Islamic Banking & Insurance Quiz

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Questions and Answers

What was established in 1981 to provide research and training in Islamic finance?

Islamic Research and Training Institute (correct)

Bank Islam Malaysia Berhad

Bank Islami Bangladesh

Dar Al-Maal Al-Islami Trust

Which entity was the first fully-fledged Islamic bank in Malaysia?

Bank Islam Malaysia Berhad (correct)

Dar Al-Maal Al-Islami Trust

Islamic Research and Training Institute

Bank Islami Bangladesh

Which country reformed its banking system based on Shariah principles in 1983?

Malaysia

Iran

Egypt

Sudan (correct)

What significant financial system was established in Iran in 1984?

Interest-free banking Signup and view all the answers

Which financial institution provided Islamic banking and investment services worldwide in 1981?

Dar Al-Maal Al-Islami Trust Signup and view all the answers

Which of the following banks was established in Bangladesh in 1983?

Bank Islami Bangladesh Signup and view all the answers

Which of these institutions was founded first?

Dar Al-Maal Al-Islami Trust Signup and view all the answers

What aspect of banking did Sudan implement in the North in 1983?

Shariah-compliant banking Signup and view all the answers

What is the primary reason Islamic finance avoids haram activities?

To adhere to ethical and moral principles Signup and view all the answers

How does Sharia compliance impact investment choices in Islamic finance?

It prohibits investments in activities deemed sinful Signup and view all the answers

Which of the following is considered a haram activity in Islamic finance?

Investing in alcohol production Signup and view all the answers

What is a key benefit of avoiding haram investments in Islamic finance?

Mitigation of legal and reputational risks Signup and view all the answers

What aspect of community welfare does Islamic finance prioritize by prohibiting haram activities?

Promoting economic development and social justice Signup and view all the answers

How do spiritual considerations influence financial dealings in Islamic finance?

They prioritize earning halal income over profit Signup and view all the answers

What role does social responsibility play in Islamic finance's investment decisions?

It fosters a commitment to ethical investing and positive societal impact Signup and view all the answers

Which of the following is NOT a haram activity according to Islamic finance principles?

Supporting educational initiatives Signup and view all the answers

What is the primary role of the bank in a Mudarabah account?

To manage the capital provided by the customer Signup and view all the answers

Which type of account guarantees the safety of customer deposits without providing returns?

Wadiah Signup and view all the answers

What happens to profits and losses in a Musharakah account?

Both profits and losses are shared based on contributions Signup and view all the answers

In the context of Islamic banking, what does 'Wakalah' refer to?

An agency relationship where the bank invests on behalf of the customer Signup and view all the answers

What is Bai Bithaman Ajil commonly known as in some countries?

Bay' al Muajjal Signup and view all the answers

Which statement is true regarding Qard accounts?

The deposit is treated as a loan with no interest Signup and view all the answers

What does the Bai Bithaman Ajil financing facility primarily involve?

Buying and selling based on deferred payment Signup and view all the answers

What distinguishes Term Deposit Accounts in Islamic banking?

They are structured according to Shariah rules Signup and view all the answers

Which of the following conditions is NOT associated with Bai Bithaman Ajil?

Goods must be purchased from a specific seller Signup and view all the answers

Which type of account allows contributions specifically for charitable purposes in Islamic banking?

Zakat Accounts Signup and view all the answers

In which contract must the seller disclose cost price and profit margin?

Murabaha Signup and view all the answers

In an investment account, what is the main responsibility of the bank as the mudarib?

To manage the investment's operations and risks Signup and view all the answers

What distinguishes Musawamah from Murabaha?

Musawamah does not require cost disclosure Signup and view all the answers

According to Islamic principles, what must be ensured in a Murabaha transaction?

The buyer must know the cost price Signup and view all the answers

Which of the following is a characteristic of Musawamah?

Bargaining without reference to cost Signup and view all the answers

Which of the following is NOT an essential condition of a Murabaha contract?

Payment must be made in cash only Signup and view all the answers

What is the definition of riba in Islamic law?

Unjust gain in a transaction Signup and view all the answers

Why is riba prohibited in Islamic finance?

It leads to exploitative gains Signup and view all the answers

How does gharar manifest in conventional insurance?

Uncertainty regarding premium payouts Signup and view all the answers

What element of conventional insurance relates to the concept of maysir?

Payout risk linked to random events Signup and view all the answers

In what way does conventional insurance contradict Islamic finance principles?

