WorksheetsIslamic Finance 101-B
Total questions: 20
Worksheet time: 3600secs
Which statement best defines Islamic finance?
A set of religious donations collected by mosques
A growing series of financial products designed for a specific group, developed under Shari'ah principles that prohibit interest and certain risks
A form of charity that replaces all conventional banking
A temporary initiative led solely by governments
Which primary sources form the basis of Islamic principles and values according to the section on Islamic tradition?
Only the Shari'ah
The Quran and the Traditions of the Prophet Muhammad SAW
The Hadith alone
Customary tribal law
An Islamic bank structures a sale-based financing. According to Islamic finance, what is essential for the validity of this contract?
A collateral pledge is sufficient; no asset needs to be involved.
An underlying asset that the bank sells, leases, or provides as a service/usufruct.
Charging interest to cover the bank’s risk.
A promise of a gift to encourage account opening.
According to Islamic finance, what is the primary role of money in generating profit?
Money should be traded directly to earn interest.
Money acts as a commodity that creates more money by itself.
Money must be put into real business activities to generate income.
Money should be saved to accumulate value over time.
According to Shari'ah principles, which practice would be disallowed and therefore could have prevented the mortgage-backed securities issues seen in the credit crisis?
Trading debt at premium or discount without a clear link to real assets
Using collateral to secure financing
Sharing profits between bank and depositor under a pre-agreed ratio
Purchasing goods from a supplier and selling to a customer with a fixed mark-up
A bank wishes to provide home financing without charging interest. Which Islamic contract should it apply to comply with Shari’ah principles?
Wadiah
Murabahah
Wakalah
Qard Hasan
A customer and a bank agree to share profits and losses from a joint venture. Which contract best applies?
Ijarah
Musharakah
Istisna’
Bay’ Mu’ajjal
An insurance company wants to develop a Shari’ah-compliant insurance model. It should replace the sale of indemnity for premium with what type of contract?
Donation contract among policyholders
Deferred payment contract
Deferred payment contract
Loan with interest
A company borrows GBP1,000 from a bank and agrees to repay GBP1,200 next year. Which element of Shari’ah is violated?
Gharar
Maisir
Riba al-nasiah
Mudarabah
A futures contract allows the sale of wheat not yet harvested. Which Shari’ah principle does it breach?
Profit and loss sharing
Gharar
Ijarah
Amanah
A Shari’ah board is formed in a bank. What is its main function?
Manage credit risk
Advise and ensure Shari’ah compliance
Audit the financial statements
Supervise customer service
A customer purchases an asset from a bank at a markup price with deferred payments. What is this arrangement called?
Bay’ Mu’ajjal
Istisna’
Wakalah
Ijarah
An Islamic bank earns profit by leasing machinery to a client instead of charging interest. Which contract applies?
Murabahah
Ijarah
Musharakah
Wadiah
A company wishes to invest in shares of a beverage firm that also sells alcohol. What should an Islamic investor conclude?
Investment is permissible due to diversification
Investment is prohibited due to unlawful activity
Investment is valid if returns are high
Investment is valid if debt levels are low
A construction company seeks financing to build housing units to specification before delivery. Which Islamic contract best suits this case?
Bay’ Mu’ajjal
Istisna’
Musharakah
Qard Hasan
To ensure an Islamic financing contract remains valid, what must always be present?
A speculative derivative
An underlying tangible asset
Interest-based collateral
Guaranteed return clause
A firm plans to raise capital via Sukuk backed by actual property. Which feature makes this permissible?
Link to real assets rather than debt trading
Guaranteed fixed interest rate (coupon)
Sale of future receivables
Absence of ownership transfer
When a bank buys a property and then resells it to the client at markup with deferred payment, what Shari’ah principle allows this transaction to replace interest?
Trading for profit rather than lending for interest
Gambling for quick returns
Asset leasing under uncertainty
Halal interest to ensure the bank also receive returns
If an Islamic financial institution invests in a firm producing pork products, which Shari’ah rule has been breached?
Interest prohibition
Unlawful goods or services
Deferred-payment rule
Disclosure requirement
A depositor places funds in a Wadiah (safe-keeping) account and later receives a gift from the bank. What must the bank avoid to remain compliant?
Promise of predetermined gift
Collecting service fees
Using funds for charity
Acting as trustee
