COURSE BACKGROUND

This practical, 4-day program is designed for a wide range of attendees – from beginners to those with a good understanding of Islamic finance. It is suitable for all personnel within a financial institution, corporate, regulator or consultant, including relationship managers and other frontline staff, middle, finance, back office, legal and compliance, risk management and internal audit professionals, as well as senior management.

The course will give delegates highly valuable insights into why Islamic finance is necessary, the Shariah principles it is based on and how it compares and contrasts to conventional finance. The program will also cover in detail key Islamic products and contracts, how they can be structured and risk management of each. A continuous theme throughout the course will be the development of new and innovative financial products. However, this important topic can only be covered adequately once delegates fully comprehend the core building blocks and products available. The important areas of Sukuk, Islamic securitisation and hedging techniques are also covered. Overall, the program covers essentials that all finance professionals involved with Islamic finance must be familiar with.

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DAY ONE: Primary Concepts and Course Tools

Understanding the Major Islamic Concepts and how these affect Financial Contracts

• Sources of Islamic law and meaning for finance
• Hadith & Athar
• Classical contracts and resources
• Consensus and evolutionary methods
• Ijtihad and product development
• Scholarly difference
• What is riba?
• Why this affects the decisions that one makes in structuring loans and financial instruments
• Why its ban necessarily means Islamic transactions are similar, but different
• Whiteboard Exercise: Which contract is ribawi?

Team Formation as Unique Banks

• Balancing of language, business and participant goals and elements

How do Murabahah/Sales Contracts illustrate our principles?

• Gharar: the second grave concern in the theory of Islamic finance
• How Gharar relates to risk and deception and the controllable elements of each in omission
  
• Gharar relates to transactional transparency and requires disclosures
• What are the Islamic rules of possession and contract?
• Do the rules of possession and contract inhibit banking activities?
• Mechanics by case study of the concepts of sales in Islamic finance
• Principles of the Islamic instalment credit sale
• Diagramming a sales contract and shifting it into a credit instrument
• Practical sales cases involving showing simple accounting treatment, risk weighting and RAROC
• Murabahah for liquidity management: London Metals contracts and parallel Murabahah
• Can we really do “Islamic” “banking”: the question of the riskless principal

Discussion of Shariah Differences and their Practical Meaning

• Commonality and distinction between key schools of thought
• Understanding areas of divergence
• Examination of regional differences:
• Gulf Cooperation Council
  • Malaysia
  • Egypt
  • Muslim Minorities
• A brief review of the key areas of creative divergent thought among the scholars and the practical fact of consumer and corporate demand
• The strange cases of tawarruq and bai al inah

Accounting & Regulatory Principles

• What makes Islamic finance different from traditional finance?
• Discuss the roles of AAOIFI and IFSB
• Understanding the primary distinctions between AAOIFI, IASB and GAAP
  • Where are the prospective conflicts
  • Will banks prefer one method over another
• How difficult is it to reconcile IFSB and Basle II
  • Basle II favors large entities and data rich banking environments
  • How does the Islamic bank in an emerging market manage Basle II challenges
• Exercises relating to deposit concepts

Three Transactional Concepts to Remember:

• Mudarabah is one of the key organizational forms of Islamic banking
• Musharakah, is it the principle leading to the corporation?
• Sukuk, an Islamic securitization tool, key organizing principle for the expansion of Islamic finance?
• Is the modern corporation permissible?
• The distinction between shirkat al milk and shirkat al aqd

DAY TWO

Core Islamic Financial Transactions:

• Overview of Islamic contract forms
• Freedom of contract rules compared to emphasis on contract form
• Documentation issues to consider

Sales Contracts: Murabahah–Syndicated Trade Finance

• Examining a syndicated trade deal in order to review the concepts of Murabahah and methods of syndication
• Can there be a revolving or variable rate Murabahah?
• Is there such a thing as Shariah compliant forfeiting?

Letters of Credit & Shariah Compliance

• Islamic principles relating to guarantees and letters of credit
• Trade Wakalah and trade Musharakah concepts
• Micro cases examining trade and Murabahah principles in the market

Steel Company Tawarruq

• Is there a better way to structure working capital finance?

Sukuk

• What are sukuk?
• How is this market developing?
• How do they benefit the banking business?
• What are practical applications?