It involves interest-bearing financial instruments Signup and view all the answers

Which of the following is not a characteristic of gharar?

Too much clarity in contracts Signup and view all the answers

What type of returns are often promised in whole life insurance policies?

Predetermined fixed returns Signup and view all the answers

What is a significant consequence of applying riba in insurance?

Disruption of economic fairness Signup and view all the answers

What is the main purpose of Family Takaful?

To offer protection for individuals' lives and financial support for families. Signup and view all the answers

Which of the following best describes the contributions to a Family Takaful plan?

They serve as donations to a shared fund. Signup and view all the answers

What types of coverage does General Takaful provide?

A wide range of physical assets including homes, cars, and businesses. Signup and view all the answers

Which of the following is NOT a key feature of Health Takaful?

Investments in high-risk medical technology. Signup and view all the answers

What principle do Family Takaful and Health Takaful both adhere to?

They are designed to avoid interest (riba) and gambling (maysir). Signup and view all the answers

What types of risks does General Takaful protect against?

Damage, theft, or accidents affecting physical assets. Signup and view all the answers

What does Health Takaful ensure for its participants?

Access to healthcare without financial strain. Signup and view all the answers

Which statement is true regarding the sustainability of the funds in Family Takaful?

Profits are shared among participants or reinvested in the fund. Signup and view all the answers

Study Notes

Specialization: Applied Economics
Topic: Islamic Banking & Insurance
Instructor: Mr. Mussa Ramadhani

Course Outline - Islamic Finance

Introduction to Islamic Finance
- Meaning of Islamic Finance
- Short History of Islamic Finance
- Principles of Islamic Finance
- Difference between Islamic Finance and conventional finance
- Sub-Sectors in Islamic Finance
  - Islamic Banking
  - Islamic Insurance
  - Islamic Capital market
  - Islamic Microfinance
  - Islamic non-banking institutions
Meaning and Scope of Islamic Banking
- Definition of Islamic Banking
- Short History of Islamic Banking
- Islamic Banking Products
  - Retail Islamic banking Products
  - Corporate Islamic banking products
- Islamic Banking Model
  - Full fledge Islamic Banking
  - Subsidiary Islamic Banking
  - Window Islamic Banking
- Challenges faced by Islamic Banking
Source of Fund of Islamic banking
- Internal Source of Fund
  - Shareholders Capital
  - Reserve
  - Returned Earnings
- External Source of Fund
  - Deposits
    - Shariah Principle in deposits
      - Wadiah Principle
      - Mudarabah Principle
Uses of fund of Islamic banking
- Trade-based modes of financing
  - Murabaha
  - Bai Bitham Ajil
  - Musawwamah
  - Tawarruq
  - Salam
  - Istisnaa
- Rental-based modes of financing
  - Ijarah
- Participation-based modes of financing
  - Musharakah
  - Mudarabah
Meaning and Scope of Takaful
- Introduction of conventional Insurance
  - Meaning of Insurance
  - Function of Insurance
  - Benefits of Insurance
  - Principles of Insurance
- Insurance from the shariah perspective
  - Interest
  - Gharar
  - Maysir
- Meaning of Islamic Insurance
- Takaful Product
  - Family Takaful
  - General Takaful
  - Health Takaful
Principles of Islamic Finance
- Prohibition of Interest or Riba
- Prohibition of Gharar
- Prohibition of Maysir
Sub-Sectors in Islamic Finance
- Islamic Banking
- Islamic Insurance
- Islamic Capital markets
- Islamic Non-Bank Financial Institutions
Short History of Islamic Finance
- Key Developments in different periods
Difference between Islamic Finance and conventional finance
- Discussion based on core principles of Islamic finance
Islamic Banking Model
- Fully-Fledged Islamic Banks
  - Independent Operations
  - Complete Product Range
  - Dedicated Infrastructure
  - Regulatory Compliance
- Islamic Subsidiary
  - Operating Independently
  - Separate Funds and Reporting
  - Operational Separation
  - Limited Product Range
Challenges Faced by Islamic Banking
- Profit and Loss System
- Regulatory Issues
- Default Penalty
- Skilled Employees
- Shariah Scholar Confusion
- Shortage of Multi-Skilled Scholars

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Description

Test your knowledge on Islamic Banking and Insurance with this quiz. Explore its principles, sub-sectors, and the differences from conventional finance. Perfect for students in Applied Economics.