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Syllabus for Islamic Banking Finance

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									                                            Islamic Finance
                        Five consecutive weeks in November/December 2009
                            3 Hours Seminar each Friday 2p.m. to 5 p.m.
             The course starts on November 20th, 2009 and ends on December 18th, 2009

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 15-20% each year, and is expected to be US$2 trillion in size by
2010. 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. It will help participants to fully understand the fundamental principles underlying modern Islamic
finance, as well as modern practices prevailing in this industry.

2. Course Objectives

At the conclusion of the course, the participants will be able to:

    1. Understand the basic rules and values underlying Islamic finance.
    2. Learn about the full range of current Islamic products used in Islamic banking, capital markets
       and insurance.
    3. Have an up-to-date overview on the scope and relevance of the Islamic financial market across the
       world and, in particular, in Europe
    4. Comprehend current issues and discussions surrounding the Islamic financial industry.

3. Course Schedule and Topical Outline

Introduction of Islamic Finance
Basis of Islamic Finance: The Shariah
Main Prohibitions in Islamic Finance
Riba, Gharar and Maisir/Qimar
Contracts (‘Aqd) and Promises (Wa’d)
Practical Implications of these Prohibitions
Prohibition of Short-Selling, Conventional Insurances, and Financial Derivatives
Shariah Boards

The Global Islamic Financial Industry
A Worldwide Growing Industry
History and Development
Islamic Banking
Islamic Insurances (Takaful)
Islamic Capital Market
Main Markets and Institutions: IIFM, AAOIFI, IFSB, LMC, IDB, etc.
Global Market Trends

Islamic Finance in Europe
Islamic Finance in Germany: Issues and Opportunities
Islamic Finance in the UK: Institutions, Issues and Experiences
Islamic Finance in other European Countries
Bosnia, Italy, Austria, France
Basic Financial Modes Used by Islamic Banks
Fixed Income versus Profit-Loss Sharing (PLS) Modes of Finance
Murabaha and Murabaha-to-Purchase-Orderer (MPO)
Tawarroq and Prohibition by Islamic Scholars
Mudaraba
Musharaka
Ijarah and Ijarah-wal-Iqtina
Salam
Istisna

Hedging Products in Islamic Finance
Hedging using Basic Islamic Financial Modes
Global Hedging Products Standards
Replication of Conventional Financial Products: Financial Engineering
Islamic Forwards, Options, Swaps, and Futures
Total Return Swaps: Structure and Criticism by Islamic Scholars

Sukuk (Islamic Bonds)
Basic Structure of Securitization
Islamic Sukuk versus conventional bonds
Mudaraba Sukuk
Musharaka Sukuk
Ijarah Sukuk
Murabaha Sukuk
Salam Sukuk
Istisna Sukuk
Case Studies
Rating and Risk Management of Sukuk
AAOIFI Standards of Islamic Sukuk

Islamic Fund and Asset Management
Principles and Constraints of Islamic Investing
Islamic Investment Products
        Investment Funds
        Hedge Funds
        Venture Capital and Private Equity Funds
        Real Estate Investment Trusts (REITs)
Islamic Approaches to Short-Selling
Islamic Market Indices
Case Studies

Islamic Structured Products
Murabaha-based Structured Products
Murabaha plus Arbun
CPPI-based Structured Products
Wa’d-based Structured Products
Khiyar al-Tayeen
Other Types of Islamic Structured Products
Case Studies
Trends and Limitations


                                                                        2
Takaful (Islamic Insurance)
What is Islamic Takaful?
Comparison between Conventional Versus Islamic Insurances
Types of Takaful
Pure Wakala, Pure Mudaraba and Combined Wakala and Mudaraba Model
Underwriting Surplus in Islamic Takaful
Reinsurance and Retakaful
Use of Takaful Products for Hedging Purposes

Risk Management and Corporate Governance for Islamic Banks
Nature of Risks and Risk Management in Islamic Banking
Basel II for Islamic finance
Corporate Governance for Islamic Financial Institutions
Islamic Banks are Unique and Need for Shariah Compliance
Profit Equalization Reserve and Investment Risk Reserves

4. Instructor Profile

Michael Mahlknecht has many years of experience in capital markets and risk management and regularly
provides workshops, seminars and consulting services in the area of Islamic finance for universities and as
a Director Consulting for his software company, Delta Hedge, based in Vienna, Austria.

He has worked as a risk management expert in consulting, banking, financial regulation and IT, gathering
extensive knowledge about integrated risk methods, which range from market, liquidity and credit risk to
counterparty risk and operational risk, as well as on complex financial products and private equity risk
evaluation. He is the author of various articles about issues as diverse as Islamic finance, the global
structured products market, hedging, real-time graphical risk management, credit rating, portfolio credit
risk, counterparty risk, data management, and has written an introductory book about Islamic finance.
Moreover, Michael is a board member of the global ERM Academy. He holds a degree in Economics
from the University of Innsbruck (specializing in financial markets and risk management).


5. Course Evaluation
To obtain the credits, students will have to attend the seminar, write a paper and, together with other students,
give a group-presentation.

6. Selected Readings

- Muhammad Ayub: ”Understanding Islamic Finance“
- Michael Mahlknecht: “Islamic Finance”
- Michael Mahlknecht: “Islamic Capital Markets and Risk Management”
- Mohammed Obaidullah: “Islamic Financial Services”




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