Economics and Business

Course Outline: Finance under Islamic Perspective and Bank Management

Nazneen Fatema
Lecturer in Finance, IIUC, Dhaka Campus

Paper presented at a Follow-up Workshop on Curriculum Reform
9 November, 2008, Dhaka University

Financial Manager – Controller and Treasure Functions; the firm and its financial environment – Types of financial claims, Accounting and cash flow measurement; Accounting Information and Agency Costs; Risk and Return: Ex Post and Ex Ante; Measuring Risk of Individual Security and Portfolio, Capital market Theory, CAPM and SML; Financial Leverage, Capital Structure Theory – MM Proposition and Policy, Firm Value and Capital Structure, Optimum Capital Structure – Corporate Taxes, Personal and Corporate Taxes; Cost of Financial Distress and Agency Costs, Pecking Order Theory, Explaining Financial Choices, Checklist; Cost of Capital – Cost of Equity, Preferred Stock, WACC, Break Point, Investment Schedule, Marginal Cost of Capital; Dividend Theory and Policy – Dividend and Firm value – Gordon and Linter model, Dividend Irrelevance Argument, Market Imperfection and Taxes; Information Content of Dividend – Dividend Signaling, Agency Explanation of Dividend, Clientele Effects; Market Efficiency – Forms  and Implications.  


Specially Focus on:  “Finance Under Islamic Perspective”

Topic covered:

  • Introduction:
    üFinance without interest
    ü Features of Islamic finance,
    ü Jurist, Sharia Board and innovation
  • Two Major Prohibitions: Riba and Gharar
    üThe Prohibition of Riba
    ü Economic Substance of the Prohibition of Riba
    ü The Prohibition of Gharar
    ü Definition of Gharar
    ü Economic Substance of Prohibition
    ü Insurance and Derivatives
    ü Bundled vs. Unbundled Credit and Risk
  • Sale-Based Islamic Finance
    üBasic Rules for Sales
    ü Trust Sales: Murabaha, Tawliya, Wad. i‘a
    ü Currency Exchange (Sarf)
    ü Same-Item Sale-Repurchase (‘Ina)
    ü Same-Item Trading in ‘Ina and Tawarruq
    ü Custody Sale (Bay‘ Al-‘uhda) and Sukuk Al-ijara
    ü Cost of Funds: Interest-Rate Benchmarks
    ü Opportunity Cost for Conventional Fund Providers
    ü Viability of Islamic Benchmark Alternatives
  • Some Issue in Risk Management
    • The Operation of the Modern Financial Markets for Stocks and Bonds and Its Relevance to an Islamic Economy
    • Problems and Prospects of Financing Rural Micro-enterprise Projects under Rural Micro-enterprise Projects under Islamic Shar’iah: Bangladesh Perspective

1. J J Hampton, Financial Decision Making, Prentice- Hall International Inc., Englewood Cliffs.
2. E F Brigham, Financial Management: Theory and Practice, Dryden Press, Hinsdale
3. I M Pandey, Financial Management, Vikas Publishing House Pvt Ltd., New Delhi.
4. M Y Khan and P K Jain, Financial Management: Text and Problems, Tata McGraw-Hill Publishing Company Limited, New Delhi.
5. Mahmoud A. El-Gamal,  Islamic Finanace: Law, Economics, and Practice , Cambridge University Press, Cambridge
6. Brigham, Gapensky and Ehrhardt, Financial Management – Theory and Practice, the Dryden Press
7. Ross, Westerfield and Jaffe, Corpoorate Finance, McGraw Hill Incorporation
8. Articles of renown authors:
- Chapra, M, Umar. “  The Prohibition of Riba in Islam: An Evaluation of Some Objectives 1:2/23 AJISS
- Raquibuz Zaman, M, “ Some Issue in Risk Management”. 5:2/263 AJISS
- Problems and Prospects of Financing Rural Micro-enterprise Projects under Rural Micro-enterprise Projects under Islamic Shar’iah: Bangladesh Perspective ( Prof. Dr. S.M. Ather & Prof. Dr. Muhammad Loqman)
- Iqbal, Zamir, “ The Benchmark Issue in the Islamic Financial System.” 16:2/45 AJISS.



  1. Structure of commercial banking system.
    2. Role of commercial banks in the economic development.
    3. Banking system in Bangladesh.
    4. Organization and management of commercial banks.
    5. Deposits of commercial banks.
    6. Commercial banks lending and investment portfolio.
    7. Earnings, expenses, profitability of commercial banks.
    8. Capital structure and safety of commercial banks.
    9. Reserves and liquidity requirements of commercial banks.
    10. General accounting system in commercial banks.
    11. Bankers and customer relationships.
    12. Central banking.
    13. Specialized Banking system: Islamic Bank, BSB, BSRC. Grameen Bank and others.

Specially Focus on: “Interest-Free Commercial Banking System”

Introduction: Concept, Principles of Islamic Banking 
Historical Development: Interest-free banking as an idea, the coming into being of interest free banks, the last decades
Current Practices: Deposit accounts, Modes of financing, Loans with service charges, investment under PLS scheme. Services, Shortcomings in current practices
Problems in Implementing the PLS scheme
Islamic Banking in non-Muslim countries: Certainty of capital return, Supervision and control, Tax regulations.
• Open Discussion: Islamic Banking in Bangladesh, Islamic Banking Regulations in Bangladesh, Problems, Prospects and Contributions of different Islamic Banks in Bangladesh, Comparison

1. S.A.Shakoor, “ A Handbook of Bank Management: With Particular Reference to Bangladesh Monograph”
2. The Bangladesh Banks (Nationalisation) Order, 1972.
3. Edward. Reed and Edward K Gill “ Commercial Banking”, Prentice Hall, New Jersy.
4. Islamic Banking and Insurance, IERB, Dhaka.
5. IBBL-Risk Analysis\Islamic Banking and Finance.htm 
6. Islamic Banking, by A.L.M. Abdul Gafoor (from internet)

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