Contracts and Deals in Islamic Finance: A User s Guide to Cash Flows, Balance Sheets, and Capital Structures

Preface

Contracts and Deals in Islamic Finance is a unique idea for which I have my professors and industry peers to thank. It is a collaborative effort between two conventional bankers with Islamic roots and aims at addressing some basic fundamentals of Islamic finance and banking and explores complex enhancements to traditional contracts that are the pillars of Islamic banking.

This work we hope will be of use not only to students, beginners, and practitioners, but banks, central banks and governments that are trying to get a grip on this subject.

This work has been designed keeping in mind the cynic and the skeptic who feels that Islamic finance is a mere twisting of legal terms to achieve ends that replicate loans. To such a cynic we can only ask him or her to read the book. The coauthor of this book, who approached the subject of Islamic finance with equal skepticism, however, at one point had to question his own assumptions and expectations.

One key aspect that is explored is what do we as Muslims expect from Islamic financial institutions (IFIs)? If we expect IFIs to finance us with money and then forgive the resulting debt obligations later on, then this is an unrealistic expectation, as we see later that IFIs are not financing borrowers using their own money, but that of their depositors. If we expect IFIs to offer loans on “generous” terms, on terms that make losses for the IFI, then this is also incorrect as Islam allows a Muslim a right to profit making within certain ...