Preface
1 The Author’s Motivation
2 Aim of the Thesis
3 Proceedings of Information Gathering
4 Structure of the Work
5 Terminology
Chapter A - Islam - History, Cultural Aspects, and Principles for the Financial System
1 Foundation and Meaning
1.1 The Prophet
1.2 Statutory Sources in Islam
1.3 Discrepancies among Mohammads Successors and the Development of Various Movements
1.3.1 Sunnites
1.3.2 Shiites
2 The five Pillars of Islam
2.1 Shahada - Faith
2.2 Salaat - Prayer
2.3 Zakat - Almsgiving
2.4 Saum - Fast
2.5 Hajj - Pilgrimage
2.6 Djihad - A sixth Pillar?
3 Islamic Banking
3.1 Development of Islamic Banking
3.1.1 Roots of Islamic Principles and Problems with Interpretations
3.1.2 The Early Days
3.1.3 Emergence of Conventional Banking Facilities in Islamic Countries
3.1.4 Implementation of Theory into Practice
3.1.5 Reorganisation of Old Values
3.1.6 The Basis for a Modern Islamic Banking System
3.1.7 New Customers’ Needs and the Establishment of Control and Supervisory Bodies
3.2 Principles in Islam connected with financial activities
3.2.1 Haram - Halal
3.2.1.1 Description
3.2.1.2 Background
3.2.2 Gharar - Maysir
3.2.2.1 Description
3.2.2.2 Background
3.2.3 Riba
3.2.3.1 Description
3.2.3.2 Background
3.2.4 Zakat
3.2.4.1 Description
3.2.4.2 Background
3.3 Financing Tools and Methods
3.3.1 General Rules
3.3.2 Various Kinds of Bank Accounts
3.3.2.1 Current Account
3.3.2.2 Savings Account
3.3.2.3 Investment Account
3.3.3 Overview of Selected Financing Tools
3.3.4 Profit and Loss Sharing
3.3.4.1 Mudarabah
3.3.4.2 Mudarabah Mutanaqisa
3.3.4.3 Musharaka
3.3.4.4 Musharaka Mutanaqisa
3.3.5 Fixed Charges - Mark-up Schemes
3.3.5.1 Murabaha
3.3.5.2 Bai Muazzal
3.3.5.3 Bai Salam
3.3.5.4 Istisna
3.3.5.5 Ijarah
3.3.5.6 Ijarah Waiktina
3.3.6 Free Charges - Qard Hassan
3.3.7 Concepts Applicable Directly or Indirectly to the Operations of Islamic Banks
3.3.7.1 Wadiah
3.3.7.2 Rahn
3.4 Summary of Selected Features of Islamic Contracts
3.5 Shariah Supervisory Board
Chapter B - Muslims in Germany
1 Population
1.1 World Wide Trends and Developments
1.2 Number of Muslims in Germany
1.3 From Migration to Immigration
1.4 The Age Structure
2 Culture and Education
2.1 The Islamic Charta
2.2 Cultural Distinction
2.3 Associations and Societies
2.4 Concerns of the ‘Federal Office for Protection of the Constitution’
2.5 Media
2.6 School
2.7 Work
2.8 Integration
3 Financial Status Quo
3.1 World Wide Trends
3.2 Muslims’ Savings in Germany
3.3 Roles of Financial Systems
3.4 Approach of Muslims in Germany
3.5 Exceptions as Examples
3.5.1 “CICM Fund Management Ltd.”
3.5.2 “UBS Islamic Fund Management Company S.A.”
3.5.3 Islamic Bonds of Deutsche Bank AG
3.5.4 Sukuk of Saxony-Anhalt
4 Potential
4.1 Population
4.1.1 Shifts in the Population Structure
4.1.2 Reasons for Shifts in the Population Structure
4.1.3 Assumptions for a Future Development
4.1.4 The Migrants
4.2 The Labour Market
4.2.1 The Activity Rate in Germany
4.2.2 Relation of Activity Rate to Migration
4.2.3 People at Working Age and Unemployment
4.3 The Income Structure and Wealth of the Muslim Population
Chapter C - Requirements and Proposals for Islamic Financial Products in the German Market
1 Requirements Set by German Law - Chances and Obstacles for Islamic Finance
1.1 The German Banking Act
1.2 Minimum Reserve
1.3 Protection of Deposits
1.4 Provisions Concerning Competition and Advertisement
2 Requirements Set by Islamic Law
3 Harmonisation of German Laws to Islamic Necessities
4 Proposals for Islamic Financial Activities in the German Market
4.1 Requirements and Proposals for Structuring a Financial Institution Offering Islamic Products
4.2 The Gafoor Model
4.2.1 Deposit Accounts
4.2.2 Riba and Cost of Borrowing
4.2.3 Deductive Features of the Gafoor Model and Further Explanations
4.2.4 Conclusion of the Gafoor Model
4.3 Conventional Banking Models
4.4 Examples of Products Compliant with Shariah and Conventional Law
4.4.1 Sukuk - Bond
4.4.1.1 Mudarabah Bonds
4.4.1.2 Musharaka Bonds
4.4.1.3 Murabaha Bonds
4.4.1.4 Salam Bonds
4.4.1.5 Istisna Bonds
4.4.1.6 Ijahra Bonds
4.4.1.7 Mixed Forms
4.4.2 Credit Cards
4.4.3 Hedge Funds
4.4.4 Index Certificates and Funds
5 Transformation of a Conventional Equity Financing Concept into an Islamically Compatible One
5.1 The Conventional Model
5.1.1 General Features of the Conventional Model
5.1.2 Items of the Model Calculation
5.1.2.1 Revenues and Costs of Operation
5.1.2.2 Liquidity Computation
5.1.2.3 Financial Statement for Taxable Income
5.1.3 Details for Selected Items
5.1.3.1 “Ship Mortgage Loan I”
5.1.3.2 “Ship Mortgage Loan II”
5.1.3.3 Taxable Income and “Tonnage Tax”
5.1.3.4 Income Distribution and IRR
5.2 The Transformed, Shariah Compliant Model
5.2.1 Changes in the Financing Structure
5.2.2 The Mortgage Loan
5.2.3 Taxable Income and “Tonnage Tax”
5.2.4 Income Distribution and IRR
5.3 Conclusion
Chapter D - Final Conclusions of this Thesis
Appendices
References
1 Bibliography - Print Media
Contents
2 E-Mail Contacts
3 Letters
4 CD-Rom
5 Internet Source
table 1 Scheme of Selected Islamic Financing Tools
table 2 - Development of Muslims Living in Germany from 1945 - 2000
table 3 - Savings of “High Net Worth Individuals” from the MENA Region Abroad
table 4 - Presumptions of Structural Shifts Concerning the German Population until 2040
table 5 - Migrants in Germany According to Origin
table 6 - Development of Foreign/Muslim Immigrants in Germany (1962-2000)
table 7 - Development of Foreigners/Muslims in Germany until 2040
table 8 - Scenarios of Shifts in the Activity Rate in Germany until 2040
table 9 - Activity Rates as Percentage of Population in Germany/Immigrated Population
table 10 - Percentage of Capable Foreign Workers in the German Labour Market
table 11 - Unemployment Rates - Total Compared to Foreigners’
table 12 - Participation in Advanced Vocational Trainings
table 13 - Predicted Cumulated savings of Muslims in Germany until 2040
table 14 - “HC Elida-Original” - Application and Source of Funds
figure 1 - Development of Muslims Living in Germany from 1945 - 2000
figure 2 - Allotment of Branches of the Turkish Self-Employed
figure 3 - Allocation of Funds of ‘Al Sukoor European Equity Funds’ by Country
figure 4 - Performance of “Al Sukoor European Equity Funds” Compared with “DAX”
figure 5 - Performance of “Al Sukoor European Equity Funds” Compared with “DJIA”
figure 6 - Allocation of Funds of “Noriba Global Equity Fund” by Country
figure 7 - Performance of “Noriba Global Equity Fund” Compared with “DAX”
figure 8 - Performance of “Noriba Global Equity Fund” Compared with “DJIA”
figure 9 - Performance of “DB-Certificates” Compared to “DAX” and “DJIA”
figure 10 - Future Scenarios of Structural Shifts in the Population in Germany until 2040
figure 11 - Future Scenario of Structural Shifts in the Foreign Population in Germany until 2040
figure 12 - Development of Foreign/Muslim Immigrants in Germany (1962-2000).
figure 13 - Scenarios of Shifts in the Activity Rate in Germany until 2040
figure 14 - Example of Istisna Bonds
figure 15 - Example of Mixed Forms of Usage of Bonds
illustration not visible in this excerpt
"My feeling is that in the modern marketplace it is certainly within the realm of possibility to reproduce or replicate in some way, shape, or form, all modern instruments, derivatives or otherwise, used for trading or creating wealth and distributing it in ways that conform with Shariah."
