CIFE Islamic Banking Products 2

Question 1

What is Istisna'a financing used for in Islamic banking?

Accepted Answer

Manufacturing or construction financing where the bank commissions the creation of an asset to customer specifications with deferred delivery and payment

Answer

Istisna'a is used for financing the manufacture or construction of assets to specific requirements. The bank commissions the construction and delivers the finished asset to the customer, with flexible payment arrangements.

Question 2

What is Salam (forward sale) and what conditions make it Sharia-compliant?

Accepted Answer

An advance payment sale where full price is paid upfront for delivery of specified goods at a future date, with quantity, quality, and delivery date precisely defined

Answer

Salam requires full upfront payment for goods to be delivered later, with precise specification of quantity, quality, and delivery date to minimize gharar. It is an exception to the general rule against selling what one does not possess.

Question 3

What is Wakala (agency) in Islamic banking?

Accepted Answer

An agency contract where one party (wakil/agent) acts on behalf of another (muwakkil/principal) for a fee or commission

Answer

Wakala is an agency arrangement where the principal (muwakkil) appoints an agent (wakil) to conduct specific transactions on their behalf, typically for a fixed fee, commonly used in investment management.

Question 4

What is an Islamic credit card and how does it work?

Accepted Answer

It uses structures like Bai al-Inah, Tawarruq, or Ujrah where fees replace interest charges, with a Sharia-compliant fee structure

Answer

Islamic credit cards use various Sharia-compliant structures to replace interest: Bai al-Inah (sale and buyback), Tawarruq (commodity murabaha), or Ujrah (fee-based), ensuring no riba is charged on outstanding balances.

Question 5

What is the concept of Islamic windows in conventional banks?

Accepted Answer

Dedicated departments within conventional banks that offer Sharia-compliant products, with segregated funds and independent Sharia oversight

Answer

Islamic windows are dedicated units within conventional banks that offer Sharia-compliant products. They require fund segregation from conventional operations, independent Sharia board oversight, and separate accounting.

CIFE Islamic Finance Practice Test

CIFE Islamic Finance Practice Test

CIFE Islamic Banking Products 2