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Introduction To Islamic Finance Quiz

This document contains a 10 question quiz about key concepts in Islamic finance. The questions cover principles such as prohibiting Riba (interest) and hoarding, the evolution of early Islamic finance contracts like Mudaraba and Musharaka, the objectives of Islamic economics in ensuring socio-economic justice and Sharia compliance, and the goals of financial tools like Zakat in encouraging productive activities. The document also discusses the role of Islamic banks in providing an alternative to interest-based finance and the distinctive features of Islamic finance like prohibiting interest, linking transactions to assets, and profit/loss sharing.

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Saad Nadeem 090
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2K views

Introduction To Islamic Finance Quiz

This document contains a 10 question quiz about key concepts in Islamic finance. The questions cover principles such as prohibiting Riba (interest) and hoarding, the evolution of early Islamic finance contracts like Mudaraba and Musharaka, the objectives of Islamic economics in ensuring socio-economic justice and Sharia compliance, and the goals of financial tools like Zakat in encouraging productive activities. The document also discusses the role of Islamic banks in providing an alternative to interest-based finance and the distinctive features of Islamic finance like prohibiting interest, linking transactions to assets, and profit/loss sharing.

Uploaded by

Saad Nadeem 090
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Introduction to Islamic Finance

QUIZ
Multiple Choice Questions

1. A key principle related to Islamic finance is:


a. Encouragement to use Riba and loss
b. Earning money from money
c. Avoid hoarding
d. Hoarding
Answer: _____C_______
2. Which one below is not forbidden in Islamic finance and banking:
a. All kinds of risk
b. Hoarding of goods
c. Speculative behaviour
d. Making money out of money
Answer:_____A______
3. Which of the following statement(s) is/are correct about the early evolution of Islamic finance?
a. Islamic finance was born in the early 7th century and continued to develop up to the 11th century
b. Islamic finance contracts like Mudaraba and Musharaka were in use for trade and business
c. Islamic traders and ships faced frequent events of mutiny while at sea
d. Only a and b
Answer:_____D______
4. Western conventional banking was established by three groups of people. Which group below is
not one of them?
a. Rich merchants
b. Goldsmiths
c. Money lenders
d. Land owners
Answer:____D_______
5. Islamic economics ensures:
a. Socio-economic justice
b. Harmony between the moral and material needs of society
c. Sharia compliance in economic activities
d. All of the above
Answer:____D_______
6. Zakat is an important financial tool in Islam. Zakat application differs for money used in a
productive manner or kept idle as cash. Which statement below best describes this goal of Zakat?
a. To finance government expenses only
b. To encourage holding cash
c. To encourage productive activities
d. To discourage acquisition of material goods
Answer:____D_______
7. Islamic economics differs from conventional economics as it requires the benefit of society and the
environment in addition to individual gain and business profit. Which statement below best describes
this?
a. To create public good
b. To encourage profitable ventures
c. To moderate profit through application of Zakat
d. To control acquisition of material goods
Answer:_____A______
8.The main objective of Islamic banks is to provide an alternative to interest- based finance.
a.True
b.False
Answer:____A________
9. The main objective of Islamic banks is to finance the construction of masjids.
a.True
b.False
Answer:_____B_______
10. The goal of Islamic economics is to ensure socio-economic justice.
a.True
b.False
Answer:_____A_______

Answer the following Questions:


1.Briefly discuss the creation of money in the world.
Ans: Before money was created barter system used to work in the society. Goods were exchanged in
return for the goods that were actually needed to the person. The inconveniences of the barter system
then led to the creation of money which the separated buying and selling as two different activities and
allowed people to buy stuff that they need without giving anything in return that the own except
money.

2. Discuss the early establishment of commercial banking in Europe.


Ans: With the creation of money the financial intermediaries also came into being. They were made to
bring together the people who have surplus of money and the people who do not. They collected money
from people, provided them safekeeping then investing that money to earn profit and run the financial
institute. Then the industrial revolution came in 18 th century the commercial banks were formally
formed with the help of three group of people.

3. Which three groups of people established the original banking system in the Western world? What
are their similarities to a modern bank?
Ans: Rich and reputable merchants , money lenders , goldsmiths. All these people handled money or
what is backing money called gold. These people already acted as financial intermediaries long before
banks were formed and after money was created.
4. Define Islamic finance.
Ans: Islamic banking is defined as banking system which is in relation with the spirit, ethics and value
system of Islam and governed by the principles laid down by Islamic Shariah. While Islamic banking has a
broader scope and meaning, it is generally referred to the transformation of conventional money
lending system into Asset-backed financing transactions conducted by the Financial Institutions.

5. Briefly discuss the distinctive features of Islamic finance.


Ans: It Is based on religion islam and the teaching of handling the money of how we were taught
according to Allah. There is prohibition of interest. No form of interest is allowed in Islamic finance. All
Islamic financial transactions are linked to an asset and there are exchange of goods and services. Bank
will act as partner to the lender the bank is giving the loan to. Profit and loss shall be equally shared
among both parties. The selection of the person to whom the bank shall lend money to will be very strict
to minimize the risk. Islam prohibits any transactions that are based on excessive and unnecessary risk-
taking leading to uncertainty.

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