Sources of Finance – Islamic Finance – ACCA Financial Management (FM) #Finance

this is a lecture from open tuition to benefit from the lecture you should download the free lecture notes from open tuition comm this ledger is our chapter 14 and is the last chapter chatting about sources of #1a73e8; text-decoration: none;">Finance and this one is islamic Finance and it’s got more and more important and that’s why it’s was brought

into the syllabus for the exam a few years ago because financial institutions make the money or traditionally made the money by lending with money to businesses and charging interest under Islamic laws you’re not allowed to make money out of money by charging interest something older the word

is RIBA that you’re not allowed to charge interest on money and of course London in particular being a big financial center they’ve been looking for ways of being able to effectively lend money to Islamic organizations in a way they can get money without actually charging interest there

is other Islamic laws you know you can’t invest in things like tobacco drugs alcohol etc so it’s very tiring but the main thing is this business of not being allowed to charge interest and that although financial institutions can provide money to businesses and they can share in the

Profits but they must also share in the risk sharing the losses and although you can’t give any calculations in this Excel you are expected to be aware of the different Islamic financial interests which are listed in section 3 and so I’ll give this not to shore

there’s not much me just reading into your word for word let me quickly go through each one and although there won’t be a lot of marks in the exam on Islamic none;">Finance there’s certainly like to be some marks and I’m afraid you are expected I mean can you can be tested on the actual words you have to forgive my pronunciation probably talking complete rubbish but learn about a Jarrah would arrive up and so on so it’s

just pure learning and as I say again no arithmetic so let’s just run down them as I mean this is effectively a Credit sale then you know very well now traditionally he might sell goods on Credit and if they’re late pay you charge them interest well

again and there’s something law that’s not allowed and the way around it is by all means agree that they can take extra Credit but instead of having on interest you simply charge a higher price you know you might normally sell for $100 alright they want two months

Credit fine perhaps he’ll charge other than five dollars or something it’s just a higher price as opposed to purely an interest charge more relevant in terms of long term text-decoration: none;">Finance injera as it says again effectively a lease where instead of lending a business money to buy an asset and charging them interest site we buy the asset and effectively rented to the business so they may rent rather than interest and as you can see at the

end of the lease period depending on the agreement either we take back the asset o we sell it to the and accompany look at I thought if we’re providing the asset and charging rent we remain the owner and we respond to all the maintenance Insurance so we are taking on some

risk now the third one would do wrapper again I must have apology now I still have plenty I should I should look up and learn how to pronounce it properly but still I’ve got the ball things he’s seen the driver recolor: #1a73e8; text-decoration: none;">Finance i as the investor I provide fine numbers for the business and I arrange for somebody else to actually run the business a bit like Nia putting in a share Capital and employing a director however Profits

are shared between both parties so no I won’t charge interest on the money I’m investing but hopefully we’ll make Profits and I get share of it but all losses are suffered by me the investor so just like Shares find my Shares in a

company by Shares I’m attracted to the Profits but equally our set of losses but the Profits have to be shared and there I suffer all the losses next one mashenka here both parties provide Capital it’s like a

partnership so I’m investing money but so is somebody else we share Profits between us but we also share the losses is regarded bit like metric applicants I’ve written but again I share the Profits but under this arrangement we share the losses parents

taking risk unlike just pure lending you know where I just get the young interest but I’m not at risk of losing anything unless the business collapses here you share the Profits that you must share the losses as well and finally some cook those really secret to

Debt Finance here instead of just putting in money and getting interest what happens is the people who arranged this buy an asset but no example they may buy

a property and to Finance buying it I ask you all to my certificates in it’s just like raising Debt

style="font-weight: bold; color: #1a73e8; text-decoration: none;">Financed but instead of getting paid interest on the money you’ve put in this asset mainly we’ve bought a property and we rent it out the Income from the acid is then distributed to the

investors so when rent the rent coming in is what you get a share of is equivalent to the interest but of course if the rain gets higher or lower there is that element of risk and the person who were ages on this can as you will see there a charge a fee but it’s a way of instead of buying

debentures and getting the fixed interest you buy these units and you get a share of whatever the money’s being invested in so they I mean read it yourself learned basically what each of those different instruments but again it will be many marks in the exam but it almost certainly will be us

somewhere