Shaikh Yusuf Talal DeLorenzo
As the author of this diploma thesis, I would like to say “Thank You” to all who made this essay possible and supported my studies.
Special thanks go to Prof. Dr. Patrick Moore of the “University of Applied Sciences Stralsund” for coaching me during the whole time of preparing this paper. He has always been approachable and his attitude towards my efforts has been kind, encouraging, and constructive. Further I would like to thank Dr. Tomasz Korol from the University “Politechnika Gdanska” for taking the part of the secondary surveyor. He helped me with the thesis as did he organise formalities at the University in Gdansk.
Also, I would like to thank Dr. Christoph Theo Wagner for giving me valuable advices concerning Islam and my work as a whole.
My warmest thanks got to Eva Daum and Olli Backman for helping me with the structuring and the contents of this thesis. They corrected me in the phase of writing and were always there when I needed them.
I would like to use this opportunity to thank my family, especially my parents; without their engagement my studies and this diploma thesis would not have been possible.
Holger Timm, November 24th, 2004, Stralsund
During an internship in a bank in Berlin the author had the chance to work together with Turks. “Ziraat Bank International AG” is one of the leading banks in Turkey, and it has various branch offices in Germany. The daily business activities undertaken were similar to those in a conventional bank, although the relations between clerks and their customers varied strongly. Intense interpersonal contacts, displayed in friendly chats and the offering of tea, were daily routine.
When working together with Muslims the author started to compare financing activities undertaken by “Ziraat Bank International AG” with prescriptions provided by Islamic scholars. Clear differences were obvious from the beginning and the author investigated, if there are financial institutions in Germany providing the services demanded in those prescriptions. It did not seem so. The Turks around showed a proudness in their Muslim-being, but there was no possibility for them to undertake their money transactions in a way their religion prescribes.
Thereby the idea for the following work was born. More than 120,000 Turks are living in Berlin alone1, and none of them has the chance to approach an Islamic bank. Is that true for the whole of Germany? What potential lies in the Muslim population in Germany speaking about their number and their financial strength? How may this potential develop in future?
The aim of this thesis is to show the potential Muslims in Germany have concerning their number and financial power. As assumed, whilst developing the idea for this work, no financial institution is existent in Germany which offers banking services in compliance with Islamic law. Would it not make sense to introduce such instruments in a market which accommodates more than 3 million Muslims? Are the hurdles for introduction too high or is the financial potential of the Muslim population too low to care about such questions? They will be answered in this thesis.
To gather information necessary for writing this thesis, the author read various books about Islam, its roots, and its financial systems. The “World Wide Web” was a valuable source, especially publications of data by statistical offices, ministries, and institutions dealing with the topic. For certain parts specific data were not accessible to the author. For investigation purposes he wrote letters and mails to various institutions to find out that specific data were not available and certain statistical investigations were not undertaken. In that case approximations and extrapolations were used and marked as such.2
The author has divided the thesis in four parts. The first chapter, “Chapter A - Islam - History, Cultural Aspects, and Principles for the Financial System“, introduces Islam, its roots and foundation about 1,400 years ago. In that chapter basic Islamic principles are explained and their relevance in all aspects of Muslim life is shown. With those principles underlying, a financial system developed which is different from the Western one. The development of the financial system is described as are various Islamic financial tools explained.
In “Chapter B - Muslims in Germany” it is shown how the Muslim community in Germany developed. It is explained when processes of migration started and to what extent they developed. The cultural and educational “Status Quo” of the Muslim community is analysed, and it is looked at their stand concerning school, work, associations, etc. Thereby Islamically cultural distinctions are outlined and resulting obstacles for integration deduced. Following that, the financial “Status Quo” is looked at. Facts about Muslim savings are provided and examples of instruments available at the German market, which are in compliance with Islamic law, are described. Out of the outlined facts in the “Status Quos” a potential analyses is developed. Future scenarios about shifts in the population structure are calculated and thereby resulting changes at the labour market predicted. After combining the analyses it was assumed that changes in the population structure and at the labour market may result in changes in the income structure, which is looked at in the following.
After the Muslim community and its financial situation is analysed, “Chapter C - Possibilities for Islamic Products in the German Market“ describes legal requirements set by German authorities as does it look at Islamic prescriptions for the running of a financial institution. Proposals are given how to harmonise differences to create possibilities for a financial system which encompasses both - conventional and Islamic finance. Afterwards descriptions of product examples are provided which are in compliance with German law and with Islamic law. Finally a conventional equity financing model is analysed and ways of its transformation into an Islamically acceptable model are developed. It is calculated if such a model can be operated efficiently and profitably.
In “Chapter D - Conclusions Deduced from the Thesis” final remarks are given concerning results achieved in the process of analysing the market and writing this paper.
It has been the author’s aim to outline complex correlations as simply as possible. It was tried to clarify theoretical conditions with help of practical examples. Only selected areas of a financial system were looked at, and the author concentrated on “financing instruments” applicable by “financial institutions” for “financing purposes”. Other tools also relevant in the financing sector, such as insurances, were not considered in this paper.
Asymmetries in terminologies exist throughout Muslim countries. These differences are, however, only in terms of spelling and not in meaning and utilization. In this work the assumed simplest spelling was chosen to make it more convenient for the reader.
One example shall point it out:
An interest-free loan in Iran is called Qard al-hasanah, Malaysia uses Al-qardhul hasan, Pakistan uses Qarz-e-hasna, Bangladesh uses Qard-e-hasana and Jordan Al-qird al-hassan. In this work the term Qard hassan was chosen, as it seemed simplest and it is often used in literature.3
The Arabic terms are written in Italics.
The following chapter focusses on Islam as such. The historical context of its foundation is described as are consequential principles and characteristics explained. Based on elementary values, certain financing methods and tools developed, which are outlined next.
Islam is the youngest of the world religions and was founded by the Prophet Mohammad. At the time of its development Islam etymological meant in Arabic ‘to give something to somebody’; interpreted it means ‘sacrificing oneself to God’. Another translation is ‘disregard death’; that is to sacrifice ones soul and thereby ones life to God. Today Islam is translated as ‘abandonment’, ‘devotion under God’. He who avows oneself to Islam is called Muslim. A Muslim is, according to Quran, somebody who behaves and acts with love and in obedience to God and is characterised by an ideal religious attitude.4
The Prophet, Abul Kasim Muhammad Ibn Abd Allah, lived from about 570 until 632 AD. At the age of 25 he married a merchandiser’s widow Chadidsha and started to work as a merchant. At the age of 40, when Mohammad was resting in a cave in the mountain Hira close to Mecca, for the first time the Angel Gabriel appeared in his dreams and revealed Gods will. From then on the Angel appeared to him frequently until his death about 20 years later.5
At that time Mecca was a place where many Gods were rendered homage to. Three years after the first revelation, Mohammad got the order to preach in public. Since Mohammad prayed to only one God and did not accept any others, locals started prosecuting him and his followers. Their lives were endangered and they fled for Medina in 622 AD. In that year, Hedjra, the Muslim calendar starts. In 630
AD, the year of Fath (success), Mohammad returned to Mecca, destroyed the 360 images of false Gods, whom were prayed to in the Kaaba6, and left only one God - Allah. Before that, freedom of thought had been common in Mecca as well as violence among the people. Mohammad established peace by means of a monotheistic religion in exchange for the freedom of thought.7
During Mohammad’s lifetime people were listening to him and behaved according to his rulings. Right after his death the order was given to collect all revelations confessed by him in one book - the Quran. The version we know today and which is recognised by every Muslim has been written under the third Caliph, ‘Utman (634-644).8 The Quran, consisting of 114 Sura (chapters), is the holy book of Islam, and it describes various aspects and situations of human life. It is mandatory for Muslims to behave according to its teachings. Since not all possible aspects of life can be included in one book, further sources of lawful behaviour are recognised.
