الاثنين، 9 نوفمبر 2009

The Financial Mediation


The Financial Mediation
in stock market investments
detailed study through Shariah Law
To what extant are investment contracts in the stock market by mediator under shariah law

By
AL.OKAILI SAMI FAHAD

INTRODUCTION
In the European financial world, Islamic finance is fast becoming a reality. In 2004, the UK regulator, the Financial Services Authority approved the UK’s first Islamic Bank, the Islamic Bank of Britain. This was one of the steps taken to recognise and include the Islamic financial inputs into the mainstream financial markets. One of these inputs is the area of financial mediation, and it is this feature that the author intends to examine in a detailed study entitled Financial Mediation in shariah law .
The main concept underpinning the Islamic financial system is that of fairness, a similar concept to the English common law doctrine of equity. However, as search of the literature shows that in general, those companies that are able to offer advice on a wide range of debt solutions target the needs of the individual, and are not offering advice to corporate bodies in terms of their Corporate and Business needs.It is important first to understand that a financial mediation firm is not a claims management company; nor is it offering debt management solutions. Following an initial enquiry the firm gathers as much information as possible from its client, and gives simple and honest advice as to the merits of differing forms of solutions and options for dealing with stocks. However, this is not undertaken without obligation.
The research shows that the motive for the question which is The Islamic Bank:
Merchant or Intermediary
is that prevailing laws differentiate between obligations of two types of institutions: mercantile institutions and those of financial mediation. Certain activities may be permissible for the former institutions and not the latter. But from a Shariah stand point, no such differentiation is entertained. What is permissible or not is equally applicable to all economic entities, hence such a question is irrelevant..
The economic justification for differentiating mercantile from financial mediator institutions is that the the need to match the risks of their assets and liabilities. therefore will found that this matching much less urgent in an Islamic bank model which is based on the principle of al-mudareb-yudareb (manager/recipient of funds on profit-sharing basis, assigns the funds to another on the same basis).
The research also will be show that early Muslims have known financial mediation through the madarabah contracts
This research will be examine the nature of the financial mediation in an Islamic economy. It concludes that for such mediation to be optimal, is should be based on bank's agency relationship (e.g. wakalah, mudarabah, musharakah) with both sides: savers and businessmen In theory, such model of banking achieves an optimal level of efficiency and profitability. In comparison, traditional model of banking (based on debt on both sides) is more vulnerable to disturbances, and attains a lower level of profitability. The common model of existing Islamic banks (based on murabaha on the asset side) on the other hand, is less efficient than the proposed model. The research also will compare Islamic mediation with the ordinary trading, and outlines the differences between them
And there is a huge similarity between a financial mediator and a broker in stock Market , in other words a Broker is that a Person who serves as a trusted agent or intermediary in financial negotiations or transactions. Brokers are usually licensed professionals in fields where specialized knowledge is required, such as finance, insurance, and real estate. Their rate of compensation (called brokerage or commission) is determined according to custom of the particular trade or by law, and is computed commonly either as a fixed percentage of the value of the transaction or on a sliding scale (higher the value, lower the percentage).
The main elements of the research can be summarized in the following
1-The basic rule in business transactions is the permissibility and the validity
The only prohibited one is what has been stated in the texts as prohibited. Islamic shariea is bases especially in business transactions.
2-The financial mediation is defined to be: A contract that gives a certain compensation for the mediator against a work that he completed between two parts. It should done be done on behalf of one, and this is the meaning of brokerage.
3-The name (financial mediation) is chosen because it is inclusive for all the titles mentioned
4-The legality of the mediation is general weather it is estimated in time, finishing the work, the work is easy or heavy.
5- If The financial mediation is estimated in time then it is considered to be obligatory leasing and can not be cancelled and can be considered A reward and will be also considered as one of the permissible contracts.
6-The mediations estimated by work done is permissible contract and both parties has the right to cancelled it.
7- The mediations rules details does not come under one of the business transactions contracts only, but it is based on what has been mentioned in the research in the contract characteristics and circumstances in each case and the similar rules in the articles of; lease, reward and agency. This make it clear that the commercial mediation is an independent contract in general.
8-The mediation contract is valid in all it is linguistic and traditions functions used by people indicated their intention either directly, indirectly, sending, giving or other than that.
9- The urban man shall not mediate for the nomadic man in selling his commodity , if the nomadic man brought his product and he is ignorant of it’s today price and approached by the resident and people are in need of his commodity. The same for the resident selling for the villages men and other cities.
If the mediation is completed according to these conditions then the sales contract is valid and the sin will fall on the mediator. The mediator is not entitled for any reward for his mediation. The mediation is purchasing is permissible.
10- The Moslem has the right to be a mediator for non Moslem in all permitted commodities, and the opposite is the same.
11- The mediators role is restricted in guidance, to show favor to both and declare for the commodity. The mediator has no right to sign the contract based on the mediation contract that can be only if he has a formal agency.
12- The mediator has no any obligations towards the contract, subject of the mediation. Rights like the receiving the contract value, following the lessee unless that has been stated in the contract or a function of tradition.
13- Bidding can be started by a person who is not going to buy according to the know tradition and the on going practices. Starting means the starting price.
14- The proprietor has the right select the buyer from the interested in the bidding unless selling required that. As for the agent he has right to sign the contract –if he is an agent- for the highest bidder.
15-The mediator and the person who involved him in the mediation, then the second view shall have the final word.
16- The reward as a percentage - which is the common practice today- is permissible.
17- The mediator shall have the reward of (the similar) if the reward amount is not stated in the contract, on condition that he has a pre permission from the other mediation party.
18- The broker reward shall be refunded if the contract subject of the mediation is cancelled, on condition that he should not cheat.
19-The mediator in marriage contracts has the right to receive a reward for his mediation weather it was a search, guidance or effort to bring them close each other.
20- Mediation shall be cancelled for the nominal reasons like death, imperfection that make it impossible to complete the job, subject of the mediation damage, the general fear, if the mediator is became adult and the contract had been signed with him before that. The mediation is also cancelled if it’s contract became invalid.
21-Care should be given by scholars and religion men to the brokers to associate with them and in their practices and to care about their guidance and direct them beside holding them responsible for any mistakes


