Lecture 01 islamic financial institutions and markets (ge30003)

The Functions of Financial Institutions and Markets(Topic 01)

Main ReferenceInternational Centre for Education in Islamic Finance. (2006).Islamic Financial Institutions and Markets..Kuala Lumpur: INCEIF

Synopsis

Introduction History Creating and Transferring Money Accumulating and lending savings Marketing and Transferring Financial assets Financial Planning Summary

Introduction

Financial market Financial Institutions Surplus and Deficit Units

History and development

The basic Stage

-----Barter Trading -----Commodity Money

History and development

The Second Stage

-----Primary Debt Limitations: i. Maturity Problem ii. Default risk iii. Liquidity problem

History and development

The Third Stage

-----Conventional

History and development

The Current Stage --Savings and Credit markets ---Money and Capital Market

Crating and Transferring money:

Money:

---Medium of Exchange

---Unit of Account

----Store of value

Money Creation:

---Deposit Expansion Multiplier

--- Effect on Economy

Transferring money:

Cash Cheque Electronic means of Payments

---Direct Funds Transfer

---Payments cards

Accumulating and lending Savings:

Household Sector Corporate sector Government sector Foreign Sector

Marketing and Transferring financial Assets

Limitations of Tangible assets Benefits of Financial assets

Financial Planning

Convenience Protection against fraud Quality of Investment Selection Low transaction cost

End

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