The most important sources additional to the Quran are the Hadith. These are collections of what Mohammad said and did in his life. They also contain exemplary dictums and deeds of his companions. All together there are about 1465 collections. Only a few are recognised by the different movements of Islam as being authentic.9
Another source is the so-called Idjma. This is a collection of unanimous theologian opinions concerning religious and ethical matters.10
The last source of Islamic law is called Quiyas - a system of analogical deductions on the basis of Quran, Hadith, and Idjma.11
Mohammad was the political and religious leader of the Umma, the Muslim community, and he represented the divine will. After his death the question arose: Who will become his successor?
The three following Caliphs12 were chosen by prominent and intellectual followers of the Prophet because of their charisma and reputation among the community. The first discrepancies arose with the fourth successor, Ali (656), who was cousin and son-in-law of the Prophet. He was doubted and not recognised by parts of the community. Different movements within the Umma started to develop.13
In the following two of the most important movements are introduced.
The name of this movement of Islam is derived from Sunna; tradition. It developed at the end of the ninth century. The Sunnites base their belief on collected behavioural patterns of the Prophet (Hadith; Chapter A: 1.2). Different Hadith exist among the different orientations of Islam. Sunnites only recognise the Hadith based on the Sunna of the Prophet; his life, his actions, and his achievements. These are mainly collections of al-Bukharis (810-870) and Muslims (820-875). The successor of the Prophet can be every ordinary man. Prerequisites are that he is extraordinarity God-fearing and that he has experiences with religious sciences. Sunnites reject the belief in the absolute power and infallibility of the Imam14 as opposed to the Shiites (Chapter A: 1.3.2).15
Today Sunnites account for about four fifths of the Muslim world population.
Shiites got their name from Shia; party. The main difference to the Sunnites is that only a direct descendant of the Prophet may become his successor, and thereby Imam. Shiites believe, because of the charisma and infallibility of their Imam, they are the only authentic heirs of quranic and prophetical tradition. For Shiites relevant sources for law and order are Hadith based on the life of the Prophet and of the Imams, whereas for Sunnites only the Hadith of the Prophet count. The most important ones are collected by al-Kulaini (died in 939), supplemented by Ibn Babuyas (died in 991) and Tusis (died in 1067). The Shiites did not recognise the first three successors of Mohammad but started to count the line of rightful Imams with the fourth, Ali. From then on all Imams had to be descendants of Ali. Since polygamy is common in Islam and every Imam may have manifold offspring, controversies were predictable. Who is the son to become the rightful Imam? Thus it does not surprise that the branch of Shiites split into further movements. The three most important ones are the Imamites (Twelve-Imam Shiites), Ismaelites (7) and Zaydites (5). The number in brackets represents the Imam where the line starts to differ from the Imamites. The twelveth Imam lives, according to the Imamites, since 874 AD in concealment (the Hidden Imam), but he will return to mankind as Mahdi (leader) in their last days of being.16
Today Shiites account for about one fifths of the Muslim world population.
Fundamental and central in the Muslim society as a whole are the “Five Pillars of Islam”. These pillars represent duties which are incumbent on every Muslim, as there are faith, prayer, almsgiving, fasting, and pilgrimage. By reason of their importance, they are called “pillars”. In the following they are briefly introduced and their content is shortly described.17
Shahada stands for faith. The mere repetition of the sentence „a ilah illa Allah wa Muhammad rasul Allah“, which translates to “There is no God but Allah, and Muhammad is his Prophet” is interpreted to be an avowal of faith. That short dictum is the basic requirement of Islam. Apart from the Shahada no further creeds exist.18
The second pillar is that of Salaat; ritual prayer. One can distinguish between Du’a, private and individual prayer, which is not subject to any sort of regulation and Salaat, which is a ritual prayer and must be in Arabic.19 The ordinance is strictly regulated. It is the duty of every Muslim to pray five times a day at strictly defined times turning towards the “Holy Shrine” in Mecca. Prayers are held in a state of purity after ritual washings and in certain postures. They should be prayed in community, but prayers might be recited at home as well.20
Zakat is the third pillar and represents the Islamic way of how to achieve social justice. It is said that Mohammad introduced this alms-tithe, or tax on capital, to redistribute wealth in society. Every Muslim is obliged to give a portion of the wealth he possesses, in excess of what is needed for sustenance, to “purify” what one retains. Allah permitted to accumulate wealth. A portion of what Allah has granted shall now be donated for the upkeeping of the less fortunate. The amount of Zakat to be donated is specified in the books of Fiqh (principles of jurisprudence). The Quran (9:60) describes the utilization of funds and the classification of people, who shall benefit from Zakat.21
According to Rothlauf, all Islamic schools of law do agree on the principle that one fortieth of ones wealth should serve as computation base. Zakat may be donated either in cash or in kind.22
What some people do in the West for reasons of health or in order to reshape their body, is a duty in Islam and represents the fourth pillar. Saum is a thirty days lasting fast in the month of Ramadan (ninth month of the lunar calendar). Saum is obligatory to every Muslim. Exclusions in the case of illness, travel, pregnancy, Djihad etc., are granted but are temporary. The fast begins with the break of dawn and lasts until sunset. It comprises the total abstinence from food, drink, perfumes, tobacco, and conjugal relations. After sunset these interdictions are raised.23
The fifth and last pillar of Islam is the Hajj, the Great Pilgrimage to Mecca. As an elaborate series of rites, every believer should undertake the Hajj at least once in his lifetime. It is performed in the twelfth and last month of the year, Dhu al-Hijjah. It is obligatory to those who “can make their way” (2:196, 3:97); minors, slaves and poor persons are exempted from this obligation. Wearing the Ihram, a plain garment indicating the equality of all believers before Allah, the pilgrims circle the Kaaba (Chapter A: 1.1), wander from Safa to Marwa, and visit the outlying sanctuaries of Arafat, Muzdalifa, and Mina. Abstinences as imposed in Ramadan are compulsory as is the prohibition of cutting hair and nails.24
Apart from the Hajj, Muslims know al-´Umrah - “the lesser pilgrimage” or “visitation” which can be performed at any time of the year within the ‘Grand Mosque’ in Mecca. Whereas the Hajj takes several days, the al-´Umrah can be made within hours. Az-ziyarah, “visit”, is not a rite but the visiting of the tomb of the Prophet in Medina. It is a non-canonical custom and does not have ritual elements. Nevertheless, it is often carried out according to traditional program.25
Djihad, often translated as “Holy War”, really means effort, endeavour. It should not be seen as a war, because a war is an unjustified aggression, and Djihad is for the expansion of the “Good”. Djihad is mentioned here, not only because it is an often used word in news and press when reporting about “radical Muslims”, but because it has almost become the “Sixth Pillar of Islam”, as with the Charidjites.26 It is the communal duty, not the liability of every individual separately, to spread Islam. Muslims divide the world in “Dar al-Harb”, the war territory, and “Dar al- Islam”, the land of Islam. Djihad is to expand the Dar al-Islam into the Dar al-Harb. It is the duty of the believers to fight for that until the whole world is under Muslim reign.27
There are certain preconditions for Djihad. It must be headed by a Muslim sovereign or Imam, and it must have a reasonable prospect of success. Also a Djihad is not lawful unless it involves the summoning of unbelievers to belief. Non- believers thereby can become fully-fledged members of the Islamic state. Non- believers may keep their religion (except for Arabic idolators) but then they have to pay a poll tax to obtain the protection of the authorities. If non-believers do not convert to Islam and reject to pay the poll tax, they have to die by the sword.28
In war, truces may not be concluded for periods longer than ten years, but such truces may be renewed indefinitely. For the Imamites (Twelve-Imam Shiites), it is legally impossible to participate in Djihad until the return of the “Hidden Imam” (Chapter A: 1.3.2).29
Today Muslims distinguish between ‘Small Djihad’, which is directed against non- believers, and ‘Big Djihad’, which heads against inferior emotions of the own mind.30
The majority of the principles of Islamic finance are based on simple morality and common sense.31 Since financial principles are not explicitly defined, various passages in the Quran and the Hadith concerning this are understood differently by scholars throughout the Muslim world. Especially looking at sources in their historical context often leads to a different understanding than a more modern approach. Scholars’ opinions differ and these differentiations about certain aspects have led to the development of various financing tools and methods. Nevertheless, some basic principles have been established which are recognised by all Muslims and which will be explained in Chapter A: 3.2.32 So is Zakat, as being one “Pillar” of Islam, included and it must be observed in all financing activities.
