Islamic Banking in Practice - Part 1
Welcome!
Islamic banking and finance is a topic that is become ever more important and relevant in the changing global economic climate.
I am producing a comprehensive set of resources for education of Islamic banking and finance, and I am delighted to introduce you to my 3rd course on Islamic Banking and Finance, to accompany "Introduction to Islamic Finance" (HERE) and "Free Course - Islamic Finance" (HERE).
I have decided to create this course to help those who want a understand, in more detail, what Islamic Finance is all about, and wish to learn more about the products, contracts and how the markets actually work in practice.
Please read more below about the course and how it can benefit you.
Safdar Alam
INTRODUCING THE COURSE
Upon registering, you will have access to a course of around 30 videos that cover Islamic banking and finance.
The detailed contents are listed below. You can go through the videos at your own pace. There will be a quiz at the end, to see how well you have digested and learned the topics.
You will also be provided with a certificate after completing the course, and this course will qualify for CPD (Continued Professional Development) if you work in a related field.
Introduction
We look at Islamic Law, and the major rules and principles that govern Islamic Finance. We also cover the most important types of contracts that are used in financial products.
Money Markets
This is a fundamental and core market for all banks, and we discuss why this is not Shariah compliant, and how to approach finding a solution.
Commodity Murabaha
This product is the main building block for all products. We look at how this is constructed, from first principles and how it has evolved over the last two decades.
Transaction Walkthroughs
All products will be consolidated by real market examples, and we talk through how they are priced and executed by Islamic banks and their clients.
FX Spot
We discuss perhaps the most simple product in Islamic finance - an FX Spot transaction, where two currencies are exchanged.
FX Options
We move on to key risk management instruments, and we begin to see simple contracts, and theory, come to life. We use a simple Undertaking to create an FX Option.
FX Forwards 1
We construct this derivative, building on the structure we have created for FX Options - we utilise the dual Wa'ad structure to create the outcome that is desired, and we have to mitigate all the risks that arise.
FX Forwards 2
We discuss the need for an alternative structure for the markets, and we now use a combination of Commodity Murabaha contracts that we looked at earlier. We identify all the key commercial and Shariah elements, and the risk introduced by assets, and we work through this until we find the desired solution.
IN THIS TRAINING YOU WILL LEARN ...
How Islamic commercial law is used to derive principles and rules
How major contract types are used to create the basis for financial products
Each contract needs to undergo significant transformation to become a financial product
New assets introduce new risk, and we learn the art of structuring, from a recognised global expert
Discover, and understand, the multi-faceted journey that we need to undertake, to reach a finished commercial product that is ready for the financial markets
THIS IS FOR YOU IF YOU ARE ...
Interested in how Islamic banking and finance operates
Wishing to learn directly from a leading structurer and global expert
Keen to see how theory translates to reality, using contracts and transcations
Working in the finance field and wish to expand your knowledge base
Not a finance professional and want a simple, clearly explained course on Islamic banking and finance
ABOUT THE INSTRUCTOR
Safdar Alam is an investment banker and has worked at some of the largest banks in the world, and has held senior positions at UBS, Credit Agricole and JPM Morgan as Global Head of Islamic Structuring. He writes, consults and teaches about Islamic banking and finance. As well as blogging at www.safdaralam.com, he has written for a variety of the most respected publications in the world. He is a published author and his books are available on Amazon.
Safdar is a keen supporter of true Islamic finance and the potential it holds to deliver the transformation of the global banking sector that is required.
Topic Details
Topic 1 -Introduction
We discuss why this course is important. Too often, we hear about Islamic Finance purely from a theory point of view. And, too often, we end up not learning anything about how the products really work. It is easy to explain how Murabaha can be used for a deposit, but it is more entlightening to explain the details behind the structure, contracts, and execution. Being told what is done is easy, being told how, and why everything is done in a certain way is more lasting knowledge.
This is why the focus will ALWAYS be on transcations - not on theory. This course is a journey - on transforming a simple Arabic term (that can be explained in 10 seconds) into complicated transactions and structures.
Topic 2 - Rules and Contracts
We learn about the most common contracts utilised in islamic Finance, including Murabaha, Mudarabah, Wakala, Wa'ad, Ijara and so on. We also discuss some commercial rules that arise from Islamic commerical law, such as the rules of a sale contract, short selling, Riba, Gharar, Maysir and so on. These will form the building blocks, from which we shall create the contracts and structures in the following sections.
Topic 3 -Money Markets
This is a sector of the market that ios not widely taught, however it is fundamental, in my view. A bank will become insolvent rapidly, if it is unable to participate in the interbank money markets. In addition, the structures utilised here will form the basis of many products we will look at in future sections. Commodity Murabaha is quite well known, however we will look at details that are not widely discussed. This will enalbe us to obtain an expert understanding of how this product operates, and why everything must be present in a certain way.
We go through a live market example to illustrate how our learning is put into practice by the market participants.
We also discuss some market variations, such as the use of exchanges, and the development of transactions utilising Wakala and Mudarabah contracts.
Topic 4 - FX Spot
We wo move onto the topic of Foreign Exchange. In the global economy, it is imperative that banks, importers and exporters are able to deal with the FX risk that arises from transactions. Not only this, but we will see how simple contractual forms (such as Wa'ad) are utilised, and combined, to create some complex derivatives.
In this topic, we lookat FX Spot.
Topic 5 - FX Options
Now, we move on to derivatives, utilised for risk management (hedging purposes). We discuss how a Wa'ad (Undertaking, or Promise) can be used to structure an FX Option. We look at some option theory too, and we see what call options and put options are.
Topic 6 - FX Forwards
We discuss why a regular forward transction is impermissible, and we now build on our previous learning to find alternative solutions. First, we continue with the use of a Wa'ad contract, and we see that we must create a dual Wa'ad structure to replicate and FX forward. We discuss the use of conditions in the undertakings, and why these are necessary from a Shariah point of view.
Finally, we discuss the necessity of having a second structure available to the market, because not all counterparties can execuate a Dual Wa'ad structure. In this case, we structure a solution that is built upon a combination of Commodity Murabaha transactions. and we see hwo these must be combined, very carefully, to acheive the desired outcomes.