ISLAMIC FINANCE –PROHIBITION OF INTEREST IN HOLY QURAN AND HADITH

The biggest difference between Islamic banking and conventional banking is interest in this blog we are going to read that why Muslims do not want riba what their holy book Quran says about interest (riba) and what Prophet Mohammad peace be upon him said about interest I collected these notes from different books of Islamic finance qualification from the library of my institute of Islamic finance and a study notes of my own when I was doing diploma in Islamic banking let’s begin to know why Muslims don’t want riba in this world..

INTEREST IN THE QUR'AN

1. First Revelation (Surah al-Rum, verse 39): “That which you give as interest to increase the peoples' wealth increases not with God; but that which you give in charity, seeking the goodwill of God, multiplies manifold.” (30: 39)
2. Second Revelation (Surah al-Nisa', verse 161): “And for their taking interest even though it was forbidden for them, and their wrongful appropriation of other peoples' property. We have prepared for those among them who reject faith a grievous punishment (4: 161)”
3. Third Revelation (Surah Al 'Imran, verses 130-2): “O believers, take not doubled and redoubled interest, and fear God so that you may prosper. Fear the fire which has been prepared for those who reject faith, and obey God and the Prophet so that you may receive mercy.”
4. Fourth Revelation (Surah al-Baqarah, verses 275-81): “Those who benefit from interest shall be raised like those who have been driven to madness by the touch of the Devil; this is because they say: "Trade is like interest" while God has permitted trade and forbidden interest. Hence those who have received the admonition from their Lord and desist may keep their previous gains, their case being entrusted to God; but those who revert shall be the inhabitants of the fire and abide therein forever. God deprives interest of all blessing but blesses charity; He loves not the ungrateful sinner.” (275-276)

I will post other verses some other time if God wills it.

Image Courtesy: AIMS College

INTEREST IN HADITH

1. From Jabir : The Prophet, , may cursed the receiver and the payer of interest, the one who records it and the two witnesses to the transaction and said: "They are all alike [in guilt]." (Muslim, Kitab al-Musaqat, Bab la'ni akili al-riba wa mu'kilihi; also in Tirmidhi and Musnad Ahmad)
2. Jabir ibn 'Abdallah , giving a report on the Prophet's Farewell Pilgrimage, said: The Prophet, , addressed the people and said "All of the riba of Jahiliyyah is annulled. The first riba that I annul is our riba, that accruing to 'Abbas ibn 'Abd al-Muttalib [the Prophet's uncle]; it is being cancelled completely." (Muslim, Kitab al-Hajj, Bab Hajjati al-Nabi, _; may also in Musnad Ahmad)
3. From 'Abdallah ibn Hanzalah : The Prophet, , said: "A dirham of riba which a man receives knowingly is worse than committing adultery thirty-six times" (Mishkat al-Masabih, Kitab al-Buyu', Bab al-riba, on the authority of Ahmad and Daraqutni). Bayhaqi has also reported the above hadith in Shu'ab al-iman with the addition that "Hell befits him whose flesh has been nourished by the unlawful."
4. From Abu Hurayrah : The Prophet, , said: "On the night of Ascension I came upon people whose stomachs were like houses with snakes visible from the outside. I asked Gabriel who they were. He replied that they were people who had received interest." (Ibn Majah, Kitab al-Tijarat, Bab al-taghlizi fi al-riba; also in Musnad Ahmad)

There was a big amount of hadith and verses of Quran in my notes but I decided to pick some of

them because of lack of time I am also preparing my thesis for phd in Islamic finance and I give

lectures in my institute of Islamic finance for the classes of mba Islamic finance but my students

of diploma in islamic banking and islamic finance qualification helped me a lot to complete this

article or blog and some of my friends in PhD in islamic finance and mba islamic finance

students too.

Basic Principles - Project Management

This blog is based on sort of tips about how to manage a project. I found these tips very useful in every aspect of life in fact I follow these tips in every moment of my life and every field when I teach my students of project management certification I take them as my team or when I give tuitions as a freelancer for several levels of courses most of them are diploma in project management or sometimes luckily masters in project management etc. Read this blog carefully it will help you in whole life.

Image Courtesy: AIMS College UK

I. Know your goal

It sounds obvious but if you don’t have an end-point in mind, you’ll never get there. You must be able to clearly state the goal of your project so that anyone can understand it. If you can’t adequately describe your goal in a single sentence then your chances of achieving it are pretty slim.

II. Know your team

Your team is the most important resource you have available and their enthusiastic contribution will make or break your project. Look after them and make sure the team operates as a unit and not as a collection of individuals. Communications are vital! Invest time in promoting trust and ensuring that everyone knows what they have to contribute to the bigger picture. Dish out reward as well as criticism, provide superior working conditions and lead by example. (Tip: Always try to make your team with professionals or at least qualified team mates like mates who did diploma in project management or masters in project management)

III. Know your stakeholders

Spend time with your stakeholders. Stakeholders will either contribute expert knowledge to the project or will offer their political or commercial endorsement which will be essential to success.

Shake hands and kiss babies as necessary and grease the wheels of the bureaucratic machine so that your project has the smoothest ride possible.

