Learning Center
Plans & pricing Sign in
Sign Out

Product Development and Islamic Financial Engineering


									                   Product Development and Islamic Financial Engineering
                                Professor M. Kabir Hassan

1. Course Description

Islamic finance is one of the fastest growing and most innovative financial disciplines in the
international financial market. It is growing at a rate of 15% each year, and is expected to be
about $2 trillion by 2010 in size. It is one of the least understood both by the western financial
community and indeed by those in Islamic communities. This course offers a clear and
understandable examination of this dynamic area of finance, and is essential for bankers, lawyers,
institutional investors and corporate executives. This course will help participants to fully
understand the fundamental religious principles underlying modern Islamic finance and banking.
It will provide participants with the opportunity to understand the religious principles and their
interpretation, as well as the diversity and adaptive mechanisms of Islam. This course will
primarily focus on financial innovations in Islamic finance.

2. Course Highlights

Understanding key Islamic financial products
Understanding Shariah principles in Islamic product design
Structuring rules for Islamic financial products
Principles of Islamic securitization, Islamic bonds and certificates
Structuring Hybrid Islamic Financial Contracts
Islamic Mutual Funds, REITs and Hedge funds

3. Target Audience

Accountants and Auditors
Asset Managers
Business Consultants
Business and Strategy Development Managers
Chief Executive Officers
Chief Financial Officers
Company Secretaries
Corporate Strategists, Developers and Planners
Financial Analysts
Financial Brokers
Financial Directors
Financial Managers
Financial Planners
Fund Managers
General Managers
Investment Analysts
Managing Directors
Merchant Bankers
Pension Fund Trustees
Policy and Strategy Directors
Portfolio Managers
Risk Directors and Managers
Structured Finance Specialists
Treasury Directors and Managers
Central Bankers

4. Course Schedule and Topical Outline

Fundamentals of Islamic Banking and Finance

Fundamental Concept
Islamic Financial System
Norms and Ethics in Islamic Financial System
Prohibition of Riba and Gharar
Basics of Islamic Financial System

Concepts and Type of Riba
Riba al-jahlia
Riba al-fadl

Permissible Financing Methods
Credit Plus Sales (Murabaha)
Credit Sales (Bai-Bithman Ajil)
Leasing (Ijara)
Partnerships (Musharaka and Mudaraba)
Islamic Forwards (Salams and Istisna)
Tripartite Resale (Tawarruq)
Repurchase (Bi-al-Einah)
Bill Discounting (Bai-al-Dayn)
Bai al-arboon, Khiyar al Shart

Fee-Based Products
Letter of Credit (Wakala)
Letter of Guarantee (Kafala)

Advanced Financial Products and Islamic Law of Contracts

Permissible Investment Methods
Investing in Equities
Islamic Mutual Funds

Permissible Insurance Products
Insurance Based on Tabarru
Insurance Based on Mudaraba
Insurance Based on Wakala

Islamic Law of Contracts
Islamic Business Principles
Contracts of Exchange
Contracts allowing transfer of the usufruct
Partnership contracts
Security and Agency Contracts
Rules regarding foreign exchange contracts

Basic Constructs of Islamic Financial Engineering

Combination of contracts
Distinction between tying arrangements and Combination of Contracts
Tying arrangements (Ishtirat Aqd fi aqd) and Combination of contracts (Ijtima al–uqud)
Prohibition of Ishtirat Aqd fi Aqd or Bay’tayn Fi Bay’ah Transactios
Legal Ruling of Combination of Contracts
Determining Combinable and Non-Combinable Contracts
Principles of Freedom of Contracts
Terminology Based Criterion
Objective-Based Criterion
Quality-based Criterion
Criteria for Unilateral Termination
Legitimacy of Combination of Contracts
         Combination must not violate Shariah
         Impermissible Transactions
         Combination must not involve contradictory contracts

Case Study of Combination of Contracts
       Loan and Musharaka
       Loan and Mudaraba
       Two Sales in one Deal
       Money Exchange and Money Transfer
       Prepayment and Combination of Contract
       Wakala (agency) and Kafala (guarantee)
       Mudaraba and Musharaka
       Musharaka and Kafala
       Mudaraba and Kafala

Derivatives, Options and Hedging Contracts in Islamic Finance

The Forward Commodity Market
Salam and Forward Contract
Istisna and Forward Contract
Bai-al Sifa and Forward Contract
Hedging, Speculation and Futures Market
Arbun Risk Management and Options
Arbun in Commodities and Services
Arbun in Shares Trading
Arbun in Salam and Istisna
Arbun as the Islamic Alternative to Options
The Sale of Pure Rights and Options
Sale and Exchange of Right of Precedence
Sale of Right and Intellectual Property
Exchange of Right to bargain for purchase of property

Definitions of Shariah Options
Basic Features of Shariah Opitons
Parameters of Valid Options
Basic Features of Financial Options

Similarities and Differences of Shairah and Financial Options
Examples of Financial Options in Islamic finance
Financial Option and concept of sale contract
Financial Options and Floating Contracts
Financial Options and Arbun Sale
Similarities and Differences between Financial options and Arbun
Financial Options and Concept of Property
Concept of Right and Financial Options
Case Studies of Shariah Options
        Hamish jiddiyah and Call option
        Ijara and Financial Options
        Ju’ala Contract and Financial Options
        Options and Combination of Sale and Contract of Gift
        Financial Options and Payment of Price in Shari’a Options

