ISLAMIC FINANCE RESEARCHES
Year:2012 | Volume:1 | Issue:1 (1)|Papers Count:7

Having a fundamental attitude to the issue of financial institutions, the present article maintains that it is necessary for an Islamic financial system to reconsider the issue of innovation, trying to produce an Islamic financial engineering to get rid of its present inactivity.The term "financial engineering", as far as its specific sense is concerned, provides the tool for the development of an Islamic financial system, thus it is not restricted to the conventional meaning of the term, which refers to its financial derivations.The first fundamental issue necessary to be taken into consideration on the way to produce an Islamic financial engineering, to which no specific attention has been paid so far, is to think of its structure. To this end, it is obligatory to consider the process of innovation and its restrictions and challenges on the one hand, and the opportunities and necessities on the other. The next important stage on the way to get to Islamic financial engineering is to pay attention to the principles related to the issue and its Islamic and religious foundations. As a matter of fact, fundamental policy of Islamic financial engineering can only be determined through the Islamic foundations, and their financial and scientific principles.In the end, having recognized the current conditions of Islamic financial system, having explained the strategies and policies of such a system and having determined the ultimate goals and attitudes of the system, we will extract the central foundations and principles of Islamic financial engineering.

Usury is prohibited in Islam and other divine religions. However, the financial system which is common in today's world, especially in West, is founded on the basis of usury. In effect, it is the features present in usurious loans that seduce uncommitted capitalists into preferring this kind of contract to other methods of investment. As a matter of fact, such loans need not be supervised by economic activities, they guarantee the capital itself, and finally they do certainly lead to profitability. Some of the most important reasons for research to be done about the rationale behind prohibition of usury are as follows: spreading new skepticisms and uncertainties regarding usury, taking some usurious contracts out of the realm of usury so that they are no longer considered religiously prohibited (i.e claiming they are not taboo), spreading synthetic contracts, i.e. the ones that are innately usurious loans, and the need to design new contracts with respect to Islam's financial system.The methodology for the present study is analytic and qualitative. In fact, referring to different verses of Quran and various hadiths, and making use of jurisprudential texts and intellectual analyses, the research tries to extract the reason underlying the prohibition of usury, seeking to verify the following hypotheses:1. Loan Usury is prohibited due to cruelty it induces, not because of piety (i.e. not because religion says it is so).2. The reason for loan Usury's being cruel is the transferring of ownership it produces through the loan contract.3. Usury systematically causes disorder to occur for suitable and charitable economic activities.

A behavior common in financial markets is speculation. In fact, regarding the development of capital markets in Iran, and referring to the importance of the issue for investors, the present study deals with providing an economic, jurisprudential analysis of speculation on the basis of the two following criteria, including fair price and la darar principle. Therefore, first we start the study by reviewing the prevalent definitions of speculation and go on to investigate different kinds of speculation occurring in goods, foreign exchange and shares markets; then, the study evaluates the most important views of scholars about the issue. Then, referring to the consensus of scholars about some religiously prohibited speculations, we try to enumerate the evidence of such speculations; and eventually, in order to determine the amount to which other forms of speculation are consistent with Islamic foundations, we, through investigating the effects of speculation on goods markets, give some examples of speculation, the ones that have not conformed the criterion of rightful price, or those having led to chaos in markets, considering them as being against the teachings of Islam religion.

Credit risk is defined as a situation in which the liability itself and its interests are not paid back based on the terms determined in contract. In fact, it is considered as the most important risk each bank has to encounter, among the ones present in banking operations, which is actually because of bank's later life being dependent on it. Therefore, carefully taken into account, the factors effective on the risk and the sound management of it can guarantee the bank's stability and profitability. Though the current banking has taken the various dimensions of the issue into consideration, due to the different nature of Islamic banking, it is highly necessary to investigate the risk and, what is more important, to examine the attitude of Islam toward risk in general. Hence, the aim underlying the present study is to explain the attitude of Islam to the concept of risk and also to present a theoretical analysis through which to compare credit risk in Islamic banking versus current banking.Although the concepts of risk and gharar are similar in meaning in Islamic discussions, it seems that the two are distinct from each other, thus no criticism will be directed to contracts made on the basis of credit risk by the viewpoint of Islam. Research shows that despite being less flexible in making use of tools for the management of credit risk, Islamic banking has naturally different contracts and treaties and dissimilar surrounding conditions in the management of credit risk, which causes such banking to face theoretically less credit risk, leading to the removal of restrictions existing in the management of risk. Therefore, through having a sound management of credit risk, such banking can be more stable compared to the current banking.

One of the most common methods of financing to which banks repeatedly resort nowadays is, in addition to planning different kinds of bank deposits, to distribute securities supported by bank facilities. The application of such tools is highly experienced in the current banking. In fact, enjoying such instruments, banks have the intention to renew their resources in their attempt to enhance their power of granting credit facilities. However, such tools are not highly common in Islamic banks, including the ones across Iran.After the law of stock market was ratified in 1384 and 1388, legal grounds necessary to plan and distribute different kinds of new securities were provided. Now Iranian banks are also able to finance through capital market with the help of planning and distribution of new financial tools, especially via changing of bestowed facilities into securities.The present study is seeking to introduce such tools in three sections. In the first section, taking a glance look at the history of changing bank assets into securities in conventional banking and Islamic banks, the research will clarify the goals, performance and pathology of changing bank assets into securities. The second section deals with designing suitable financial instruments for the changing of bank assets into securities in Iran banking system. It will also be explained that such tools should have the following characteristics: first, they should be acceptable by jurisprudential standpoint; second, they should be consistent with monetary and financial laws and rules of Iran; third, regarding the role of such tools in the occurrence of current financial crisis, they should not be crisis-making. In the last section, the study will try to examine possible risks of the designed instruments and the ways to manage them.

As the most perfect divine religion, the holy Islam contains comprehensively complete programs leading human-being to prosperity and salvation. One of the recommendations highly emphasized in the religion of Islam is charitable endowment. Though being not compulsory, endowment is highly advised in the religion and has a well-deserved role in elevating our souls and providing spirituality for the whole community. Many people are interested in giving endowments; however, it is not possible for all to do so, especially when the endowed object is a building, school, etc, because such things require the person to undergo a huge cost, which is not possible for everybody.U sing the suggestions proposed regarding the expansion and diversity of financial tools, the present article is intended to offer a model that solves the above-mentioned problem. In addition to absorbing small capital of individuals, the distribution of endowment papers will also lead to the promotion of endowment culture. Such papers are non-for-profit, and the owner, after earning the property, finds the possibility to endow it. Hence, in addition to examining the foundations effective on the process of distributing endowment papers, the present essay is also intended to present the financial model related to such papers.

A central element in financial system of each country is its insurance market. In fact, due to the important function of insurance and its remarkable role in the life of individuals in our Islamic community, the thing which is considered as the most significant duties of authorities in the Islamic government is the attempt to satisfy the aims of Islam religion, among which are to remove poverty and also to improve the welfare status of the poor in the community, making use of insurance instruments.Through combining cooperative mechanisms (which are in agreement with Islamic teachings) with insurance mechanisms for the presentation of small insurance products, the study wants to present a strategy the operationalization of which will certainly have a deserving role to provide insurance coverage for the low-paid individuals (those who are not normally able to purchase insurance products) in the community, and consequently to increase the welfare status of the dispossessed in the community. This will definitely affect the country's insurance market to be more compatible with the spirit of Islamic teachings.