IV. Spend time on planning and design

A big mistake traditionally committed on projects is to leap before you are ready. When you’re under pressure to deliver, the temptation is to ‘get the ball rolling’. The ball however, is big and heavy and it’s very, very difficult to change its direction once it gets moving. You need to spend time deciding exactly how you’re going to solve your problem in the most efficient and elegant way.(Tip: Designing and planning is a time consuming process use your fresh employees in this process or you can contact some project management institute to use project management certification students they will be useful in future)

V. Promise low and deliver high

Try and deliver happy surprises and not unpleasant ones. By promising low (understating your goals) and delivering high (delivering more than your promised) you:

·         Build confidence in yourself, the project and the team

·         Buy yourself contingency in the event that things go wrong

·         Generate a positive and receptive atmosphere

VI. Iterate! Increment! Evolve!

Most problems worth solving are too big to swallow in one lump. Any serious project will require some kind of decomposition of the problem in order to solve it. This works but only with close attention to how each piece is analyzed and resolved and how the whole fits together. Without a systematic approach you end up with a hundred different solutions instead of one big one.

VII. Stay on track

Presumably you have an end goal in mind. Maybe it’s your job, maybe your business depends upon it or maybe you’re going to revolutionize the world with the next Google, the next World Wide Web or the next Siebel/SAP/Oracle.

If this is the case you need to work methodically towards a goal and provide leadership (make decisions). This applies whether you’re a senior project manager running a team of 20 or you’re a lone web developer. You need to learn to use tools like schedules and budgets to keep on track.

VIII. Manage change

We live in a changing world. As your project progresses the temptation to deviate from the plan will become irresistible. Stakeholders will come up with new and ‘interesting’ ideas, your team will bolt down all kinds of rat holes and your original goal will have all the permanence of a snowflake in quicksand. Scope creep or drift is a major source of project failure and you need to manage or control changes if you want to succeed.

The best way to handle this is to have a plan, to update it regularly and make sure everyone is following it and pointing in the same direction.

IX. Test Early, Test Often

Project usually involves creative disciplines loaded with assumptions and mistakes. The only way to eliminate errors is through testing. Sure you can do a lot of valuable work to prevent these mistakes being introduced, but to err is human and some of those errors will make it into your finished product code. Testing is the only way to find and eliminate errors.

X. Keep an open mind!

Be flexible! The essential outcome is delivery of the finished project to a customer who is satisfied with the result. Any means necessary can be used to achieve this and every rule listed above can be broken in the right circumstances, for the right reasons. Don’t get locked into an ideology if the circumstances dictate otherwise. Don’t get blinded by methodology.

Focus on delivering the project and use all the tools and people available to you

(I always follow these tips and tell my students to follow whether they are my tuition students or students of my project management institute.)

SUPPLY CHAIN RISK MANAGEMENT

Supply Chain Trends and Consequences

• The trend towards reducing costs: has resulted in the globalization of supply chains, making supply chains more vulnerable and complex.
• The trend towards outsourcing non-core business activities: has resulted in loss of control when it is most needed).
• The trend towards just-in-time and lean practices: has resulted in efficiency rather than effectiveness.
• The trend towards the consolidation of suppliers: has resulted in the increased potential for supplier failure

How to Define Risk

Risk is often defined as

RISK = f (Probability, Consequences).

Hence, risk is the combination of the probability of an event and its consequences/impacts.

Risk Management

Risk in the context of supply chains may be associated with the production/procurement processes, the transportation/shipment of the goods, and/or the demand markets.

Such supply chain risks are directly reflected in firms’ financial performances, and priced in the financial market. For example, it has been estimated that the average stock price reaction to supply-demand mismatch announcements was approximately -6.8%. In addition, supply chain disruptions can cause firms’ equity risks to increase by 13.50% on average after the disruption announcements.

Supply chain risk management is the intersection of supply chain management and risk management.

Constructs of Risk Management

Figure: The Basic Constructs of Supply Chain Risk Management

Source: Image taken from supply chain certification syllabus of AIMS institute of supply management)

Categorization of Risk

There have been different ways proposed of categorizing risk:

·         High-Impact Low-Likelihood (sometimes called Black Swan events)– Low-Impact High-Likelihood

·         Environment-Organization-Network

Risk Sources

Figure: Risk Sources in Supply Chains

Source: Image taken from diploma in supply chain management book of AIMS institute of supply management)

Environmental Risk Sources

Environmental risk sources consist of any uncertainties arising from the supply chain and environmental interactions. These may be the result of accidents (such as fires, explosions,

etc.), man-made (terrorist attacks), or natural disasters (earthquakes, tsunamis, and other extreme weather events).

Organizational Risk Sources

Organizational risk sources lie within the scope of the boundaries of the supply chain parties and include labor issues such as strikes, production uncertainties (quality and machine failures) to IT-based uncertainties.

Network-Related Risk Sources

Network-related risk sources arise from interactions between the organizations involved in the supply chain.

