I learnt a lot!
If you happen to read a book titled An Introduction to Islamic Finance by Muhammad Taqi Usmani, you are in the right way to improve your knowledge in Islamic finance.
In this book, Muhammad Taqi Usmani as one of the leading Shari’ah scholars in the field of Islamic finance aimed at providing basic information about the principles of Islamic finance, with special reference to the modes of financing used by the Islamic banks and non-banking financial institutions.
He has tried to explain the basic concept underlying these instruments, the necessary requirements for their acceptability from the Shari’ah standpoint and the CORRECT method of their application.
In that sense, he has chosen to discuss on musharakah (joint venture), mudarabah (profit sharing), murabahah (cost plus), bai’ mu’ajjal (deferred payment sale), ijarah (agency), salam (advance purchase) and istisna’ (project financing / bridging).
He has also dealt with the practical issues involved in the application of these instruments and their possible solutions in the light of Shari’ah.
For example in transactions of murabahah, he stressed that:
“Murabahah is not a mode of financing in its origin. It is a simple sale on cost-plus basis. However, after adding the concept of deferred payment, it has been devised to be used as a mode of financing only in cases where the client intends to purchase a commodity. Therefore, it should neither be taken as an ideal Islamic mode of financing, nor a universal instrument for all sorts of financing. It should be taken as a transitory step towards the ideal Islamic system of financing based on musharakah or mudarabah. Otherwise its use should be restricted to areas where musharakah or mudarabah cannot work.”
Just to share with you that for more than a decade he has served as chairman or member of Shari’ah supervisory boards of a dozen Islamic banks and financial institutions in various parts of the world.
The Performance of the Islamic Banks – A Realistic Evaluation
On the last chapter, Muhammad Taqi Usmani has talked about The Performance of the Islamic Banks – A Realistic Evaluation.
In my opinion, this chapter was very good as it criticized the Islamic banks honestly and equitably. But, before you jump to the last chapter, you should read from the beginning first as it will help you to get a better understanding on the discussion. Insha-Allah.
The Contribution of the Islamic Banks in Promoting Islamic Economy
Last but not least, Muhammad Taqi Usmani has mentioned in his book that he was asked the question about the contribution of the Islamic banks in promoting Islamic economy.
His reply to the question was apparently surprising and contradictory. He said:
“They have contributed a lot and they have contributed nothing.”
If you read the book, you will know why he said like that. 😉
Allah knows best.