Basic practices and principles of an Islamic banking system date back to the early part of the seventh century33, a time when the Prophet Muhammad was still alive. It was a banking system only roughly comparable to what we know these days, but limited activities, such as the acceptance of deposits, started.34 Also a form of investment was common with the creditor (initiator) being part of the management of an enterprise. One model was the equipping of trading caravans by rich urban merchants. The merchants forwarded the capital needed, and, after a successful project, split the proceeds in pre-agreed manner with the caravan leader. In case of loss of the goods the lender was bearing all costs. The “creditor” only could loose the value of his efforts (like Mudarabah, Chapter A: 3.3.4.1).35
In the Middle Ages Islamic finance was fostering trade and business activities. Not only in the Muslim world but throughout Europe, from the Baltic to the Mediterranean Sea, Islamic merchants became middle man for many trading activities. ”It is claimed that many concepts, techniques, and instruments of Islamic finance were later adopted by European financiers and businessmen.”36
In the world of the late 19th and early 20th century, Western economies were predominant in the Muslim world. Their industries established branches of any kind in former colonies, therefore requiring better developed import and export facilities. Accompanying those requirements, a more sophisticated banking system, appropriate for Western demands, was needed. As a consequence conventional banks opened. The newly established branches concentrated on commercial businesses in major cities, thus the local population remained largely untouched. Over the years the firms’ networks spread, as did the engagement in trading. The use of financial services became indispensable being a participant in economic life. Local economies were lacking appropriate banking facilities, therefore the people had to make use of commercial banks.37
Economies grew, countries became independent, people gathered “wealth” - transactions with banks became unavoidable and urgent. For the locals there has always been a bitter by-taste using conventional banks due to the lack of Islamically compliant ones; they only dealt with the conventional banks as much as they had to.38
The overall situation and conditions on the financial market drew attention to Muslim intellectuals and scholars, and that is where “the story” of Islamic banking begins.39
The earliest references which aim at the reorganisation of banking in accordance with Islamic law (on the basis of profit sharing rather than interest) are found in the late forties.40 The involvement of various institutions and governments led to the implementation of theory into practice. The first interest-free banks were established, which worked exclusively in compliance with Shariah (Islamic law).41 Especially Pakistan and Egypt played a leading role. Attempts were made to organize smaller commercial banks and savings banks on the basis of Islamic law. Until the 70s no common standards were set, the economies were still young, industries and sources of income were just starting to establish and to develop. Most of the early attempts to build up financial institutions failed, often due to political reasons and to the lack of experience.42
The renaissance of Islamic finance began with following attitude: whatever financing method inexistent in the early days of Islam is considered to be un- Islamic. Advancements have been made since then. Current efforts are trying to make Islamic finance compatible with conventional finance or at least to find ways to cope with customers’ demands. Examples thereof are provided in Chapter C 4.4.
This shows the adaptability of Islam and rebuts the preconception that Islam is obsolete and stiff. Today most banks expand in areas which were considered to be un-Islamic in former times.43 For countries like Malaysia and Bahrain for instance, the Islamisation was a way to dispose the anticompetitive private financing sectors, which were only interested in high interest gains and against any change of established conditions. A return to the principles of Islam begun, and Islamic values gained in importance. Business activities ought to be fair and the whole society should benefit from them - not only a small sector of the population.
Thereby these countries started their modernisation process. In Islamic diction these are the principles of renunciation of tradition (Urf) in order to integrate into regional customs of public interest (Maslaha) or of social necessity (Darura).44
It also proved that “focussing on an unduly restrictive reading of the Shariah, focussing on the prohibition of interest - can lead to a large number of possible worse transgressions such as fraud (Ghosh) or speculation (Gharar). It was thus a combination of internal problems and external events that led to a transformation of Islamic finance.”45
Excurs: Egyptian IMMCs
As mentioned, the introduction of a finance system compliant with Shariah did not undergo trouble-free. The economical situation was new, people were unacquainted and sceptical, there were no experiences with Islamic banking under such conditions.
How things worked in the beginning shall be shown with the example of Egypt:
Egypt’s financial situation was transformed due to monetary help mainly by the US and by Egyptian migrant workers, who needed to exchange their earnings in hard currency. Outdated rules and regulations still prevailed in the financing sector; credits and interest rates were strictly regulated by the government (often not even compensating for the inflation). A parallel financing sector, starting from black- market transactions, was quick to emerge. A flourishing currency trading begun; soon after “Sharikat tawzif al-amwal al-islamiyya”, “Islamic Money Management Companies” (IMMCs), were founded. The government tolerated those activities and saw them as a source of Dollars flowing into the country. After lifting governmental finance regulations, many of those dealers evolved into full-service financial institutions. To their depositors they issued ‘investment certificates’ under the scheme of Musharaka, Mudaraba or Murabaha (see below), since the dividends paid therewith were not considered to be interest. Those companies neither were subjected to religious supervision nor to government regulations. Also reserve requirements, as banks have them, did not apply to them. Islamic principles, such as the prohibition of Riba, were observed to attract Muslim investors with Shariah-compliantness.
The “IMMCs” invested their customers’ deposits and paid dividends twice as high as the official rates were. Visible investments were made in productive sectors of the Egyptian economy, but a large fraction went into speculation. Much money went into bank accounts abroad, too. As in 1985 the Egyptian economy went towards a fiscal crisis, the economy sled into recession. A shortage of funds left the majority of the IMMCs facing liquidity problems. Many of their owners fled the country - leaving a considerable impact on the economy. Some estimations speak of 15 percent of Egypts GNP which had evaporated.46
Despite the fact that Islamic banks should not speculate, due to the lack of suitable investments opportunities, a number of banks engaged in dangerous speculation in gold, foreign currencies, and commodities. Some suffered heavy losses - some were on the brink of insolvency - some collapsed.
“The successful and lasting implementation of the idea, and therewith the story of modern Islamic finance, began in the early 1970s”47 because of two major incidents which coincided: the rise in petroleum prices and the extension of pan- Islamic movements. The secular pan-Arabic movement of Nasserism48 ceased to exist with the defeat in the “Six-Day War” in 1967.49 Saudi Arabia gathered regional predominance under pan-Islamic banner. Emphasis was laid on research work concerning Islamic economics and finance throughout the Muslim world. In 1970 the “Organisation of Islamic Countries” (OIC) was founded with one aim being the adaptation of the traditional Islamic banking system to the present. In 1974, the price of natural petroleum had quadrupled since the foundation of the “OIC”, the inter-governmental “Islamic Development Bank” with its headquarter in Jeddah (Saudi Arabia) was established. Its aim was to provide the basis for a modern Islamic banking system. Only one year later, with the “Dubai Islamic Bank”, the first modern non-governmental Islamic bank started to operate. In the following international associations of Islamic banks emerged and started to frame binding standards as well as to defend common interests. In 1979 Pakistan started as the first country to operate its whole banking system according to Islamic principles, followed in 1983 by Sudan and Iran.50
Islamic financial advisors work closely together with scholars, who are studying Islamic sources, to develop applicable concepts to handle the assets of their customers in a Shariah compatible manner.51 With growing disposable income depositors become more aware of and interested in financial services offered by banks, which have to incorporate customers’ needs.
Today’s Islamic investors are becoming more sophisticated, globally minded and risk averse. Thomas Gainor points out “that it may be appropriate to introduce the term ’Islamic Private Bank Investor’ or ’IPBI’ to describe a particular segment or need within the Private Banking industry.”52 In order to be in a position to offer required services, the most developed countries in that respect worked together and created bodies, which are supervising the immature industry. Malaysian and Bahraini authorities created the “International Islamic Financial Market” (IIFM), set up in Bahrain. The “Islamic Development Bank” (Saudi Arabia) initiated the establishment of the “International Islamic Rating Agency” (IIRA) in Bahrain.
