CIFE Islamic Capital Markets 2

Question 1

What is the IFSB (Islamic Financial Services Board) and what is its role?

Accepted Answer

An international standard-setting body that issues regulatory and supervisory standards for Islamic banking, capital markets, and insurance (Takaful)

Answer

The IFSB is an international standard-setting body that develops prudential regulatory and supervisory standards for the Islamic financial services industry across banking, capital markets, and insurance sectors.

Question 2

What is the Islamic liquidity management challenge and how is it addressed?

Accepted Answer

Limited Sharia-compliant short-term instruments are addressed through Islamic money market instruments, government Islamic securities, and the IILM (International Islamic Liquidity Management Corporation)

Answer

Islamic banks face limited short-term investment options since conventional money market instruments involve interest. Solutions include Islamic interbank instruments, government Sukuk, and the IILM which issues short-term Sukuk.

Question 3

What is the Dow Jones Islamic Market Index (DJIMI)?

Accepted Answer

A global equity index that screens and includes only companies meeting Sharia-compliant criteria based on business activities and financial ratios

Answer

The DJIMI is a widely-used global equity benchmark that applies Sharia screening criteria (business activity and financial ratio tests) to include only Sharia-compliant stocks from major global markets.

Question 4

What is the concept of Islamic REITs and how are they structured?

Accepted Answer

Real estate investment trusts that invest only in Sharia-compliant properties, exclude haram tenants, and use Islamic financing, distributing rental income as dividends

Answer

Islamic REITs invest in Sharia-compliant properties (excluding hotels serving alcohol, conventional banks), use Islamic financing, screen tenants for compliance, and distribute halal rental income to unit holders.

Question 5

What is the role of credit rating agencies in Islamic finance?

Accepted Answer

They assess creditworthiness of Sukuk issuers and Islamic financial institutions, with additional consideration of Sharia governance and compliance risk

Answer

Credit rating agencies evaluate Sukuk and Islamic financial institutions using modified methodologies that consider Sharia governance quality, compliance risk, structural features of Islamic instruments, and traditional credit factors.

CIFE Islamic Finance Practice Test

CIFE Islamic Finance Practice Test

CIFE Islamic Capital Markets 2