CME-1 Islamic Finance & CMA Regulations

Question 1

What is 'riba' and why is it prohibited in Islamic finance?

Accepted Answer

Interest or any predetermined return on a loan, prohibited as it is considered exploitative and unjust in Islamic law

Answer

A type of equity instrument

Answer

A form of market manipulation

Answer

A government guarantee

Question 2

What does 'Shariah compliance' mean for a Saudi capital market product?

Accepted Answer

Structured to comply with Islamic law principles: no riba, gharar, maysir, and backed by permissible activities

Answer

Approved by the Saudi government

Answer

Listed on the Saudi Exchange

Answer

Denominated in Saudi Riyals

Question 3

What is a 'Shariah Supervisory Board' in the context of Islamic financial institutions?

Accepted Answer

An independent body of Islamic scholars that reviews and certifies a firm's products and activities as Shariah-compliant

Answer

A government regulatory body

Answer

A CMA inspection team

Answer

An internal audit committee

Question 4

What is 'murabaha' in Islamic finance?

Accepted Answer

A cost-plus-profit sale where the seller discloses the cost and an agreed profit margin to the buyer

Answer

A profit-sharing partnership

Answer

An Islamic lease

Answer

A donation structure

Question 5

What is 'musharaka' in Islamic finance?

Accepted Answer

A joint venture or partnership where all parties contribute capital and share profit and loss proportionally

Answer

A pure loan structure

Answer

A lease agreement

Answer

A deferred sale

Question 6

What is 'mudaraba' in Islamic finance?

Accepted Answer

A profit-sharing arrangement where one party provides capital (rabb ul mal) and another provides labour/management (mudarib), sharing profit but with losses borne by the capital provider

Answer

A secured loan

Answer

A commodity swap

Answer

An Islamic forward contract