The art of RF (riba-free) Islamic banking and finance

Preface to the Second Edition Preface: My Story with RF (Islamic) Banking and Finance in America Acknowledgments About the Book Cover The Faith-Based Judeo-Christian- Islamic Foundation of the Prohibition of Interest and the RF (Riba-Free) Banking System ISLAM: THE ADDITIONAL AND CLOSING LINK IN THE CHAIN OF JUDAISM AND CHRISTIANITY AN INTRODUCTION TO THE JUDEO-CHRISTIAN-ISLAMIC FOUNDATIONS OF FAITH The Book The People of the Faith Loans Usury/lnterest THE JUDAIC POSITION ON THE CHARGING OF RIBIT (INTEREST): MONEY, LENDING, AND INTEREST IN THE TORAH AND THE JEWISH TRADITION Loans to the Poor Lending to Non-Jews with Interest Business Financing THE CHARGING OF MBIT (INTEREST) IN THE ROMAN CATHOLIC TRADITION: THEN AND NOW Lending to the Poop Position of the Contemporary Roman Catholic Church on Allowing the Charging of Interest THE CHARGING OF RIBIT (INTEREST) IN THE TRADITION AND TEACHINGS OF THE EVANGELICAL CHRISTIAN CHURCH Lending tn the Poor Lending to the Enemy Business Financing and Relaxation of the Rules of Prohibiting the Charge of Interest THE PROHIBITION OF CHARGING OF RIBIT/RIBA CINTEREST/USURY) IN ISLAM The Development of the Universal RF System in Islam The Concept of God Owning Everything Developing the Institution of Giving (Zakah) as a Required Islamic Ritual (Like Prayers)Behavioral Guidelines and the Discipline of Giving Business Finance Types of Riba Riba al-Jahiliyah Riba al-Fadl The Law (Shari'aa) Prohibits Deceptive and Speculative Activities in Business Transactions (Gharar)The RF Valuation Disciplines of Commodity Indexation and Marking to the Market DEVELOPMENT OF THE MARK-TO-THE-MARKET RULE RIBA-FREE BUSINESS TRANSACTION MODELS Cost-Plus (Murabaha)Leasing (ljara) Rules The RF Legal Foundation on Leasing Process Joint Venture (Musharaka) Direct Investment/Equity Ownership or Partnership Money Management (Mudaraba)Financing Future Production (Ba'i ul Salam)REVIEW QUESTIONS The Law: The Judeo-Christian-Islamic Shari'aa THE LAW: SHARI'AA Sources of Shari'aa The Qur'aan The Way of Life (Sunnah) of the Prophet The Science and Foundation of Scholarly Research, or "Usui Ul Fiqh"Performing Scholarly Research to Develop and Pass Religious Edicts and Rulings: The Process of Issuing a Fatwa (An Edict)The Ultimate Intent and Goals of the Law (Shani'aa): Maqasid Al Shari'aa THE SHARI'AA BOARD IN AN RF (ISLAMIC) BANK OR FINANCE COMPANY The Role of the Shari'aa Board Duties of the Shari'aa Board at the RF Bank Approaches Used to Appoint Shari'aa Boards Concerns of Western Central Bankers and Bank Regulators Regarding Shari'aa Boards THE DEVELOPMENT OF RF SCHOLARS AND COMPLIANCE COMMITTEES FOR RF FINANCE INSTITUTIONS IN THE TWENTY-FIRST CENTURY The Central Bank and the Regulatory Shari'aa Compliance Committee Money and Its Creation: The U.S. Federal Reserve System (Central Banks) and Interest Rates THOSE WHO "MAKE" MONEY AND OTHERS WHO "EARN" MONEY What Is Money?The History of Money Fiat (Paper) Money American Currency before the Federal Reserve System THE FEDERAL RESERVE HOARD OF THE UNITED STATES OF AMERICA,Function of the Federal Reserve Structure of the Federal Reserve Board (America's Central Bank)Who Owns the Federal Reserve Bank?Credit Creation in the Modern Banking System — The Money Multiplier Concept A BRIEF HISTORY OF THE BRETTON WOODS AGREEMENT GOLD: