamic financial transactions without considering the needs of the conventional markets.

Question 23

According to a 2010 estimate, there are more than 430 Islamic banks and financial institutions spread across over 75 countries in the world.

Question 24

The following modes. of transactions were prevailing during the Prophet's lifetime:

A) shirkah partnership. based on profit and loss sharing PLS.
B) al qard al hasan benevolent loan.
C) salam forward. contract
D) all of the above

Question 25

In Islamic law, financial products are restricted to profitable dealings. Non-profitable dealings may not be designed as financial products.

Question 26

The period of the noble companions and the succeeding generations was marked by:

A) tremendous increase in level of commercial interaction between merchants in the Islamic state and other regions
B) further development of fiqh Islamic jurisprudence.
C) advanced economic reforms based on self-exerted judgment ijtihad.
D) all of the above

Question 27

The period of Orthodox Caliphate covered the period between 632 - 661 C.E. The four rightly-guided Caliphs are:

A) Abu Bakr, Umar, 'Uthman, and Salman
B) Abu Bakr, Umar, Uthman and Ali
C) Abu Bakr, Uthman, Ali, and Uthman
D) Omar, Ali, Abu Bakr, and Abdel Malik.

Question 28

The global financial crises of 2008-2010 has hindered the acceptance of Islamic banking and finance as an alternative to the conventional financial system.

Question 29

Islamic finance has the potential of being an alternative mode of finance in the modern world.

Question 30

The Islamic finance industry has more than tripled in size since 2006.

Question 31

Islamic housing cooperatives, Islamic microfinance institutions and private equity/venture capital firms are examples of Islamic non-bank financial institutions.

Question 32

Leading banks and financial institutions in Europe and America are reluctant to open Islamic banking windows or subsidiaries.

Question 33

Dubai Islamic Bank DIB. operates the following main business groups.:

A) retail banking
B) corporate banking
C) real estate
D) all of the above

Question 34

Which of the following is not a function of the Islamic Development Bank IDB.?

A) to accept deposits and mobilizing financial resources through Sharī'ah compatible modes
B) to Assist in the promotion of foreign trade especially in capital goods, among member countries
C) to regulate the Islamic banking and financial industry
D) to establish and operate special funds for specific purposes

Question 35

The Islamic finance industry has demonstrated its resilience and feasibility evidenced by its continuous growth at the time of global financial crisis.

Question 36

Islamic non-bank financial institutions play a facilitative role in the Islamic society to ensure economic development by supporting the liquidity needs of the major agents in the economy.

Question 37

As opposed to takaful, conventional insurance is based on principles of mutual cooperation, common welfare and general good of the society.

Question 38

Takaful and retakaful play a significant role in managing and mitigating risks in Islamic banking and finance.

Question 39

Islamic finance products were initially based on the idea of equity partnership or partnership modalities in general.

Question 40

The acceptance of the practices of Islamic banking and finance has brought new non-Muslim experts, professionals, and financial institutions to Islamic banking and finance.

Question 41

Islamic financial architecture and infrastructure provide crucial support for sustainable practices in the Islamic financial services industry, which includes:

A) payment-settlement systems, legal institutions and framework
B) safety net
C) liquidity support providers
D) all of the above

Question 42

Islamic finance, as an ethical, interest-free regime built on PLS, is meant:

A) only for Muslims
B) for Muslims and non-Muslims only in commercial transactions
C) for Muslims and non-Muslims only in personal finance
D) as an alternative to conventional finance

Question 43

A comprehensive study conducted on Islamic finance products and instruments reveals that:

A) about 1,357 products extracted from 41sources
B) about 1,753 products extracted from 14 sources
C) about 1,357 products extracted from 14 sources
D) about 1,537 products extracted from 41 sources

Question 44

__________ is not a major component of the Islamic banking and finance industry.

A) Islamic banking
B) conventional insurance
C) Islamic capital markets
D) Islamic non-bank financial institutions

Question 45

____________ is not a key operating mechanisms of Islamic banking and finance industry.

A) fund mobilization
B) fund utilisation
C) takaful/retakaful
D) leasing mode

Question 46

The Islamic banking component of Islamic financial services may be:

A) fully fledged Islamic banks,
B) Islamic subsidiaries
C) 'windows' of conventional banks.
D) all of the above

Question 47

What is the main difference between the Islamic Development Bank IDB. and the Dubai Islamic Bank DIB.?

Question 48

Examples of Islamic non-bank financial institutions include:

A) Islamic leasing and factoring companies,
B) Islamic microfinance institutions,
C) waqf management institutions,
D) all of the above

Question 49

The following are examples of non-profitable Islamic financial products EXCEPT:

A) zakat alms.
B) waqf charitable endowment.
C) tabaru'at gratuitous contracts.
D) musharakah

Question 50

Describe the major economic problem that the first Caliph, Abu Bakr encountered and how did he deal with such a problem.

Question 51

All financing in Islamic banking and finance can be conveniently classified under:

A) sharing modes
B) sale modes
C) leasing modes
D) any of the above modes

Question 52

Which one of the following statements. is/are true?

A) by the end of 2010, it was estimated that the total size of Islamic financial assets was more than US$1 trillion
B) Sharī'ah -compliant assets rose by 8.85 percent from US$722 billion in 2009 to US$985 billion in 2010
C) by the end of 2011, the total estimate of Sharī'ah -compliant assets was put at US$1.38 trillion
D) all of the above

Question 53

The market players in the Islamic Capital Market ICM. include all of the following EXCEPT:

A) brokerage houses
B) Islamic leasing companies
C) fund management institutions
D) Islamic asset management institutions

Question 54

Main multinational Islamic banks include:

A) Bahrain Islamic Bank
B) Kuwait Finance House
C) Arab Islamic Bank
D) all of the above

Question 55

Describe the Mit Ghamr experiment and explain its significance as the first modern-day trial of Islamic banking.

Question 56

Describe the key functions of the Islamic Development Bank IDB..

Question 57

List some of the prohibited transactions prevalent during the early days of Islam.

Question 58

Describe the three models of Islamic banking in practice Islamic banking component..

Question 59

Discuss the economic reforms undertaken by the second Rightly Guided Caliph, Umar ibn Al-khattab.

Question 60

International bodies dedicated to enhancing Islamic finance industry include:

A) the International Islamic Financial Market IIFM.
B) Islamic Financial Services Board IFSB.
C) accounting and Auditing Organisation for Islamic Financial Institutions AAOIFI.
D) all of the above

Question 61

How do experts envisage the future of the Islamic Finance Industry?

Question 62

Explain briefly how Islamic banks mobilize their funds.

Question 63

Identify at least six supporting institutions that are necessary for sustainable practices in the Islamic banking and finance industry