Numerous banks in Kuwait, Saudi Arabia and Malaysia, the international rating agency “Capital Intelligence” and the domestic rating agencies of Malaysia and Pakistan53 were working together to achieve such goal as defined by the “OIC”.54 The adaptation of the Islamic financing system to Western practices to provide a basis for a modern Islamic financing industry was aimed at. The relatively new and reasonably immature but dynamic industry will underlie improved regulatory controls by the “IIFM”, “IIRA” and the “IFSB” (Islamic Financial Services Board, Malaysia55 ) which facilitate a sustainable growth. Bahrain is to be established as the major hub of Islamic banking. Controlled by the before mentioned institutions it is supported by the “Bahrain Monetary Authority”, the “Bahrain Financial Habour” and the “Dubai International Financial Centre”.56
The principles of Haram and Halal are universal in Islamic society and apply to all facets of life.57
Haram means literally ‘forbidden’ and belongs to one of the five categories of religious valuations distinguished by Fiqh (Islamic jurisprudence). On a scale of do’s and don’ts Haram means “prohibited” and is thereby the most negative. Everything what is deemed Haram is intolerable in Islamic culture and therefore taboo. The other four categories shall only be mentioned; Makruh (discouraged), Mubah (neutral), Mustahabb (recommended), Fard (obligatory).58 By Haram all forms of activity are prohibited, which are morally or socially injurious. The best known in non-Muslim countries might by the prohibition of interest or the consumption of pork, but also gambling, liquor, pornography and anything else what is deemed by Shariah contrary to the teachings of Allah and of the Prophet is forbidden.59
Barring the mentioned, all other activities, professions, contracts, and transactions etc. are Halal. Halal is everything which is permissible. Often spiritual and moral factors are involved when differentiating between these two principles.60
Many Suras and verses in Quran could be mentioned here. Some describe a specific activity, some are more broadly composed.
To give only one example; it is explicitly described what animals are prohibited to be eaten (5:3), and how an animal has to be slaughtered so that it is Halal for man to consume. When slaughtering, the name of Allah has to be spoken out (6:118). If it was not, Muslims shall not eat that meat (6:121) which is also true when another name than Allah’s was spoken out (5:4). The slaughtered meat is considered to be Haram then.
Gharar (uncertainty, risk, hazard, speculation) and Maysir (gambling) are prohibited by the Quran. It is shared opinion that any transaction entered into should be free of the above mentioned. Contracting parties ought to have perfect knowledge of the counter-values to be exchanged as of the outcome of a transaction. In contracts should clearly be stated, what benefits and what costs each party incurs, so that any ambiguity is avoided. Contracts and transactions violating those principles are Gharar; therefore intolerable and prohibited in Islam.61
Maysir62 is a zero-sum game where the winner gains at the expense of others. Even though it was practice among Arabs to help the needy and to support the poor, the Quran condemned such behaviour since the gambler is ignorant of the result.63
Not that clear it is with Gharar. Analysing the Hadiths, Frank Vogel distinguished prohibitions according to the degree of risk involved (pure speculation, uncertain outcome, unknowable future benefit, and inaccurateness) and developed three categories of risk. Risk exists
- because of the parties’ lack of knowledge about the object
- because the object does not exist, yet
- because the object deprives the parties’ control64
“Islamic experts draw a distinction between productive speculation and treating the market like a casino.”65 Not all forms of risk are forbidden since that would be
senseless. Risk is even advocated but should be equitably shared. Forbidden transactions are conditioned on uncertain events.
In the following some examples are given to clarify the just stated:
-advance-selling of commodities not existent yet (unborn calf, a harvest to come,…)
-selling known or unknown goods against an unknown price (selling the contents of a sealed box)
-making a contract conditional on an unknown event (if Y happens Z will be done in the following)
-selling goods without allowing the buyer to properly examine the goods
-investing in shares solely on speculative basis (expect the price to increase without any interest in the company)
-lottery (zero-sum games; winner gains only at the expense of others - collective winning is impossible)66
as opposed to:
-the stock market
It is often argued that the outcome of the development at the stock market is uncertain as well. But there is a clear difference to be distinguished. “It is evident that Gharar is not present in speculation in stock markets as each party is clear to the quantity, specification, price, time and place of delivery of the object. Moreover, the object of the transaction, which is the purchased security, is available in the market at the time of transaction and is bound to be available at the time of delivery.”67 Investing in the stock market therefore is Halal.
The most cited sources in literature are the verses 2:219, 5:90, and 5:91 of the Quran. Therein all games of chance are described as an abomination devised by Satan and that they cause great evil among man. Satan sows enmity and hatred and turns man away from God and from prayer. Although it is written that games might bring benefit as well, the sin caused is greater than the benefit.68
Riba has its root in the word raba69 which means an “increase” or “addition”.70 In finance Riba means a loan transaction or an exchange of commodities, where the borrower will return to the lender more than and/or better than the quantity borrowed. The value of the lenders’ loan increases without him giving an equivalent counter value or recompense in return to the other party.71 The owner of the capital gets rewarded while the borrower has to shoulder the risk. Islamic jurisprudence prescribes that the lender must share in the profits and losses arising out of the undertaking, for which the money was lent. Every investment has to reflect equal distribution of risk and reward.72
There are two categories of Riba distinguished by Shariah; Riba al-fadl is “usury of increase” and an alternative term for Riba al-buyu. A commodity is lent out and has to be returned in higher amounts. The second kind, Riba al-nasi’ah, is the “usury of deference”. A loan is granted for any period of time, and the lender charges more than the principal value.73 In both cases “money” is earned by simply extending it. But money should only be used as a means of exchange and should not be treated as commodity.74 Money does not have intrinsic value and therefore should only be exchanged at par. Therefore Riba is prohibited in Islam.
Riba is translated as interest or usury interchangeably, although attempts have been made to classify interest as a moderate, economically justified remuneration of capital and usury as an excessive, sometimes extortionate rate. The Egyptian Mufti Muhammad ´Abdul once declared “moderate interest” lawful.75 Some scholars tried to differentiate between loans for consumption and loans for production. None of the arguments have won acceptance.76
The prohibition of interest in Muslim countries does not mean that risk is not rewarded or the investment of capital not being priced.77 Over the years, Islamic jurists and scholars designed an impressive array of contracts and mechanisms to circumvent Riba. Special attention was paid to profit-and-loss sharing transactions, as used these days by Islamic financiers, and as will be described in the section “Financing Tools and Methods” (Chapter A: 3.3) of this work. “Some of these contracts were in fact so clever as to be considered Hijal, meaning ‘ruses’ or ‘wiles’; that is, lawful means used, knowingly and voluntarily, to reach an unlawful objective.”78
Originally the common practice was to double the owed amount if a creditor did not pay in time. Therefore many Muslims, interpreting sources in their historical context, conclude that only usury is meant by Riba; the majority, on the other hand, takes it as the prohibition of interest in any kind.79
There are many comments in the Hadiths concerning the taking of interest. Here it is focused on four revelations made in the Quran, why Riba is forbidden and unjust as discussed in literature.
In the first revelation is written that Riba deprives the wealth of Allah’s blessing (30:39). The second places those who take interest in juxtaposition with those who wrongfully acquire property belonging to others (4:161). The third revelation tells Muslims to keep away from interest if they desire their own welfare (3:130-132), and the fourth emphasises on a clear distinction between interest and trade. It states that trade is permissible while interest taking is prohibited. It requires Muslims to annul outstanding interests, to take only the principal amount, and to even forgo the owed sum if the borrower is unable to pay (2:275-281).80
To complicate matters, one Hadith shall be mentioned:
“Gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates, and salt for salt; like for like, hand to hand, in equal amounts; and any increase is Riba.”81
Whereas the revelations in Quran are rather distinct, the interpretations of the Hadiths differ. The Zahirites, for example, accept, out of principle, no analogies, thus they take the prohibition of Riba only as mandatory for the six mentioned commodities.82 Other Muslim groups interpret in analogy and deduce generalities as described above.
