CIFE Principles of Islamic Finance 2

Question 1

What is the role of the Sharia Supervisory Board (SSB) in Islamic financial institutions?

Accepted Answer

To ensure all products, services, and operations comply with Islamic law and issue fatwas on financial matters

Answer

To manage day-to-day banking operations

Answer

To set interest rates

Answer

To approve loan applications

Question 2

What is the concept of Maqasid al-Sharia (objectives of Islamic law) in relation to finance?

Accepted Answer

Protecting five essential values: faith, life, intellect, lineage, and wealth, to ensure social welfare and justice

Answer

Maximizing shareholder returns

Answer

Following conventional banking practices

Answer

Minimizing risk in all transactions

Question 3

What distinguishes a Sharia-compliant stock screening process?

Accepted Answer

Screening for both business activity compliance (sector screening) and financial ratio compliance (quantitative screening)

Answer

Only screening for financial performance

Answer

No screening is required for stocks

Answer

Only checking if the company is listed on an Islamic exchange

Question 4

What is the concept of Zakat in Islamic finance and how does it relate to financial institutions?

Accepted Answer

A mandatory wealth tax (typically 2.5% of eligible wealth) that Islamic financial institutions must calculate and facilitate for customers

Answer

A voluntary charity with no institutional obligation

Answer

A transaction fee charged by Islamic banks

Answer

A profit-sharing arrangement

Question 5

What is the difference between Halal and Haram in the context of Islamic financial products?

Accepted Answer

Halal means permissible under Sharia law while Haram means prohibited; products must be Halal to be offered by Islamic financial institutions

Answer

They are interchangeable terms

Answer

Halal refers to products and Haram refers to services

Answer

Both terms relate to pricing strategies

Question 6

What is the concept of Wa'd (promise) in Islamic finance?

Accepted Answer

A unilateral promise or undertaking by one party that can be made binding, used in structuring Islamic financial products

Answer

A binding bilateral contract

Answer

A guarantee of returns

Answer

A type of insurance policy