Islamic Banking & Insurance Quiz

Established by the Islamic Development Bank (IDB) to research and train in Islamic finance.

Provided Islamic banking, investment, and insurance services globally.

Malaysia's first full-service Islamic bank.

Sudan implemented Shariah-based banking in the North, but the South remained with dual banking.

Bangladesh's first Islamic bank.

Iran established interest-free banking throughout the country.

Islamic banks and research institutes emerged in several countries during these years.

This decade saw significant strides in the development of Islamic banking and financial institutions worldwide.

Activities prohibited in Islamic finance due to their unethical or harmful nature, as dictated by Sharia.

Fairness, justice, and ethical conduct are prioritized in Islamic finance, avoiding haram investments.

Islamic finance adheres to Sharia, which prohibits activities like alcohol, gambling, and interest-based transactions.

Islamic finance prioritizes ethical investments promoting social good and avoiding exploitative practices.

Avoiding haram investments helps manage potential legal, ethical, and reputational risks for Islamic financial institutions.

The prohibition of haram activities in Islamic finance protects community interests and promotes economic development.

Permissible income earned through lawful means, avoiding activities considered haram according to Sharia.

Investing in alcohol production, distribution, or sale is prohibited in Islamic finance as alcohol consumption is forbidden in Islam.

A financing method where a customer purchases an item with deferred payments. The bank buys the item and sells it to the customer with a pre-agreed price and installment plan.

BBA is permissible for non-interest-based goods. The duration of the contract must be clearly defined, and payments can be made in different ways.

A general sale in which the buyer and seller bargain for the price. The seller doesn't need to reveal their cost.

A sale where the seller sells an item at a cost-plus profit markup. Both parties agree on the markup and the seller must disclose their purchase price.

The most common Islamic financing technique, where banks use Murabahah to provide goods or services with a profit markup.

Hadith shows the Prophet s.a.w. practiced deferred payment, buying a camel and a meal with later payment.

The buyer MUST know the original cost price of the goods in Murabahah transactions.

Currencies subject to exchange rates cannot be sold through Murabahah.

A type of Islamic banking account where customers deposit their money for safekeeping. The bank guarantees the safety of the funds but doesn't offer any interest. The bank may offer discretionary gifts (hibah) as a gesture of goodwill.

In Islamic banking, Qard is the deposit that's treated as a loan from the customer to the bank. No interest is paid, but the principal is guaranteed to be returned on demand.

Mudarabah is a profit-sharing principle in Islamic banking. A customer (rabb-al-mal) invests money and the bank (mudarib) manages it. They share profits based on an agreed ratio, but any losses are borne by the depositor unless the bank was negligent.

Musharakah is a form of Islamic banking where the customer and the bank jointly invest in a venture, sharing both profits and losses based on their contributions.

Murabaha is a structure where the bank uses the deposited funds to buy an asset and then sells it at a mark-up to the customer, sharing profits based on a pre-agreed arrangement.

Wakalah is when the customer appoints the bank as their agent to invest on their behalf. The bank might charge a fee and distributes profits to the customer as per the terms.

Zakat accounts allow customers to deposit funds specifically to fulfill their Zakat obligations. The bank ensures the funds are distributed to eligible recipients according to Islamic law.

A Waqf account allows customers to contribute to charitable endowments (waqf). These funds are used for ongoing charitable purposes.

An Islamic life insurance alternative providing financial security for individuals and their families in case of death or disability.

A shared fund in Family Takaful where participants contribute, and benefits are paid out to members in case of death or disability.

An Islamic insurance alternative covering non-life risks like damage to physical assets like homes, cars, or businesses.

An Islamic health insurance alternative ensuring access to medical care without financial strain, adhering to Sharia principles.

Interest (riba) is forbidden in Takaful and replaced with contributions shared between members.

Gambling (maysir) is also forbidden in Takaful, as it involves uncertainty and risk that goes against Islamic values.

The types of events or risks covered under a Takaful plan, which can include death, disability, health expenses, or property damage.

Key characteristics of Takaful that make it a distinctive form of insurance, like the absence of interest and gambling, contributions considered donations, and profit-sharing or reinvestment in the fund.

An excess, increase, or unjust gain in a financial transaction, mainly related to loans or debts. It involves making money from money, primarily through interest payments.

Riba is forbidden in Islamic finance due to its potential to lead to exploitation, where one party benefits unfairly at the expense of another. This violates the principles of economic justice and ethical financial behavior.

Conventional insurance companies typically invest the premiums they collect into financial instruments that often generate interest-based returns. This practice of earning returns from interest (riba) is prohibited in Islamic finance.

Excessive uncertainty or ambiguity in a contract. Shariah prohibits contracts with high levels of gharar as it can lead to unfair loss for one party and unfair enrichment for the other.

Conventional insurance involves uncertainty about whether the insured will ever receive a payout. Policyholders may lose their premium if no insured event occurs, or they may receive a payout disproportionate to their premiums.

Gambling or wagering, typically involving the exchange of money for a chance of winning. Shariah prohibits maysir as it is considered a form of speculation with no real economic value.

Conventional insurance can involve elements of maysir, particularly in types of insurance that emphasize large payouts with low probability. This resembles gambling as both parties rely on chance events for their benefit.

Islamic finance principles emphasize ethical and fair financial dealings, prohibiting riba, gharar, and maysir. Therefore, conventional insurance practices that involve these elements are considered impermissible.