Zakat often is translated as the Islamic “alms-tax”. It is a kind of alms-tithe or tax on capital, which is regulated in the books of Fiqh.83 The payment of Zakat is compulsory on the excess wealth one possesses. The defined minimum schedule is called Nisbah.84 How to calculate the exact amount of Zakat is not described in the Quran. Scholars often recommend 2,5 percent of one’s assets, which is the generally accepted benchmark today.85 Islam distinguishes two types of Zakat; Zakat al-fitr, payable by every Muslim at the end of Ramadan (the month of fasting) and Zakat al-maal (annual levy on the wealth).86
The word Zakat is derived from the verb zaka which means “to thrive”, ‘to be wholesome’, “to be pure”87. It signifies “cleanliness” and “purity”.88
Zakat is the third pillar of Islam (Chapter A: 2.3) and has been mentioned in Quran over seventy times. The giving of Zakat is not considered as charity but rather as an act of purification, and it is an obligation for every Muslim. The wealth one has accumulated is due to Allah and out of His bounty89 ; a favour granted for which one should be grateful. Everything belongs to God and the wealth held by human beings is nothing but entrusted to them.90 Islam incorporates a system of social justice. The redistribution of wealth, the giving up of a portion of ones belongings, is a requirement for the upkeep of the poor, the ones, who own less. By sharing wealth, society is kept in balance.91 The proceeds of Zakat may only be given to defined categories of people specified in Quran (9:60) and must be spent on humanitarian purposes.92
As already mentioned, Zakat has been referred to in Quran over seventy times. One of the most important text passages on the matter of Zakat is verse 9:60, where is defined what alms are for:
"Alms are for the poor and the needy, and those employed to administer (the funds); for those whose hearts have been (recently) reconciled (to truth); for those in bondage and in debt; and for the wayfarer: (Thus is it) ordained by Allah, and Allah is full of Knowledge and Wisdom." (Quran 9:60)
In verse 2:261 it is stated, what good the spending will cause.
"The parable of those who spend their wealth in the way of Allah is that of a grain of corn. It grows seven ears and each ear has hundred grains. Allah increases manifold to whom He pleases." (Quran 2:261)
Apart from that, Quran warns those who amass fortune and fail to spent.
"And there are those who hoard gold and silver and do not spend it in the way of Allah, announce to them a most grievous penalty (when) on the Day of Judgment heat will be produced out of that wealth in the fire of Hell. Then with it they will be branded on their forehead and their flanks and backs. (It will be said to them) This is the treasure which you hoarded for yourselves, taste then the treasure that you have been hoarding." (Qur'an 9:34-35)
Knowing general rules for contracts under Shariah, different kinds of accounts used in Islamic finance are described next. Afterwards, selected tools of Islamic finance are explained.
Every valid contract under Islamic law must be in alliance with certain criteria, and, as with contracts in our hemisphere, the participating partners have to fulfil certain conditions. The partners must be capable of entering into a contract; they must be of a certain age as stipulated by law. Contracting partners must be sane and must have entered into the contract out of free will and not by any enforcement. If certain conditions have been prescribed by law to effect a valid contract, these have to be fulfilled, for otherwise the contract is void.
The Islamic principles, as described and explained above (Chapter A: 3.2), are compulsory for all financing tools.
The content of the contract has to be Halal and thereby permissible by Shariah. If it was Haram, i.e. forms of activity which are morally or socially injurious, the contract would be not in compliance with Shariah.
Transactions should be free of uncertainty or risk. No elements of Gharar or Maysir are allowed. It should be clearly stated what benefit and cost each party incurs so that any ambiguity may be avoided. There must be no doubt about the quantity, specification, price, time and place of delivery of the object. The good must be existent, which means, it must be available in the market at the time of transaction and thereby available at the time of delivery.
Riba is not permissible. Since money has no intrinsic value, it should only be used as means of exchange. Commodities have to be exchanged at par.
Trading with debt - It is not allowed to sell something one does not own, because with such financial derivatives the risk of payment is transferred to another person.
As remuneration, neither a lump sum may be agreed upon nor the percentage of a certain sum may be specified. The remuneration must be connected to the performance of the transaction or venture.
The summarised rules are prerequisites to all contracts compatible with Shariah. If exceptions are allowed under certain conditions, these will be pointed out at appropriate spot.
Redundancies about validity clauses are made for better understanding.
Banks and financial institutions owe their existence to the need of customers of handling their funds. Therefore these institutions are dependent on depositors’ money, which is, besides their own equity, the major source of funds.
In Islamic banking three different kinds of account are distinguished, each with different features for the utilisation of the inlet.93
In current accounts money for transaction purposes is kept. It is an account only for convenience and to pay for daily commitments. The customer does not get any kind of reward. The banks provide a wide range of payment facilities (bank drafts, travellers’ cheques, clearing mechanisms etc.). The customer may withdraw her deposits at any time. Banks use the depositors’ funds but their money is disposable at any time. Some banks charge a moderate service fee. Current accounts are operated on the basis of Wadiah (Chapter A: 3.3.7.1).94
In savings accounts customers hold their money mainly for precautionary motive. Some saving accounts guarantee the nominal value of the deposit but they promise no further returns. In others, according to Gafoor, the “capital is not guaranteed but the banks take care to invest money from such accounts in relatively risk-free short-term projects.”95 They operate like investment accounts but with less stringent conditions as to withdrawals and minimum balance. Rewards from deposits entirely depend on the discretion of the bank. Such bonuses may be paid in cash or in kind. Savings accounts are operated mostly as Wadiah contracts (Chapter A: 3.3.7.1).96
Investment accounts operate on a profit-and-loss sharing (PLS) basis. Neither are deposits guaranteed nor are fixed returns. Islamic banking differentiates between two kinds of investment accounts: “one where the depositor authorized the banks to invest the money in any project and the other where the depositor had a say in the choice of project to be financed.”97 Money may be deposited for a fixed or for an unlimited period of time. The percentage of PLS is agreed upon in advance. Investment accounts are invariably based on Mudarabah principle (Chapter A: 3.3.4.1).98
For a better overview a scheme of financing tools, following Haron and extended by the author, is used. Haron distinguishes between weak and strong Islamic principles. Strong Islamic principles conform to Islamic objectives both in form and in substance, whereas weak Islamic principles only conform to Islamic norms. According to Haron “only those principles which permit risk-return sharing between providers and users of funds can be considered strongly Islamic.”99 The author followed Haron’s suggestion. The table shall help the reader to orientate in Arabic vocabulary usage.
table 1 Scheme of Selected Islamic Financing Tools
illustration not visible in this excerpt
based on: Haron, S. (1995)
In the following the selected tools are explained following the listing in the table.
Mudarabah has the meaning of “profit sharing”, “trust finance” or “investment through self-employed entrepreneur”.100 It is a contract based on the principal of profit-and-loss sharing (PLS).
In a Mudarabah contract at least two parties are involved, the Rabb-ul-mal (lendor, investor) and the Mudarib (entrepreneur, agent manager). Partners of a Mudarabah contract could be private persons or, more often, institutions, like a bank and its depositors. The bank is responsible for investing depositors’ funds to generate profits.101 The bank funds a project with the necessary share capital. Aim is to get the venture working to participate in the increase of its value and to share in the profits generated.102
According to Haron, the investor entrusts money to the entrepreneur who has to use these funds in a pre-agreed manner.103 Usmani speaks about different kinds of Mudarabah contracts, a restricted one, where the Rabb-ul-mal invests money and decides on the purpose of the business, and an unrestricted one. In the latter the Mudarib is free to decide how to employ the funds. More than one partner on either side is possible.104
In case of a positive outcome, the distribution of the profits has to be arranged as pre-agreed upon in the contract. No lump sums or specific amounts are permitted to be paid out. The proportions must always be calculated as a percentage of the actual profits. The Mudarib cannot claim any periodical salary or remuneration, as can the Rabb-ul-mal not insist on any specified amount to be paid back first.105
In case of a negative outcome only the Rabb-ul-mal suffers a loss in money terms. He might loose all or parts of the invested capital. The Mudarib did not invest money, thus he cannot loose any. His loss is restricted to that his work was in vain and that he will not get any remuneration. “However, this principle is subject to a condition that the Mudarib has worked with due diligence which is normally required for the business of that type. If he has worked with negligence or has committed dishonesty, he shall be liable for the loss caused by his negligence or misconduct.”106 The liability is usually limited to the amount invested by the Rabbul-mal, unless he permitted the Mudarib to incur debts.107
It should be mentioned that it is permissible to conclude a separate contract with a third party, not involved in the Mudarabah contract, which guarantees to compensate any losses incurred by the project.108
The contract can be terminated at any time with certain retention periods agreed upon. This is reasonable because if the contract could be cancelled just before the project starts generating profits, the Mudarib would not earn anything and the investor could claim all the proceeds for himself.109
Mudarabah seems to be an ideal instrument for PLS-contracts. The investor provides funds and participates in the success of the enterprise. The Mudarib is in case of failure not unduly penalised, parts of the risks are transferred to the Rabb- ul-mal. Therefore a higher return is anticipated for the otherwise reluctant investors. This in turn causes a principal-agent problem of asymmetric information. For the entrepreneur there always will be the temptation to report lower profits to minimise the amount to be shared with the investor. To avoid that, the investor incurs costs monitoring the proper financial reporting of the enterprise. Mutual trust is very important to avoid moral hazard problems in Mudarabah.110
Mudarabah mutanaqisa stands for “diminishing Mudarabah”. It means that the proportions of invested capital change over time and thereby the ownership of the assets of the project. It is pre-agreed in the contract that the Mudarib has the opportunity to buy shares from the Raab-ul-mal and thereby becomes owner as well.