OBJECTIVES
. OBJECTIVES AND RATIONALE (Or: AIMS AND OBJECTIVES)
In order to address the issues outlined above, the following objectives are set out in order to inform the following ::
-Identify and discuss the process of mediation in financial markets
-Identify and discuss the features of the financial intermediary
-Present aspects of the Islamic concept of sale, and implications for the Islamic financial market
-Identify the different types of financial mediation
-Discuss the formulation of the holding of financial intermediation in Islamic jurisprudence and commercial law English
By addressing these objectives, the rationale for the study can be developed. A statement of the research question, and an identification of gaps in the existing related literature and studies will be offered, and an overview of how the study will be carried out will be discussed. Variables under study will be the financial markets, and the research methodology to be applied to this study of financial mediation will be presented.
The study includes the following components in relation to financial mediation:
. -Rationale for the study: A statement to illustrate the importance of and reasons for undertaking such a study
. -Statement of the problem
. -Overview of the study
. -Methods this research will apply to the variables to be studied, in particular in the financial markets

LITERATURE REVIEW
While conducting a review of the legal literature related to the topic under investigation, I was unable to find much detailed and up-to-date discussion on the subject.
why the project is worth undertaking
After reviewing the legal books, will not be able to find who spoke in this topic by examined eye or in detailed study










The research include the following.
Financial Markets
The project (THE FINANCIAL MEDIATION) is intended to provide the knowledge and concepts a bout (THE FINANCIAL MEDIATION), either in an area of interest or in a particular professional environment

CHAPTER: FUNDAMENTALS
CHAPTER :the Major risks in banking works and Current trends in the banking industry
Definition of mediation and the financial market
- Distinction between financial mediator and others
Broker-
-The mediation of traditional bank
The rules of financial intermediation in shariah law
-Characterization of a financial mediation
CHAPTER: Overview FOR THE HOSTIRIC FINANCIAL MEDIATION
CHAPTER : Conceptual & Theoretical Framework (The format of financial mediation)
The legality of the contract of the financial mediation. CHAPTER
CHAPTER :ANALYTICAL FRAMEWORK OF THE ISLAMIC SECURITIES.
CHAPTER :FINANCIAL MEDIATION PART OF Islamic Capital Markets and financial Islamic services
CHAPTER :THE CONTRACTUAL RULES IN FINANCIAL MEDIATION
CHAPTER : METHODS OF FINANCIAL MEDIATION

CHAPTER: THE FINANCIAL MEDIATION ETHICS
CHAPTER : THE CHALLENGES AND AN OPPORTUNITIES
New Tools in Financial mediation in Emerging Markets:
The Control over the financial mediation: CHAPTER
THE Financial mediation & urgent transactions in the financial market.
The Financial mediation & Futures transactions in the financial market
The Financial mediation & Options transaction in the financial market.
- The rights of the financial mediator
The Obligations of the financial mediator.
The Contractual liability to financial mediator.
The negligent liability of the financial mediator
The conflicts between the mediator and the client.
The areas of financial mediation
- Trading in Stocks and Shares
- Management of Stocks and Shares
-order and keeping Stocks and Shares
The end of the financial mediation.
-.
Research methodology
Will done that by A comparison and contrast of the financial policies of two different policies using the theory covered in understanding Islamic finance and other theory where appropriate

RESEACH QUESTIONS
The aim of this thesis is to inform individuals or corporations about the concept of financial mediation, and how it may best serve their interests; either in a specific area of interest or in a professional environment. Due to the limited literature available on the topic, the researcher may generalise his findings, and may have to rely more on personal (subjective) experiences, rather than published material, to support the rationale for the study.





















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Sami Ibrahim Al-Swailim
Economic Consultant,
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