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The following questions test your level of understanding of Islamic banking and finance and assess your suitability for the Study Centre course material. Please select the answer that you think is most appropriate in each case. Please try to answer all questions within 30 minutes. Your test result will be provided immediately following submission of your answers. Scores of 65% or more indicate that the course may be too basic for your level of understanding of the subject. There is no charge for this test and we do not ask for or keep personal information of any kind.


Multiple-choice answers

1. Shari`ah is commonly divided into two branches of laws, one covering devotional aspects (such as prayer and fasting), and the other covering contractual and civil relationships among people (such as trade and marriage). In the Arabic language these two branches are termed what?

 ihsan and ikhlas
 akhirah and dunya
 hajiyyat and tahsiniyyat
 `ibadat and mu`amalat
 `aqidah and akhlaq

2. When a loan of money is made, does the ownership of money transfer from the lender to the borrower?

 only if the borrower agrees
 only if the money is lost or stolen
 only if the amount loaned is in excess of one dinar

3. Does shari`ah prohibit double deferment of counter-values in a contract of exchange?

 mostly yes, but with some exceptions
 mostly no, but with some exceptions
 only in an exchange of money for money

4. The term "murabahah" is used to describe a sale at a specified mark up over the cost incurred by the seller in acquiring the item that is for sale. What term is used to describe sales in which the seller's cost is not specified to the buyer?


5. Which of the following tests best helps to distinguish between sharikah al-aqd and sharikah al-mulk?

 is the partnership a profit-making venture?
 do the partners share capital losses equally?
 does the partnership have a defined lifetime?
 are the partnership activities restricted in scope?
 do partners have the right to take on debts?

6. In which of the following countries is the bay al-`ina contract widely permitted by national scholars?

 Saudi Arabia
 United Kingdom

7. Which of these five definitions most closely defines the Arabic term "usul ul-fiqh"?

 Islamic principles
 principles of Islamic law
 principles of Islamic contract law
 Islamic jurisprudence
 principles of Islamic jurisprudence

8. Which of the following types of Islamic bank account is sometimes held "off balance sheet" ?

 Islamic current account
 Islamic term deposit
 restricted Islamic investment account
 unrestricted Islamic investment account
 Islamic savings account

9. The standards issued by the Accounting and Auditing Organisation for Islamic Financial Institutions in Bahrain cover which main areas of activity?

 accounting and auditing
 accounting, auditing and shari`ah
 accounting, auditing, shari`ah and capital adequacy
 accounting, auditing and banking
 none of the above

10. In which city is the headquarters of the Islamic Financial Services Board?

 Kuala Lumpur

11. In which city is the headquarters of the Islamic Development Bank?

 Kuala Lumpur

12. When jurists judge a case based on analogy, they try to identify a common factor between the case being judged and a case for which the judgement is already known under Islamic law. What is the Latin term given to this common factor in English law?

 ratio decidendi
 mens rea
 nemo iudex in causa sua
 malum prohibitum
 obiter dictum

13. A traditional murabahah transaction can be developed into a "murabahah to the purchase orderer" transaction by using what device?

 a trust account where the ultimate buyer puts collateral
 a third party guarantee in favour of the Islamic bank
 a fatwa from a qualified Islamic scholar
 a promise from the buyer to buy from the Islamic bank
 a mark-up approximately equivalent to LIBOR

14. Which of the following transactions displays riba al-nasia?

 an exchange of good quality for bad quality dates
 an immediate exchange of unequal amounts of copper
 an immediate exchange of unequal amounts of gold
 calling in a loan when the borrower is in difficulty
 exchange of a $100 note now for ten $10 notes later

15. A nut seller offers a large sack of unshelled nuts for sale to a buyer in return for cash on the spot. The buyer suggests that the seller is engaging in gharar, since some of the nuts may be rotten inside. The seller cracks a few nuts from the sack at random and all are in good condition. Nevertheless, the buyer still objects, saying that the proposed sale involves gharar and is therefore invalid under Islamic law. Is he right in this statement?

 yes, because uncertainty remains as to the other nuts
 no, because gharar does not apply to spot sales
 no, because the uncertainty involved here is minor
 no, because uncertainty does not apply to sales of food
 we cannot know for sure until all nuts have been shelled

16. A lady wishes to buy a car from a showroom but cannot afford the price. The seller is not willing to sell the car on instalments but he does offer to lend her enough money to buy the car so long as she pays back the loan within three months. Is this transaction permitted in Islamic law?

 yes, if the lady has a mahram with her at contract time
 yes, if the car has at least three months warranty
 yes, but only if the loan is interest-free

17. Which school of Islamic jurisprudence tends to permit the `urboun contract?


18. Justice Taqi Usmani criticised the use of what technique in the Islamic bond market in his statement on the subject during 2007?

 high underwriting fees
 high profit margins
 purchase undertakings
 poor quality religious opinions
 third party guarantees on coupon payments

19. What technique has commonly been adopted in order to transfer money between debtors and creditors in the Muslim world, often across large distances?

 carrier pigeon
 a wakalah contract
 a hawala contract
 a murabahah to the purchase orderer
 a traditional murabahah

20. The premium paid in return for insurance cover is permitted by many Islamic scholars on the basis that the premiums can be seen as what?

 payment for a service by the insurer
 payment in return for an indemnity by the insurer
 a donation to a mutual fund
 a necessity, since insurance cover is essential
 an equity investment in the insurance company

21. Contract combination is a technique that is sometimes criticised by Islamic jurists on account of which potential weakness?

 the excessive fees that it generates for lawyers
 causing complexity in Islamic financial transactions
 producing prohibited outcomes from permitted contracts
 producing permitted outcomes from prohibited contracts
 gharar in the resulting cash-flows

22. An Islamic bank operates accounts in which depositors share profits made by the bank on its investment operations, and the bank in turn shares the profits of clients into whom it invests. How might this structure best be described?

 a two-tier mudarabah
 a reverse credit-default musharakah-wakalah hybrid
 a reverse musharakah
 bay` al-salam
 bay` mu'ajjal

23. An oil company wishes to finance an extra drilling well on a site that is already producing oil. It suggests to an Islamic bank that the bank pays the company cash now in return for a specified quantity of oil in one year's time, at which time the well is expected to be up and running. In principle, is this transaction valid under Islamic law?

 no, there is gharar since oil may not be produced
 no, since the company is in effect short selling oil
 no, since oil and money must be exchanged on the spot
 yes, if a third party guarantees the delivery of oil
 yes, this is a bay` al-salam contract

24. An investment manager is considering purchasing shares in a company that manufactures farming equipment. Knowing that AAOIFI standards prohibit purchasing shares in a company that uses interest-bearing debt to finance itself, the investment manager investigates the company accounts. What threshold does AAOIFI specify as the maximum permitted amount of interest-bearing debt as a percentage of market capitalisation when undertaking such an investment?

 nothing is specified

25. What kind of contract is used when establishing an Islamic current account deposit, according to the majority of Muslim jurists?

 a contract of deposit
 a loan contract
 a trust
 an agency
 a partnership contract

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