Network-Related Risk Sources

• Lack of ownership risk sources is due from the blurring of boundaries between buying and supplying companies in the chain. With outsourcing, there may be confused lines of responsibility.
• Chaos There may be chaos effects in a supply chain due to mistrust, overreaction, and distorted information.
• Inertia such risks are due to a lack of responsiveness to changing environmental conditions and market signals. Flexibility may be sacrificed, especially in global supply chains, where they may be an emphasis on cost reduction.

Adverse Risk Consequences

Risk may have adverse consequences that can be measured ex post through performance indicators. Ex ante they are captured in the variances of the indicator components.

Three of the most important adverse consequences are:

1. Financial consequences
2. Health and safety negative impacts
3. Reputation damage.

Mitigation Strategies

According to institute of supply management of supply chain management degree risk mitigation strategies are:

•  Avoidance (dropping specific products / geographical markets, etc.
• Control (through vertical integration, i increased stockpiling, maintaining excess capacity in production, storage, etc., and composing contractual obligations on suppliers)
• Cooperation (through joint efforts to improve SC visibility, the sharing of risk-related information, and preparation of SC continuity plans)
•  Flexibility (through postponement, multiple sourcing, localized sourcing)

(I wrote that notes or a blog when I was doing my supply chain management degree program I found them in my draw so I decided to share these notes for my students of supply chain certification and diploma in supply chain management) 

The Concepts and Importance Lean Supply Chain

Several researchers (Most of them are institute of supply management) explained that the information transferred from one stage to another in supply chain tends to be distorted and can misguide upstream members in the production decisions, resulting in wastes, thereby affecting the coordination between the different stages of a supply chain. Lean supply chain continuous improvement processes to focus on the elimination of waste or non-value-added functions. These waste and non-value-added stops across the supply chain and reduce set of times to allow for the economic production of small quantities. ABC (institute of supply management) came out with his points that strongly support on lean supply chain best practices and performance. How organizations keep goods and services flowing in smooth, uninterrupted and cost effective fashion from suppliers to customer firms end to end. Inventory perspectives; how do we keep minimal, but sufficient inventory in the supply chain pipeline in order to Provide good service levels without interruptions Bozdogan emphasized that the successful of lean supply chain management principles derive from 10 Basic Lean Principles:

• Focus on the supplier network value stream
• Eliminate waste
• Synchronize flow
• Minimize both transaction and production costs
• Establish collaborative relationships while balancing cooperation and competition
• Ensure visibility and transparency
• Develop quick response capability
• Manage uncertainty and risk
• Align core competencies and complementary capabilities
• Foster innovation and knowledge-sharing (core subjects of masters in supply chain management)

The Lean Supply Chain’s Practices

APICS,; Manhood et al focused more on lean supply chain level of practices (“Poor Practice”, “Inadequate Practice”, “Common Practice”, “Good Practice” and “Best Practice”) while Aberdeen Group is focused more on level of adoption (“laggards”, “industry norm” and “best in class”) of lean supply chain implementations. In conjunction to the objectives of the study, the APICS,; Manrodt et al research framework on level of lean supply chain practices seems to the perfect match and suitable to be used in order investigate the extent of lean supply chain practices towards performances in Malaysia. If we go back to the research objectives, four objectives related to the lean supply chain practices which are first, to investigate the extent of implementation for lean supply chain practices in Malaysia and second, to examine the effects of lean supply chain practices on the performance of the lean and lean supply chain in Malaysia. Additionally the study is to examine the mediating effect of lean performance. This argument perfectly supported the importance of framework selected.

Lean Performances

Lean performance is total internal lean optimization process. To develop a lean supply

Chain, there is need to apply lean to the supply chain as a system (Hennery supply chain specialist). Lean is an approach that identifies the value inherent in specific products, identifies the value stream for each product, supports the flow of value, lets the customer pull value from the producer, and pursues perfection. It is through this holistic, enterprise-wide approach to lean implementation that the theory extends beyond functional strategy to a broader supply chain strategy employed by the company. A lean organization optimizes the flow of products and services to its customers. It delivers customer value by:

• Reducing lead times
• Improving quality
• Eliminating waste
• Reducing the total costs
• Engaging and energizing people. (Analysis of supply chain specialist)

Framework and Hypotheses

As lean practices will be the core component of organizations business performances, these variables may also significantly influence the lean performance, which need to be focus in this study. Therefore, this theoretical framework (Figure 2) is served to investigate the performances rate of independent variables (lean practices from diploma in supply chain management notes).

Image Courtesy: AIMS College UK

Figure 2.Proposed Theoretical Framework

Hypothesis

Lean Supply Chain Practices and Lean Performance

In term of demand management, it is very important that how well firms manage the

Demand signal, demand collaboration, sales and operation planning and inventory

Management is also reflected in how a lean supply chain system views as a system. Lean performance is total internal lean optimization process; therefore demand management is vital to play their role to accept the concept of lean performance within their processes subsets. The strengths of lean approach are leanness are more immediate and practical focus on waste, flow and flexibility, therefore, supply chain partners including the upstream suppliers and downstream customers can work together as a team to provide value to the end-user customer.

(Hypothesis are taken from my masters in supply chain management documents and other topics are taken from diploma in supply chain management syllabus books)