Cover -- Half-title -- Title -- Copyright -- Dedication -- Contents -- List of Illustrations -- Preface -- A Note on Terms of Reverence -- Glossary and Transliteration -- 1 Introduction -- Finance without Interest? -- 1.1 Distinguishing Features of Islamic Finance -- Prohibition-Driven Finance -- Jurists, Shari'a Boards, and Innovation -- Lawyers and Regulatory Arbitrage -- 1.2 Islamic Transactions Law as Common Law -- Precedents, Analogies, and Nominate Contracts -- Convergence of Sunni and Shi'i Approaches -- Tradeoff between Effciency and Legitimacy -- 1.3 Limits and Dangers of Shari'a Arbitrage -- Risk of Mispricing -- Legal and Regulatory Risks -- Beyond Shari'a Arbitrage -- 2 Jurisprudence and Arbitrage -- 2.1 Islamic Law and Jurisprudence -- The Canon: Qur'an, Tradition, and Consensus -- Juristic Inference (Ijtihad) and Benefit Analysis -- 2.2 From Classical to Contemporary Jurisprudence -- Jurisprudence, Revival, and Codification -- Institution of Fatwa and Islamic Finance -- 2.3 Arbitraging Classical Jurisprudence -- Shari'a-Arbitraging Classical Property Law -- Valued vs. Unvalued Property: Shari'a-Arbitrage Opportunity -- Portability and Sukuk Structures -- Fungibility and Entitlement -- Ownership -- Advances and Restrictions on Partial Ownership -- Trust, Guaranty, and Interest -- Arbitraging Classical Contract Conditions -- Arbitrage, Ruses, and Islamic Finance -- 3 Two Major Prohibitions: Riba and Gharar -- Paternalism of Prohibitions -- Bounded Rationality and Paternalism -- What to Forbid? Balancing Benefits and Risks -- 3.1 The Prohibition of Riba -- Canonical Texts on Riba -- Main Juristic Taxonomies of Riba -- Riba Is Not the Same as Interest -- Economic Substance of the Prohibition of Riba -- Equity and Efficiency through Marking to Market -- Islamic Finance: Form and Substance Revisited -- Multiple Paternalistic Parties.

Human Time Inconsistency and Precommitment Solutions -- Good Loans and Bad -- Digression on Loans in Islamic Jurisprudence -- 3.2 The Prohibition of Gharar -- Definition of Gharar -- Economic Substance of Prohibition -- Bounded Rationality in the Face of Risk -- Insurance and Derivatives -- 3.3 Bundled vs. Unbundled Credit and Risk -- 4 Sale-Based Islamic Finance -- 4.1 Basic Rules for Sales -- The Underused Uncommissioned Agent (Bay' al-Fuduli) Structure -- Trust Sales: Murabaha, Tawliya, Wadi'a -- Currency Exchange (Sarf) -- Metals and Tawarruq -- 4.2 Same-Item Sale-Repurchase ('Ina) -- Same-Item Trading in 'Ina and Tawarruq -- Hanbali Denunciation of Organized Tawarruq -- Custody Sale (Bay' Al-'uhda) and Sukuk Al-ijara -- 4.3 Cost of Funds: Interest-Rate Benchmarks -- Opportunity Cost for Conventional Fund Providers -- Viability of Islamic Benchmark Alternatives -- Divergence of Rhetoric from Reality -- Disadvantages of "Islamic Benchmarks" -- Other Conventional Benchmarks -- 5 Derivative-Like Sales: Salam, Istisna', and 'Urbun -- 5.1 Prepaid Forward Sale (Salam) -- Revocation and Settlement of Long Position -- Parallel Salam -- Conventional and Synthesized Forwards -- 5.2 Commission to Manufacture (Istisna') -- 5.3 Down-Payment Sale ('Urbun) -- 'Urbun as Call Option -- Case Study 1: Al-Ahli International Secured Fund -- Case Study 2: Al-Rajhi Aman Fund -- 6 Leasing, Securitization, and Sukuk -- 6.1 General Lease Conditions -- Binding Promises in Leasing -- Flexible-Rate Financing -- Subleasing, Repairs, and Insurance Costs -- 6.2 Asset-Backed Securities -- Leasing and Securitization -- Financial and Operating Leases -- Receivable Securitization and Sale of Debt -- Bundling Asset-Based and Debt-Based Securities: A Paradox -- 6.3 Asset-Backed Leasing Bonds (Sukuk) -- Credit-Rating Issues -- Benchmarking Revisited.