THAT AMAZING METAL Gold Reserves in the World The History of Gold Markets and Prices Setting the Market Price of Gold: Gold Price Fixing The Fed Fund Interest Rates Setting Regime: The Taylor Rule,,,Real and Nominal Interest Rate The Fiat Money Economy The Velocity of Money Concept and the Riba-Based Monetary Principles The U.S. Dollar's Role as an International Reserve Currency and the Developing Nations (Also Called Less Developed Nations)Towards an RF Monetary Discipline: The RF Commodity Indexation Discipline THE CYCLICAL NATURE OF THE FIAT MONEY ECONOMY THE PROHIBITION OF RIBA/RIBIT Reason for Prohibition Application of the RF Law Using the RF Commodity Indexation Discipline Toward an RF Monetary Theory and Discipline Development of an RF Monetary System to Develop a Fair RF Pricing Discipline A Historic Review of the Definition of Money and Monetary Discipline According to the Judeo-Christian-lslamic Shari'aa Law by Many RF Scholars ANALYSIS OF PRICES OF HOMES, COMMODITIES, AND STOCK MARKETS IN THE ONITED STATES USING THE COMMODITY INDEXATION DISCIPLINE Homes in America,Price of Coal Price of Crude Oil Price of Natural Gas Price of Rice A PROPOSED BEGINNING OF A NEW ERA THAT OSES THE RF MONETARY DISCIPLINE Civility and Social Responsibility of the RF Ranking System THE JUDEO-CHRISTIAN-ISLAMIC VALUES: CIVILITY, MORALITY, AND SOCIAL RESPONSIBILITY THE VISION OF AN IDEAL FAITH-BASED JUDEO-CHRISTIAN-ISLAMIC SOCIETY NEW TRENDS THAT CAPTURED THE IMAGINATION OF THE PAGANS OF THE ARADIAN PENINSULA — LESSONS TO LfARNfflOM ELEMENTS OF THE RF ECONOMIC SYSTEM Production Distribution Consumption THE RF JUDEO-CHRISTIAN-ISLAMIC SYSTEM AND DUSINESS ETHICS The RF Market System The RF Management Ethics Justice and Fairness on Both Sides: The RF Bank and the Customer BANKING AND INVESTMENT BANKING VALUES AND BUSINESS ETHICS OF THE RF BANKER Professionalism Concentration Consistency Commitment THE 10 GOLDEN COVENANTS OF THE RF BANKER THE RF BANKING DISCIPLINE: WHERE DO WE START AND HOW DO WE REALIZE THE DREAM?The Conventional Riba-Based Banking System THE BANKING SYSTEM OF THE UNITED STATES TYPES OF BANKING SERVICES IN THE UNITED STATES National Banks State Banks Credit Unions Investment Banks Licensing a Commercial Bank in the United States GOVERNMENT SUPERVISION OF THE RANK The Office of the Comptroller of the Currency The OCC's Objectives OCC Funding Insurance of Bank Deposits by the Federal Deposit Insurance Corporation (FDIC)U.S. BANKING REGULATIONS Consumer Compliance Management Board of Directors and Management Supervision and Administration Compliance Program Compliance Committee Duties, Responsibilities, Authorities, and Accountability of the Compliance Committee Internal Controls Organizational Structure Policies and Procedures Training Compliance Audit Function SUMMARY OF FEDERAL BANKING REGULATIONS IN THE UNITED STATES Regulation B: Equal Credit Opportunity Fair Lending Policy General Policy Statement Advertising Applications and Information Gathering Application Processing and Evaluation and Loan Application Second Review Process Credit Extension Notification Record Retention Government Monitoring Program Fair Lending Training Regulation C: Home Mortgage Disclosure Act (HMDA)Purpose of the Act Reporting Requirements Denial Reasons and Other Data Disclosure Training and Oversight Responsibilities Regulation Q: Prohibition