[...]
1 Statistisches Landesamt Berlin (2004) Melderechtlich registrierte Ausländer am Ort der Hauptwohnung in Berlin am 30. Juni 2003 nach ausgewählten Staatsangehörigkeiten (Gebieten), online available
2 cf. e-mail contacts in references
3 cf. Haron, S. (1995) The framework and concept of interest free banking, p.38
4 cf.Arkoun, M. (1999) Der Islam: Annäherung an eine Religion, pp. 34-37, cf. Microsoft® Encarta® 98 Enzyklopädie (1998), cf. Hughes, T.P. (2000) Lexikon des Islam, p. 340
5 cf. Microsoft® Encarta® 98 Enzyklopädie (1998), cf. Mernissi, F. (2002) Islam und Demokratie - Die Angst vor der Moderne, p. 115
6 Holy building within the Great Mosque in Mecca containing the „Black Stone“ handed over to Ismael by the Angel Gabriel (Hughes, T.P. (2000) Lexikon des Islam, p. 380f)
7 cf. Hughes, T.P. (2000) Lexikon des Islam, p. 481ff, cf. Mernissi, F. (2002) Islam und Demokratie - Die Angst vor der Moderne, p. 125ff
8 ibid, p. 116
9 cf. Hughes, T.P. (2000) Lexikon des Islam, p. 720ff
10 cf. ibid, p. 317f
11 cf. ibid, p. 600
12 successor of the Prophet with absolute authority concerning religious and civil matters (cf. Hughes, T.P. (2000) Lexikon des Islam, p. 386)
13 cf. Arkoun, M. (1999) Der Islam: Annäherung an eine Religion, pp. 86-87, cf. Sekretariat der Deutschen Bischofskonferenz (ed.) (2003) Arbeitshilfen 172: Christen und Muslime in Deutschland, pp. 15-16, cf. Microsoft® Encarta® 98 Enzyklopädie (1998)
14 religious and/or political leader of the community
15 cf. Arkoun, M. (1999) Der Islam: Annäherung an eine Religion, p. 91, cf. Microsoft® Encarta® 98 Enzyklopädie (1998), cf. Sekretariat der Deutschen Bischofskonferenz (ed.) (2003) Arbeitshilfen 172: Christen und Muslime in Deutschland, p. 19, cf. Mernissi, F. (2002) Islam und Demokratie - Die Angst vor der Moderne, p. 153
16 cf. Arkoun, M. (1999) Der Islam: Annäherung an eine Religion, p. 93, cf. Sekretariat der Deutschen Bischofskonferenz (ed.) (2003) Arbeitshilfen 172: Christen und Muslime in Deutschland, p. 17, cf. Microsoft® Encarta® 98 Enzyklopädie (1998), cf. Hughes, T.P. (2000) Lexikon des Islam, p. 455
17 cf. Lammens, H. (1968) Islam beliefs and institution, p. 56, cf. Microsoft® Encarta® 98 Enzyklopädie (1998)
18 cf. Lammens, H. (1968) Islam beliefs and institution, p. 56, cf. Microsoft® Encarta® 98 Enzyklopädie (1998), cf. Rothlauf, J. (1999) Interkulturelles management: mit Beispielen aus Vietnam, China, Japan, Rußland und Saudi Arabien, p. 377
19 some scholars accept exception in favour of foreigners, whose tongue cannot master the pronunciation of Arabic (cf. Lammens, H. (1968) Islam beliefs and institution, p. 59)
20 cf. Waines, D. (1995) An introduction to Islam, p. 89, cf. Lammens, H. (1968) Islam beliefs and institution, pp. 58-59, cf. Microsoft® Encarta® 98 Enzyklopädie (1998), cf. Lewis, B. (ed.) (2002) Welt des Islam, p. 26
21 cf. Glassé, C. (1989) The concise encyclopaedia of Islam, p. 430, cf. Lammens, H. (1968) Islam beliefs and institution, p. 60, cf. Waines, D. (1995) An introduction to Islam, p. 90, cf. Microsoft® Encarta® 98 Enzyklopädie (1998)
22 cf. Rothlauf, J. (1995) p. 41 in Rothlauf, J. (1999) Interkulturelles management: mit Beispielen aus Vietnam, China, Japan, Rußland und Saudi Arabien, p. 379
23 cf. Lammens, H. (1968) Islam beliefs and institution, p. 60, cf. Microsoft® Encarta® 98 Enzyklopädie (1998)
24 cf. Lammens, H. (1968) Islam beliefs and institution, p. 61, cf. Waines, D. (1995) An introduction to Islam, pp. 91-92, cf. Microsoft® Encarta® 98 Enzyklopädie (1998)
25 cf. Glassé, C. (1989) The concise encyclopaedia of Islam, p. 313
26 it is still so among their modern descendants, the ´Ibadites - Charidjites belong to the oldest movement of Islam claiming to be the closest branch chronologically to Ali and therefore possess the highest credibility as his adherents. (cf. Arkoun, M. (1999) Der Islam: Annäherung an eine Religion, pp. 91-94, cf. Microsoft® Encarta® 98 Enzyklopädie (1998))
27 cf. Glassé, C. (1989) The concise encyclopaedia of Islam, pp. 209-210, cf. Lammens, H. (1968) Islam beliefs and institution, p. 62, cf. Kramers, J.H., A.J. Wensick (ed.) (1976) Handwörterbuch des Islam, p. 112, cf. Tibi, B. (2001) Die neue Weltunordnung, p. 135
28 cf. Hughes, T.P. (2000) Lexikon des Islam, p. 130
29 cf. Glassé, C. (1989) The concise encyclopaedia of Islam, pp. 209-210, cf. Lammens, H. (1968) Islam beliefs and institution, p. 62, cf. Kramers, J.H., A.J. Wensick (ed.) (1976) Handwörterbuch des Islam, p. 112
30 cf. Sekretariat der Deutschen Bischofskonferenz (ed.) (2003) Arbeitshilfen 172: Christen und Muslime in Deutschland, pp. 79-81
31 cf. The institute of Islamic banking and insurance (n.d.), What is Islamic banking? online available
32 cf. Wippel, S. (2002) Geschäfte zwischen Markt und Moral, Islam und Ökonomie: Ethisches Wirtschaften ist ein globaler Trend, online available
33 cf. The institute of Islamic banking and insurance (n.d.), What is Islamic banking? online available
34 cf. Haqiqi, A.W., F. Pomeranz (n.d.) Accounting needs of Islamic banking, online available
35 cf. Wippel, S. (2002) Geschäfte zwischen Markt und Moral, Islam und Ökonomie: Ethisches Wirtschaften ist ein globaler Trend, online available
36 cf. The institute of Islamic banking and insurance (n.d.), What is Islamic banking? online available
37 cf. Wippel, S. (2002) Geschäfte zwischen Markt und Moral, Islam und Ökonomie: Ethisches Wirtschaften ist ein globaler Trend, online available
38 cf. Gafoor, A.L.M. A., (1995) Islamic Banking in Interest-free Commercial Banking, Chapter 4, online available, cf. Wippel, S. (2002) Geschäfte zwischen Markt und Moral, Islam und Ökonomie: Ethisches Wirtschaften ist ein globaler Trend, online available
39 cf. Gafoor, A.L.M. A., (1995) Islamic Banking in Interest-free Commercial Banking, Chapter 4, online available
40 Anwar Qureshi (1946), Naiem Siddiqi (1948) and Mahmud Ahmad (1952), Mawdudi (1950, 1961), Muhammad Hamidullah (1944, 1955, 1957 and 1962) in ibid
41 cf. ibid
42 cf. Warde, I. (2001) The Prophet and the profits, online availabe
43 cf. Warde, I. (2001) Eine unwahrscheinliche Erfolgsgeschichte, online availble
44 cf. ibid
45 Warde, I. (2001) Islamic Finance in the global economy, p. 84
46 cf. ibid, pp. 80-84
47 Phieler, S. (2003), Islamic Finance and Banking, online available
48 Nasser, president of Egypt 1954-1970
49 war in which Israel defeated its Arab neighbours Egypt, Jordan, and Syria (Wikipedia - The free encyclopedia (n.d.) online available)
50 cf. Warde, I. (2001) Eine unwahrscheinliche Erfolgsgeschichte, online availble
51 cf. Gainor, T. (2000) A Practical Approach to Product Development at Fourth Harvard University Forum on Islamic Finance, online available
