module specification

This module deals with the key operations of Islamic banks. It deals with the Islamic financial markets, scope and instruments, the concepts of venture capital, investment funds, unit trusts, securitisation and Sukuk in accordance with Islamic principles. It also explores co-operation between conventional and Islamic financial institutions.

Also, the module is to acquaint the students with characteristics and trends in the emerging capital markets. It provides the students with comprehensive understanding of conventional and Islamic markets in terms of instruments, regulations, level of maturity, depth and sophistication.

It deals extensively with various Islamic capital products, with a focus on structure of Islamic funds, sukuk, derivatives, leverage and hedges.

FS7046 Principles of Islamic Finance and Economics

Module Aims

The module aims to develop:

i) An understanding of the nature and scope of risk management appropriate to both specialist and non-specialist managers in business.

ii) Ability to recognise the range of threats to a business inherent in its operations.

iii) The opportunity to use tools of quantification of these threats and take appropriate action either unaided in straightforward situations, or in collaboration with a specialist in more complex ones to deal with these threats in an appropriate manner.

iv) To develop analytical skills and evaluation theory and practice within the financial institutions and markets, and corporate sector.

v) To use various models and techniques for analysing complex issues arising during the business decision-making process.

Introduction to Islamic Capital Markets.

Credit Risk in Islamic Finance,

Operational Risk in Islamic Finance;

Islamic Banking and Insurance;

Financial Engineering (Develop a broad understanding of derivative securities and how they are used by banks and other financial institutions to hedge exposures);

Liquidity Management (including Management of Treasury Functions);

Market Risks in Islamic Finance,

Course Materials

The course material will take the form of:

a) Materials taking from Recommended Textbook:

b) Handout;

c) Journal articles;

d) Case studies analysis of ‘real-life’ decision-making situations that invite students to bring together their technical knowledge and apply it to situations that challenge top-management.

e) Engage practitioners (as guest speakers) on Financial and Corporate Risk Management Course that provide further input to the course, and serve to bring their specialist skills and practical experience to the course. Guest speakers’ contributions are drawn from contacts within the banking industry, Risk consultants and researchers on Risk Management.

Appropriateness of the module for Career Development
This module will be of great help for those students who wish to pursue careers as  risk specialists, strategists, Internal control/compliance manager, risk control manager, risk management consultants, Operational and Enterprise Risk Adviser.

The module will be delivered through a combination of lectures and student-led seminars. It is envisaged that each 3-hour weekly session will be split into a 2-hour lecture and a 1-hour seminar.

Students are required to undertake the assigned readings from the recommended textbook before lectures and read additional material after lectures to consolidate their understanding of the lectures and seminar topics.

Furthermore, students are required to spend some time searching online sources for data relevant to assessments, solving problems and preparing for seminar presentations in groups.

Learning Outcome

On successful completion of this module you should be able to:

Islamic Capital Markets:

1. Analyse the philosophy and fundamentals of Islamic capital market and evaluate the impact of recent developments. (MQF1 and MQF4)

2. Distinguish between various Islamic capital market products, due diligence processes and issues in light of complex legal relationships.

3. Evaluate Islamic equity, sukuk and derivatives as alternative means of financing and investment to conventional products.

Islamic Banking:

1. Compare and contrast between the banking operations of Islamic and conventional banks .

2. Discuss the sources and uses of funds in Islamic banking operations with their underlying Islamic contracts.

3. Analyze and compare the balance sheet and income statement of Islamic banks versus conventional ones.

4. Discuss the regulatory and supervisory environment that encircles an Islamic bank and shapes its operations.

5. Critically analyze the major issues and challenges facing Islamic banking operations.

The assessment regime consists of two components.

The first is a substantial coursework assignment based around a case study which will culminate in forming a group report. This will require students to work in groups and demonstrate analytical, problem-solving, research and communications skills. Coursework will be group based which is aimed at developing students’ skills in team-work related environment.

The final component is a final individual report, which will be designed to test student’s knowledge and understanding of primary theories, concepts and techniques or final report.

Thus, assessment will be a combination of Case Study Group Report and the final individual assignment. 

A group assignment (coursework) of 2,500 words is expected in week 9; that will require students to use information from corporate annual reports or databases with reference to academic literature to demonstrate understanding of major theoretical and practical problems.

This will afford students additional formative feedback before the final end of the course individual report

Reading list & References

Suggested  Reading list for Islamic Capital Market.

Essential Reading

Bakar, M.D & Engku Ali, E.R.A (2008). Essential Readings in Islamic Finance. Kuala Lumpur: CERT Publications.
Kabir, H, Mahlknecht, M. (2011). Islamic Capital Markets: Products and Strategies. John Wiley & Sons. ISBN:9780470689578
Rosly, S.A. (2005). Critical issues on Islamic banking and financial Markets: Islamic economics, banking and finance, investments, takaful and financial planning. Indiana: Arthur House.( ISBN 1418469300)
Securities Commission (2009). Islamic Capital Market (6 vols). ISBN:9789835371127
Further  Reading

Archer, S. and Karim, R.A.A. (2007). Islamic finance: regulatory challenge. Singapore: J. Wiley. (ISBN: 0470821892)
Malaysian Sukuk Market Handbook, RAM Rating Services BerhadArcher, S. and Rifaat Ahmed Abdel Karim

Suggested Reading list for Islamic Banking

Essential Reading

El Tiby, A.M. (2011).  Islamic Banking: How to manage risk and improve profitability. Hoboken, NJ: Wiley. 9780470880234.
Haron, S. & Wan Azmi, W.N. (2009). Islamic Finance and Banking System; Philosophies, Principles and Practices. Malaysia: McGraw-Hill. 9789833850617
Ismail, A.G. (2010). Money, Islamic Banks and the Real Economy. Malaysia: Cengage Learning Asia. 9789814281683
ISRA (2011). Islamic Financial System Principles & Operations. Harlow: Pearson. (978-967-349-127-8)
Further Reading

Khir, K.,Gupta,L.  & Shunmugam,B. (2008). Islamic Banking: a practical perspective. Kuala Lumpur: Pearson Longman.
Rahman , Z.A. (2012). Contracts and Products of Islamic Banking. Kuala Lumpur:  Cert Publications. 9789670175072

.Academic Journals & Websites
1) Asian Journal of Islamic Finance (AJIF)
2) International Journal of Islamic and Middle Eastern Finance and Mgt.
3) Corporate Finance
4) Accounting & Business Research
5) Accounting, Auditing and Accountability Journal
6) Accounting, Organisation and Society
7) British Accounting Review
8) Financial Accountability & Management
9) Administrative Science Quarterly
10) Journal of Business Finance & Accounting
11)  Journal of Islamic Banking and Finance
12) Journal of Religious Ethics
13) Journal of Risk Finance
14) Review of Financial Studies
15) European Financial Management
16) Harvard Management Review

Other essential sources of information:
1) The Financial Times
2) The Economist
3) Bank of England Quarterly Bulletin