against Payment of Interest on Certain Deposit Account Types Regulation D: Reserve Requirements for Depository Institutions (Banks)Regulation 0: Loans to Bank insiders Regulations P and S BOX 8.1 A SAMPLE PRIVACY LETTER SENT TO ALL CUSTOMERS AT LEAST ONCE A YEAR Regulation Z: Truth in Lending Act (TILA)Regulation ВВ: Community Reinvestment Act (CRA)Regulation DD: Truth in Savings Act Fair Credit Reporting Act Anti-Money Laundering (AML) Program Bank Examination fop Safety and Soundness by Bank Regulators BOX 8.2 ООС REQUEST LETTER: FROM THE ООС OFFICE TO THE BANK'S PRESIDENT Asset Quality Financial Performance Bankruptcy Laws Comparing RF Banking and Conventional Riba-Based Banking: What Is the Difference?THE RF BANKING BRAND: HISTORY, DEVELOPMENT, AND STAGES OF GROWTH AN OVERVIEW OF RF RANKING Misnomers in RF Banking What Is RF (Islamic) Banking?RF (Islamic) Banking in the Twentieth Century RF (ISLAMIC) BANKING MODELS The Cost-Plus (Murabaha) Model Financial Engineering and the Law (Shari'aa)The Lease-to-Own Models (Al-ljanah Wal Iqtina or Al-ljanah Wal Tamaluk)The Al-Baraka Shari'aa-Compliant Model The South Asian Diminishing Musharaka Shani'aa-Compliant Model Application of the South Asian Shapi'aa-Compliant Model COURT CHALLENGES TO THE SHARI'AA-COMPLIANT "CONTRACT FITTING" USED RY SOME ISLAMIC FINANCE APPROACHES Cases Litigated in the U.K. Courts Resolutions Taken by "Islamic" Banks to Avoid Lengthy Trials CONCLUSION RF Banking Model for the Twenty-First Century: The LARIBA RF Model: Developing the Shari'aa-Based Finance Model THE PUZZLE AND THE CHALLENGE OF DEVELOPING RF RANKING AND FINANCING Legal and Financial Categories Participants in the Development of Modern RF Banking Muslim Puritans Monetarists,,,Religious Leaders Popular Thought Leaders in the Muslim World Local Community Religious Leaders or Imams Community Leaders Academics and University Professors of Economics and Finance Politicians The Media Bank Regulators Professionals Who Serve and/or Benefit from the New Islamic Banking Industry Sharfria Scholars Attorneys Riba Bankers Organizers for Seminars, Industry Group Conferences, and Training Programs RF Banking Consumers and Potential Users THE SHARI'AA LAW AND THE LAWS OF THE LAND Developing the Art of RF (Islamic) Banking and Finance The Approach Used to Develop the Art of Islamic RF Banking MAJOR OBJECTIONS OF RF SHARI'AA SCHOLARS TO THE CONVENTIONAL RIBA-BASED FINANCE CONTRACT BUILDING THE SHARI'AA-BASED LARIBA RF FINANCE MODEL The Unique Features of the LARIBA Shari'aa-Based RF Finance Model The Stages Used to Implement the Shari'aa-Based LARIBA Model of Financing Formulating the Financing According to Shari'aa Fatwa The Meaning of Establishing a Lien Calculation of the Economic Viability and Prudence of the Investment Appraising the Property or the Business The Unique Features of the LARIBA SharFaa-Based Model Documentation of RF Financing for U.S. Compliance The LARIBA Agreement Monthly Billing Servicing the Hnancing Facility — The Loan Sources of Funds Used in RF Financing THE RESULTS Putting the RF Finance Movement and Discipline Together: A Step-by-Step Application of the RF Finance Procedure LARIBA'S MISSION AND BACKGROUND The LARIBA RF Finance Model,Summary of the Model The Process APPLICATION OF THE MODEL Steps for Implementing the Model The Algorithm and Computer Program Mortgage Finance