52 Gainor, T. (1999) Islamic Private Banking - Now and in the Future at AiC Worldwide Limited Conference, online available
53 Malaysian Rating Corporation and JCRVIS Credit Rating Company
54 cf. ABQ Zawya Ltd. (n.d.) Part 2: Working Together, online available
55 international standard setting body of regulatory and supervisory agencies to ensure the soundness and stability of the Islamic financial services industry
56 cf. ABQ Zawya Ltd.(n.d.) Part 3: To meet the Challenge, online available
57 cf. Islamic Food and Nutrition Council of America (n.d.) What Is Halal?, online available
58 cf. Kramers, J.H., A.J. Wensick (ed.) (1976) Handwörterbuch des Islam, p. 167, cf. Glassé, C. (1989) The concise encyclopaedia of Islam, p. 148
59 cf. The institute of Islamic banking and insurance (n.d.), What is islamic banking, online available
60 cf. The institute of Islamic banking and insurance (n.d.) glossary, online available
61 cf. ibid
62 pre-Islamic game with lots, where only one out of x participants can win, all others loose their stake - the prize often was given to the poor (normally a camel) (cf. Khoury 307, Adil Salahi in http://www.arabnews.com/?page=5§ion=0&article=45343&d=22&m=5&y=2004 (Gharar)
63 cf. al-Suwailem, S. (2000) Towards an objective measure of Gharar in exchange, p. 79, online available, Lexicon, online available
64 cf. Warde, I. (2001) Islamic Finance in the global economy, p. 60
65 Rasalmal Financial Publishing FZ LLC (2001)Islamic Finance: The Inside Story, online available
66 cf. Warde, I. (2001) Islamic Finance in the global economy, p. 59, Islamic conference guide (n.d.), glossary, online available, cf. al-Suwailem, S. (2000) Towards an objective measure of Gharar in exchange, p. 79, online available
67 Jaumdally, A.A.M., (n.d.) Speculation and Gambling, online available
68 cf. Salahi, A. (ed.) (May 2004) Prohibition of All Types of Gambling, online available
69 cf. Glassé, C. (1989) The concise encyclopaedia of Islam, p. 192
70 cf. Islamic conference guide (n.d.), glossary, online available
71 cf. Kramers, J.H., A.J. Wensick (ed.) (1976) Handwörterbuch des Islam, p. 615, cf. The institute of Islamic banking and insurance (n.d.) glossary, online available, cf. Interest (Riba) (n.d.) Darul- Uloom, online available
72 cf. Quelch, J.A. (2001), Cases in strategic marketing management - Business strategies in Muslim countries, p. 3, cf. Rasalmal Financial Publishing FZ LLC (2001) Islamic Finance: The Inside Story, online available
73 cf. Muslim investor (April 2004) Why is interest/riba prohibited in Islam?, online available cf. Jaumdally, A.A.M., (n.d.), Speculation and Gambling, online available
74 cf. Glassé, C. (1989) The concise encyclopaedia of Islam, p. 192
75 cf. ibid, p. 335
76 cf. Warde, I. (2001) Islamic Finance in the global economy, p. 58, cf. Ariff, M. (1988) Islamic Banking in Asian-Pacific Economic Literature, pp. 46-62, online available
77 cf. M Iqbal, M.,.D.T. Llewellyn (2002) Islamic banking and finance, new perspectives on profitsharing and risk, p. 4
78 Warde, I. (2001) Islamic Finance in the global economy, p. 48
79 cf. Wippel, S. (2002) Geschäfte zwischen Markt und Moral, Islam und Ökonomie: Ethisches Wirtschaften ist ein globaler Trend, online available
80 cf. Haron, S. (1995) The framework and concept of interest free banking, p. 37, cf. Ariff, M. (1988) Islamic Banking in Asian-Pacific Economic Literature, pp. 46-62, online available
81 El-Gamal, M.A. (2001) An Economic Explication of the Prohibition of Riba in Classical Islamic Jurisprudence, online available
82 cf. Kramers, J.H., A.J. Wensick (ed.) (1976) Handwörterbuch des Islam, p. 615
83 cf. Lammens, H. (1968) Islam beliefs and institution, p. 60
84 Zakat has to be paid only on wealth possessed for a complete year; should be of productive nature from which one can derive profit or benefit such as merchandise, gold, silver, livestock etc.; tithe is not due upon personal dwellings, personal possessions, basic necessities (furniture, ,clothing, tools and instruments), riding and draft animals etc. (cf. The Zakat Page (n.d.), online available , cf. Glassé, C. (1989) The concise encyclopaedia of Islam, p. 430)
85 Waibl, E. (August 2002) Die Wirtschaftsauffassung des Islam, online available
86 cf. The institute of Islamic banking and insurance (n.d.) glossary, online available
87 cf. Glassé, C. (1989) The concise encyclopaedia of Islam, p. 430
88 cf. Pusat Pungutan Zakat Wilayah Persekutuan (n.d.) Zakat, online available
89 cf. The Zakat Page (n.d.), online available
90 cf. Pusat Pungutan Zakat Wilayah Persekutuan (n.d.) Zakat, online available
91 cf. Glassé, C. (1989) The concise encyclopaedia of Islam, p. 430
92 cf. Lammens, H. (1968) Islam beliefs and institution, p. 60
93 cf. Haron, S. (1995) The framework and concept of interest free banking, p. 32, cf. Gafoor, A.L.M. A., (1995) Islamic Banking in Interest-free Commercial Banking, Chapter 4, online available
94 cf. Haron, S. (1995) The framework and concept of interest free banking, p. 32, cf. Ariff, M. (1988) Islamic Banking in Asian-Pacific Economic Literature, pp. 46-62, online available
95 Gafoor, A.L.M. A., (1995) Islamic Banking in Interest-free Commercial Banking, Chapter 4, online available
96 cf. Haron, S. (1995) The framework and concept of interest free banking, p. 33, cf. Ariff, M. (1988) Islamic Banking in Asian-Pacific Economic Literature, pp. 46-62, online available
97 Ariff, M. (1988) Islamic Banking in Asian-Pacific Economic Literature, pp. 46-62, online available
98 cf. Haron, S. (1995) The framework and concept of interest free banking, pp. 33-34, cf. Ariff, M. (1988) Islamic Banking in Asian-Pacific Economic Literature, pp. 46-62, online available, cf. Gafoor, A.L.M. A., (1995) Islamic Banking in Interest-free Commercial Banking, Chapter 4, online available
99 Haron, S. (1995) The framework and concept of interest free banking, p. 32
100 cf. Haron, S. (1995) The framework and concept of interest free banking, p. 30
101 cf. Aseambankers (n.d.), Islamic Debt Capital Market, online available
102 i cf. slam.de, FAQ-Liste, online available
103 cf. Haron, S. (1995) The framework and concept of interest free banking, p.n 30
104 cf. Usmani, M.T. (2002) An introduction to Islamic finance, p.14
105 cf. ibid, p. 15
106 ibid, p. 13
107 cf. ibid, p. 13
108 cf. al-Bashir, M., M. al-Amine (n.d.) International Journal of Islamic Financial Services Vol. 3 No.1, online available
109 cf. Usmani, M.T. (2002) An introduction to Islamic finance, p. 15
110 cf. Rodney Wilson in Iqbal, M., D.T. Llewellyn (2002) Islamic banking and finance, new perspectives on profit-sharing and risk, pp. 201-205
