Islamic Finance & CMA Regulations Flashcards
6 cards from real CME-1 practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Islamic Finance & CMA Regulations flashcards as text
What is 'gharar' and why is it prohibited in Islamic finance?
Answer: Excessive uncertainty or ambiguity in a contract's terms that could lead to dispute, prohibited as it is unjust
Gharar refers to contracts with excessive ambiguity, uncertainty, or speculative elements in key terms (price, subject matter, timing), making them potentially unjust or exploitative.
What is 'maysir' and how does it relate to Islamic capital market regulations?
Answer: Gambling or speculative activity, prohibited under Islamic law; regulators apply this to exclude highly speculative derivative structures
Maysir refers to gambling or pure speculation where one party gains at another's expense without legitimate economic activity, which Islamic finance principles prohibit.
What role does AAOIFI play in Islamic capital markets?
Answer: Sets Shariah and accounting standards for Islamic financial institutions adopted widely including in Saudi Arabia
AAOIFI (Accounting and Auditing Organisation for Islamic Financial Institutions) issues internationally recognised Shariah standards, accounting standards, and governance standards for Islamic finance.
What is a 'takaful' product in Islamic finance?
Answer: An Islamic cooperative insurance model based on mutual contribution and solidarity rather than conventional risk transfer
Takaful is an Islamic insurance model where participants contribute to a mutual fund; claims are paid from the fund and any surplus may be returned to participants, avoiding conventional insurance's riba and gharar.
How does a 'diminishing musharaka' work in property financing?
Answer: The bank and customer co-own the property; the customer gradually buys out the bank's share while paying rent on the bank's portion
In diminishing musharaka, the bank and customer jointly own an asset; over time the customer purchases the bank's share in installments, and rent on the bank's remaining share decreases accordingly.
What is the CMA's stance on Shariah compliance screening for investment funds marketed as 'Islamic'?
Answer: Funds marketed as Shariah-compliant must have a Shariah supervisory board and invest only in CMA-approved Shariah-compliant securities
The CMA requires that funds claiming Shariah compliance must have oversight from qualified Shariah scholars and must restrict investments to permissible securities per their Shariah mandate.
How this page was made: written with AI tools and published by Nathan Beja, founder of Practice Test Geeks, who is responsible for its content. Exam facts are checked against the official sources listed below. Not reviewed by a subject-matter expert. Editorial policy
Sources & references
Exam facts on this page (fees, format, dates, passing scores) are checked against these official sources; the date is our last check. Editorial policy