Servicing Policy The Needy (Miskeen) Fund Loan Documentation Philosophy and Approach Starting an RF Bank in the United States: Acquiring and Restructuring a Troubled Bank and Operating It Riba-Free INTRODUCTION RIBA-BASED CONVENTIONAL FINANCING VERSUS RF FINANCING LOOKING FOR A SUITABLE BANK TO ACQUIRE MAKING HISTORY: ACQUIRING THE BANK OF WHITTIER, NA OPERATING THE FIRST RF BANK IN THE UNITED STATES Our Strategic Approach to Restructure the Bank of Whittier The Bank Restructuring and Workout Plan: Turning the Bank Around Specific Action Plan and Steps Taken by Bank Management Strategies Designed and Steps Implemented by the New Management THE STAFF AND EMPLOYEE POLICY THE AUDIT POLICY Engagement Letter for External Auditors Audit Response by Management RF Capital Markets: Developing the RF Capital Market Investment Products THE CHALLENGE OF FINANCING NEW BUSINESSES AND GROWING EXISTING BUSINESS Private Direct Investment Fixed-Income Debt Instruments in the Form of Riba-Based Bonds Government OP Sovereign Bonds Municipal Bonds Corporate Bonds Position of the Catholic Church on Usury (Interest) from Riba Bonds and the Church's Changing Position over lime VALUATION OF BONDS: BOND BATING AND BATING AGENCIES Bonds' Pricing in the Secondary Market Impact of Variation in Market Interest Rate Environment on Bond Market Value Liquidity of Bonds THE RF CAPITAL MARKET AND ITS RF INSTRUMENTS RF (Asset-Based) Bonds—Sukuk Requirements of the Judeo-Christian-lslamic Shari'aa Law in the Issuance of Sukuk TRADING OF SUKUK ON SECONDARY MARKETS Supplementary RF Finance Definitions and Principles Pertaining to Sukuk Trading Trading of Sukuk Equity Investments According to the RF Discipline GUIDELINES FOR RF INVESTING IN THE STOCK MARKET REVIEW QUESTIONS NOTES Case Studies: Developing the RF Banking Investment Products THE INVESTMENT PYRAMID Cash and Cash Equivalents Short-Term Investments RF Bonds: Sukuk (RF Asset-Based Income Instruments that Replace Riba-Based Bonds)RF ASSET-BACKED BONDS CSUKUK)RF Mortgage-Backed Sukuk Securities The Development of a Religious Real Estate Trust RF Bond (Waqf Sukuk)The MUIS Waqf Sukuk: RF Asset-Based Bonds Used to Unlock the Value of Real Estate Trusts The Structuring of the Singapore MUIS Waqf Sukuk RF Investment Discipline in Stocks Guidelines for RF Investing in the Stock Market Normalization of Various Stock Market Indexes Using the Commodity Indexation Discipline RF Credits (Loans) in Contrast to Types of Riba-Based Loans OVERDRAFT PROTECTION FOR HOLDERS OF CHECKING ACCOONTS LINES OF CREDIT Working Capital RF Lines of Credit Construction Financing Lines of Credit Unsecured Loans Ballooning Loans Automobile and Equipment Leasing Mortgages Home Equity Line of Credit (HELOC)Home Equity Loan Reverse Mortgages Commercial Buildings Business Financing Nonprofit and Religious Centers and School Financing Construction Financing The RF Approach to Handling Troubled and Nonperforming: Credits (Loans)RESOLVING THE PROBLEM OF NONPERFORMING CREDITS (LOANS)CASE STUDIES Visions for the Future of RF Banking THE 2008 GLOBAL ECONOMIC AND FINANCIAL MELTDOWN THE MEGA-BANKS AND FINANCIAL INSTITUTIONS THE CULTURE UF RENTING MUNEY WITH RIBIT/RIBA THE RF LIFESTYLE The Lifestyle of the Judeo-Chnistian-lslamic Value System SOME ADVICE FOR THE NEWCOMERS TO THE RF LIFESTYLE RF Banking: A New Banking Brand for the Twenty-Hrst Century