Salam

• Principles of the Islamic futures methods
• Diagramming salam and parallel salam
• Practical salam cases showing simple accounting treatment, risk weighting and RAROC
• Assisting the farmer
• Open market operations
• Commodity transactions

Ijarah Methods creating Flexible Extensions of the Credit Model

• Principles of the Islamic lease methods
• Diagramming Ijarah, Ijarah wa iqtina and “guaranteed” transactions.
• Managing existing balance sheet asset exposures
• Practical Ijarah cases showing simple accounting treatment, risk weighting and RAROC
• Solving consumer and corporate finance needs with Ijarah
• Cross border applications of Ijarah, master lease concepts and leveraged leases
• Leasing as the basis for securities issuances or sukuk
• Leasing funds and securities

DAY THREE

Syndicated Ijarah

• Reviewing Ijarah principles, contrasting to Murabahah & salam

Istisnah

• Istisnah in the manufacturing and construction contexts
• Differences between Salam and Istisnah
• Practical Istisnah cases showing simple accounting treatment, risk weighting and RAROC
• Construction and manufacturing
• Would Musharakah be a better tool for managing the risks of construction or manufacturing?

Musharakah, Mudarabah,

• What is the difference between Musharakah and Mudarabah and why do they seem to be favored by some Islamic scholars?
• Can the transactions be priced off of top line, intermediate or net profit/loss calculations?
• Practical Musharakah and Mudarabah cases showing simple accounting treatment, risk weighting and RAROC
• How can Mudarabah be used to meet simple cash flow needs of companies and fit within banking regulations?

Deposits

• The concept of Wakalah
• Synthetic deposits
• Deposit case studies and calculation.
• Displaced commercial reserves
• AAOIFI and IFSB issues

Consumer Finance Options

• Home finance
• Credit card alternatives and issues
• Autos, appliances and other needs
  

DAY FOUR

Securities Review

• Asset backed securities discussed
• Review of deal structures, securities applications, treasury applications.

Future flow securities

• How a future flow gas deal is structured
• Deal components defined
• Hedging query raised

Mutual Funds & Unit Trusts

• Key Islamic structuring issues
• How Islamic screens work
• How these can be used to manage existing assets at the bank or create new assets for clients

Hedging & Derivatives

• The issues that make derivatives difficult in the Shariah space
• Options & optionality
• Forwards and Murabahah structures
• Anticipating new developments

Losses and Defaults

• Reviewing the concepts of Basle II
• Looking back at the course contents and understanding the risks
• Summarizing the Islamic market space

Course Conclusion

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EXPERT COURSE DIRECTOR

Sh. Muhamed Becic

Shariah Controller & Research Analyst at SHAPE™ Financial Corp., He is supporting SHAPE™ Shariah fund and sukuk structuring and monitoring of projects in the GCC, US, and Southeast Asia, as well as assisting in the design of English and Arabic language materials meant to make non-specialist find Islamic finance more accessible.

Muhamed is a graduate of the University of Madina in Fiqh and Usul al Fiqh and holds a master’s degree in Fiqh Muamalat from the International Islamic University in Malaysia. His Master’s thesis focused on Sukuk al Mudarabah and its implementation in Islamic Capital Markets. Muhamed’s recent research relates to the practical applications of the concept of istijrar, tawarruq, sukuk forms, the Islamic rules of exchange applicable to sukuk, and Saudi Arabian capital markets rules.

During the past year, Muhamed’s client related work included developing Musharakah and Wakalah structures to replace tawarruq as applied by an EU based multi-national in its GCC and Islamic market support for clients. He has assisted a Saudi Arabian client in the understanding of sukuk al istithmar applications for the restructuring of the client’s balance sheet. And, he has worked on the Shariah analysis and implementation of a royalty based sukuk concept for a Southeast Asian based client.

Muhamed has been a frequent lecturer in the fields of fiqh and usul al fiqh over the past five years. He has performed training in Islamic finance for private clients and public courses in Malaysia, Egypt, Kuwait, Dubai, and Saudi Arabia. He presents in Arabic, English and Bosnian.

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DATES & PRICE

Discounts

• Why not take advantage of our special group booking incentive and train a number of your team members at once?  Send 3 delegates to any one course and receive a fourth place completely free of charge.  Further incentives are also available for higher delegate numbers – please contact us directly for more details.

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