Islamic finance is money management finance under Islamic and Sharia compliance. Islamic banking is different from conventional banking. Islamic finance is based on the application of “Sharia” also called “Islamic Law”. Islamic finances are managed under the law of Sharia. The Quran gives guidance to mankind. There should be no economic activity performed that contradicts the Quran and Sunnah. Islam is very clear about lending, borrowing, investing money or exchange of finances. This could be for personal use or at a corporate or government level. 

 

Sometimes students studying finance or accounting select Islamic finance dissertation topics in their course work. They have to be very specific in adding material to their dissertation as there are many points to be kept in mind while opting for Islamic finance as a topic in dissertations. This article will walk you through some topics which you can choose for your dissertation on Islamic finance subject. 

Sharia Compliance and Financial Instruments in Dissertation Topics  

The principles of Islamic finance are that no interest should be charged on the money borrowed or lent, money should be made in legal ways, no investment should be made in illegal or prohibited areas and no retailing should be done based on speculation. It is now estimated that worldwide, around US $3.2 Trillion of assets are managed under the rules of Islamic finances. Islamic finance is followed by Islamic banks all over Islamic countries, like Qatar, Oman, Bahrain, and all Gulf countries. 

Sharia Compliance

Making a dissertation on Islamic finance is not difficult. You can do it easily yourself or can get help from dissertation help services available online, but you will have to pay for it. Islamic finance should comply with Sharia. The points which must be added or kept in mind relevant to Sharia are discussed below.

  1. Prohibition on Speculation 

You should be aware of speculation (Maisir) that it is strictly prohibited in Islam. No investment should be made based on speculation. Islam does not allow such contracts where uncertain events are involved. No one can guess the future, as it is completely uncertain. We should have trust in Allah.

  1. Interest on Loans

One should stay away from any kind of interest (Riba). If someone borrows money, he will return the same amount to the lender. Any extra money paid will fall in the category of interest, which is extremely forbidden in Islam. Because no asset is involved, no economic activity is happening here.

  1. Investments in Forbidden Items or Activities

No investment should be made in forbidden areas, such as alcohol and gambling. No restaurants should be involved in pork. Since the consumption of alcohol, pork and drugs is Haram in Islam, retailing these items is also Haram. Gambling is strictly forbidden in Islam. Money made by gambling is completely Haram.

  1. Uncertainty and Risk

The rules of Islamic finance ban participation in such contracts where the subject matter is uncertain (Gharar) or there is high risk. This includes selling something that a person does not own yet. This is also called short selling.

  1. Risk Sharing in Business

The partners will share the profit or loss according to the investment they made in business. No guarantee on the rate of returns should be there.

  1. Legitimate Trade

Money must be made on legitimate trade and asset-based investment. There should be some sort of economic activity performed to make money. No one is allowed to make money for money.

Islamic Financial Instruments

While selecting Islamic finance in the dissertation, you can refer to the instruments of the Islamic Financial system. The instruments in Islamic finances include the following types of contracts.

  1. Mudaraba - Partnership 

A partnership transaction is where there are only two parties, and one party supplies the money to the other. The first party is also called the sleeping party because he will only be the financer, whereas, the second will provide the management expertise which means he will have the skill. In case of loss, it would have been pre-decided that the loss would be borne by the financier. But if profit is made, it will be divided as it was decided before a contract.

  1. Musharaka - Equity partnership

It includes two or more parties where everyone can invest money or show their skill. However, as far as profit or loss is concerned, profit will be shared on a pre-decided ratio, whereas, loss will be shared in the investor contribution ratio.

  1. Sukuk - Islamic Bond

Islamic bonds are different from conventional bonds in a way that the profit is shared without breaking the Islamic law. The profit is shared in Sukuk. It aims for profit sharing by offering the investor ownership in business and assets.

  1. Ijarah - Lease Contract

An Ijarah contract is made in Islamic banking, due to prohibition of interest in Islam. For instance, someone wants to buy a car, but he does not have immediate money to make the payment. He will make an Ijarah contract. According to this contract, the bank will buy a car for that person, but the ownership will remain with the bank. That person will pay the rentals or installments to the bank. After the rentals are finished, an option will be given to the buyer if he wants to keep the car on some extra money or return it to the bank for money.

  1. Murabah - Credit Sale

It is a transaction called a deferred payment sale or an installment credit sale. It is mostly used for immediate purchase of goods on deferred payment. The bank will buy that good for that particular person and will sell it on markup (Cost + profit) to that person. But this will be disclosed earlier. Individuals will pay the amount in installments.

Conclusion

To sum up, the principles of Islamic finance are an extensive and important topic in the dissertation. Both Sharia compliance and financial instruments should be discussed under this topic. An individual should have enough knowledge while selecting principles of Islamic finance as a dissertation topic.