Reward Pledges and Gifts Revisited -- Problematic Binding Gift Promise -- Equally Problematic Binding Reward Pledge -- 6.4 Usufruct Sukuk -- Identification of Unidentified Usufruct Shares -- 6.5 Sukuk Al-Salam -- 7 Partnerships and Equity Investment -- 7.1 Classical Types of Partnership -- Silent Partnership: Theoretical Workhorse of Islamic Finance -- Types of Silent Partnership -- Valid and Defective Silent Partnerships -- Conditions on Partnership Capital -- Profit-Sharing Conditions -- 7.2 Common-Stock Ownership -- Characterization of Stocks and Mutual Funds -- "Islamic Screens" and Their Shortcomings -- Line-of-Business Screens -- Financial Ratio Screens -- Incoherence and Dangers of Financial Ratio Screens -- Case Study on Debt Screens: REITs -- Cleansing Returns -- Positive Screens and the Islamic Brand Name -- 8 Islamic Financial Institutions -- 8.1 Banking and Islamic Banking -- Theoretical Structure: Two-Tier Silent Partnership -- Two Conflicting Fatawa -- Deposits vs. Loans: Trust and Guaranty -- A. Conventional Bank functions -- B. Conventional Bank relationship with depositors -- C. Conventional Bank interest is a form of forbidden riba -- D. Prespecification of investment profits in amount, or as a percentage of the invested capital -- 8.2 Insurance and Takaful -- Two More Conflicting Fatawa -- 8.3 Two Sides of the Two Debates -- Shari'a Arbitrage vs. Islamic Prudential Regulation -- 8.4 Generic Agency Characterization of Financial Institutions -- Agency and Takaful as Mutual Insurance -- Agency in Banking -- Agency in Asset Management -- 9 Governance and Regulatory Solutions in Mutuality -- 9.1 Rent-Seeking Shari'a Arbitrage and Absence of Mutuality -- Prohibitions as Means of Risk Mitigation -- Rent-Seeking Shari'a Arbitrage Encourages Risk Taking -- Potential for Mutuality in Islamic Banking.

Debt and Equity Structures for Assets and Liabilities -- Need for Mutuality in Takaful -- 9.2 A Call for Mutuality in Banking and Insurance -- Mutuality in Banking -- Mutuality in Insurance -- 10 Beyond Shari'a Arbitrage -- 10.1 Shari'a Arbitrage and Criminal Finance -- 10.2 Shari'a Arbitrage at the Limit -- Benchmarking ad Absurdum -- Savings Accounts via Shari'a Arbitrage -- Hedge-Fund Instruments - Shari'a-Arbitrage Style -- Short Sales -- Synthesized Options -- 10.3 Self-Destructiveness of Shari'a Arbitrage -- Declining Shari'a-Arbitrage Profit Margins -- Dilution of the "Islamic" Brand Name -- 10.4 Toward a New Islamic Finance Identity -- Macroeconomic Substance: Privatization Sukuk -- Mosque-Based Network of Financial Mutuals -- Positive Screens, Ethical Investment -- Conclusion -- Notes -- Chapter 1 -- Chapter 2 -- Chapter 3 -- Chapter 4 -- Chapter 5 -- Chapter 6 -- Chapter 7 -- Chapter 8 -- Chapter 9 -- Chapter 10 -- Bibliography -- Index.

This book provides an overview of the practice of Islamic finance.

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Electronic reproduction. Ann Arbor, Michigan : ProQuest Ebook Central, 2018. Available via World Wide Web. Access may be limited to ProQuest Ebook Central affiliated libraries.