Case Studies: Hedging in Islam
Mitigating Currency Exposure (Long-term Hedging)
Mitigating Currency Exposure (Short-term Hedging)
Minimizing Price Risk
Forward Price Agreement
Forward Foreign Exchange Market
Case Studies in Financial Engineering
        Straight Forward Islamic Swaps
        Synthetic Currency Forward Contract
        Currency Swap
        Partnership-based Currency Swap
        Sukuk-Based Currency Swaps
        Development of Islamic Benchmark

Innovations in Islamic Financial Products

Securitization in Islamic Finance
Special Purpose Vehicle-Silent Partnership
An Example of Merger through SPV
Securitization of Musharaka
Securitization of Murabaha
Securitization of Ijarah
Securitization of Salam
Securitization of Istisna
Case Study: Pre-Delivery Islamic Financing
Case Study: Post-Delivery Refinancing through Sale and Lease-Back

Islamic Mutual Funds
Islamic Mutual Funds: Background and Information
Rules of Shariah-based Investing
Shariah Supervision
Quantitative Screening
Shariah Advocacy
Monitoring and Reporting

Community-based Investment and Socially Responsible Investing
Distribution Channel
Human Capital Development

Private Equity, Venture Capital and Islamic Finance
Venture Capital Life-Cycle
Funding Sources
Venture Fund Structures
Identifying Potential Investments and Due Diligence
Structuring the Transaction
Common Stock
 Preferred Stock
- Redeemable Preferred Stock
- Convertible Preferred Stock
- Participating Convertible Preferred Stock
Exit Strategies

Putting the venture capital ideas under Islamic Perspective
Sharia Views on Equities
The Fundamental Sharia Principle of Muamalat
Structuring Issues
Preferred Stock
Valuing Company Using Discount Rate
A workable Solution Under Existing Structures

4. Instructor Profile

Dr. M. Kabir Hassan is a financial economist with consulting, research and teaching experiences in
development finance, money and capital markets, corporate finance, investments, monetary
economics, macroeconomics and international trade and finance. He has published five books, and
over 70 articles in refereed academic journals. He has presented over 100 research papers in
professional conferences in such countries as the United States, the United Kingdom, Australia,
Canada, Malaysia, Turkey, Portugal, Morocco, Qatar, Oman, United Arab Emirates, Bahrain, Iran,
Sudan, Saudi Arabia, Egypt, Kuwait, Indonesia, Brunei, South Africa and Bangladesh. He has also
presided over many sessions at professional and international seminars.

Dr. Hassan has great experience in the privatizing process of public sector industries. He has great
experience in training through workshops, seminars, and formal classes. Dr. Hassan worked on
impact of globalization of financial markets on developing countries, privatization of commercial
banks in developing countries, impact of trade liberalization on the efficiency of industry, efficiency
and performance analysis of commercial banks, financial sector reform in developing countries, euro
impact of the MENA countries, and regional economic integration either as consultant of the
USAID, the World Bank, IDB, ICDT, Government of Bangladesh, USIA and the Nathan Associates.
Dr. Hassan visited International Monetary Fund (IMF) as a Visiting Scholar, and written on capital
market, interest rate and monetary policies in developing countries. He has also visited Federal

Reserve Bank of New York to work on Islamic banking and finance.

Dr. Hassan earned a B.A. in Mathematics and Economics with Phi Beta Kappa Honors from
Gustavus Adolphus College (a four-year liberal arts college) in 1985 from Minnesota, a M.A. in
Economics in 1987 from University of Nebraska-Lincoln, and a Ph.D. in Finance in 1990 from
University of Nebraska-Lincoln. Dr. Hassan is a tenured Professor at the University of New Orleans.
He was also Visiting Professors at Drexel University, USA, North South University, Bangladesh and
American University-Beirut, Lebanon.

Dr. Hassan’s primary teaching responsibilities are in the area of financial markets and institutions,
corporate finance and international finance. Dr. Hassan teaches commercial bank management and
financial management at the MBA level, financial markets and institutions and seminar in markets
and institutions at the Ph.D. level. Dr. Hassan teaches Bank Management and Financial
Administration in the Executive MBA program of UNO both in New Orleans and Jamaica. Dr.
Hassan runs executive development seminars on financial decision making, international banking
and finance in the U.S., Jamaica and Bangladesh on a regular basis.

Dr. Hassan has received many awards and recognition for his outstanding teaching and research
performances. Dr. Hassan has received the Outstanding Teaching Award seven times at the
University of New Orleans. Dr. Hassan has supervised fifteen students for Ph.D. degrees. He has
served as outside examiner for doctoral theses of students from India, New Zealand, Sweden and
Bangladesh. He has received a number of research grants to conduct research in international
banking and finance areas.

Dr. Hassan has been involved with many civic and cultural organizations. He is on the board of
directors of Academy of Financial Services, Asian Pacific American Society, New Orleans Museum
of Arts, Association for Economic and Development Studies on Bangladesh, USA. Dr. Hassan is
currently the elected Chair of Academy of International Business-SW. A frequent traveler, Dr.
Hassan gives lectures and consulting advice in the US and abroad.


To top