Q.1    State True or False in the answer column. Give brief reason for your selection at the space           provided below the question:                                                                                           (20)
                                                                                                                                                 (Answer)

i	Islamic Shariah is a set of guidelines for all spheres of human life.
ii	Under Islamic Shariah, mutual consent is not the only component of a valid sale transaction.
iii	Islamic Shariah recognizes laws of supply and demand with certain restrictions.
iv	An Islamic Bank can enter into a unilateral promise to sell a commodity which is not owned by it.
v	In a Shariah Compliant Ijarah, variable rate is impermissible, due to involvement of Gharar.
vi	In a simple Ijarah transaction, an Islamic Bank can receive rent before delivery of the leased asset to the customer and charge it into its income.
vii	In a Mudarabah, Mudarib can get fixed salary in addition to his share of profit, if the parties agree to this effect at the beginning of the relationship.
viii	If the cost of insurance/takaful increases/decreases after the execution of Ijarah agreement, it is necessary for the Islamic bank to immediately adjust the rental accordingly.
ix	Diminishing Musharakah is only possible in Shirkat-ul-Milk.
x	Disclosure of Cost is an essential element of a Murabahah transaction.
xi	Murabaha means a sale of goods by a person to another under an arrangement whereby the seller is not obliged to disclose to the buyer the cost of goods sold.
xii	In Mudaraba goods to be traded should be real, but not necessarily tangible goods.
xiii	Credit documents can be the subject of Murabaha.
xiv	It is not essential that the commodities which are the subject of sale in a Murabaha transaction, must be existing, owned by the seller and in his physical or constructive possession.
xv	Murabaha, like other sales, does not require an offer and acceptance.
xvi	The invoice issued by the supplier will be in the name of the financier as the commodity would be purchased by an agent on behalf of such financier.
xvii	Once the sale transaction has been concluded, the selling price determined can be changed.
xviii	A Murabaha contract can be rolled over.
xix	Commodities already owned by the client cannot become the subject of a Murabaha transaction between him and any financier.
xx	All Murabaha transactions must be based on the purchase of goods from third party(ies) by the bank for sale to the client.

Q.2    Please write the alphabate of selected choice in the answer column:                           (20)
                                                                                                                                                 (Answer)

i	Islam considers economic activities of man A) Impermissible                B) Highly recommended and often obligatory C) Allowed but disliked     D) None of the above
ii	The following is not a type of khiyar A) Option of canceling a contract if goods are not in expected quantity B) Option of canceling a contract if price dissimilar to market prices C) Option of canceling a contract if goods are no longer of use to buyer D) None of the above
iii	Which of the following is not a condition for Salam? A) Exactness of date and place of delivery B) The seller must own the asset at the time of Salam Contract C) Payment of price in full                D) None of the above
iv	If Junaid sells his car to Saqib on the condition that Saqib would sell his house to him, it would be a A) Valid Sale                         B) Invalid Sale C) Valid Sale, if Mr. Saqib agrees without any pressure D) None of the above
v	If the customer do not to purchase the commodity as per the promise, after the Islamic Bank has purchased the same then A) The Bank has no right to claim any amount from the customer since it       was a unilateral promise. B) The Bank should sell the asset in the market and can claim losses, if any,      and liquidity damages from the customer. C) The Bank should sell the asset in the market and can claim actual       monetary losses, if any, from the customer. D) None of the above
vi	Choose the condition below that is not necessary for entering into 2nd Contract in a Parallel Salam arrangement: A) The asset is in physical/ constructive possession of the seller B) Two separate contracts C) Completely independent contracts          D) None of the above
vii	Governments can undertake large projects such as construction of highways, dams etc on the basis of A) Istisna                            B) Salam C) Murabahah                    D) None of the above
viii	Murabahah can be used in following situations by a manufacturing concern A) Payment of salaries to employees         B) Payment of Electricity Bills C) Purchase of raw materials                    D) None of the above
ix	In a Murabahah transaction by an Islamic Bank, Payment Terms A) Should be finalized at the time of Sale B) Can be negotiated at the time of payment C) Can be linked to a known benchmark D) None of the above
x	Following can be sold on the basis of Salam A) Specified wheat and sugar cane      B) Gold and Diamonds C) A Painting                                      D) None of the above
xi	When does the Istisna contract begin? A) As soon as a security is deposited          B) Once the contract is signed C) After purchase of raw material by manufacturer D) None of the above
xii	According to Islamic Shariah, Conventional Leasing is impermissible mainly because A) Lessor (Financial Institution) is not concerned with the asset's ownership      related risks B) Lessor (Financial Institution) use funds borrowed on the basis of interest C) Lessor (Financial Institution) use interest based benchmark D) None of the above
xiii	According to Shariah, if a consumable is given on Ijarah A) It will be an invalid Ijarah             B) It will be a valid Ijarah C) Invalid, after it is consumed          D) None of the above
xiv	Istisna cannot be used for A) Housing Construction finance B) Installing an air conditioning plant in a factory C) Trading of Fruits             D) None of the above
xv	If the Leased Asset is destroyed due to customer's fault the Islamic Bank (Lessor) A) Is allowed charge rentals until the Insurance claim is settled B) Is not allowed to charge any further rentals C) Can charge if the customer agrees D) None of the above
xvi	In an Ijarah transaction, Islamic Bank (Lessor) can terminate Agreement any time A) Allowed as Bank is the owner of the asset B) Not allowed to terminate in any circumstances C) Allowed to terminate only if the Lessee (Customer) contravenes any       term of the Agreement. D) None of the above
xvii	In an Ijarah transaction, rental can be charged after A) After the execution of Ijarah Contract B) Delivery of Asset to the Customer C) Option (i) and (ii) combined                D) None of the above
xviii	After completion of Ijarah transaction, the promise to sale the asset to the Lessee A) Should be unilateral, and binding on one party only. B) Should be bilateral, and binding on both parties. C) Should be unilateral, and binding on both parties. D) None of the above
xix	Status of Variable Rate Ijarah agreements according to Shariah: A) Haram, as Interest rate is used as a benchmark B) Allowed but need development of an other benchmarks instead of using      Interest rate as benchmark C) Permissible and ideal for Islamic Banking transaction D) None of the above
xx	Diminishing Musharakah for Housing Finance is primarily done under the following type of Shirkah A) Shirkat-ul-Aqd B) Shirkat-ul-Milk C) Shirkat-ul-Aamal D) None of the above

Q.3     Fill in the Blanks:                                                                                                         (20)

i	Ijara-wa-iktana is similar to Ijara, except that included in the contract is a _________from the customer to buy the equipment at the end of the lease period, at a pre-agreed price.
ii	Rentals paid during the period of the lease constitute part of the ______________.
iii	Murabaha is a contract sale between the bank and its client for the sale of goods at a price which includes a ________________ agreed by both parties.
iv	The Muslim jurists have allowed _____________________ promises to be enforceable based on the principle that "the promise can be made enforceable at a time of need".
v	Ijara can be defined as a contract "to transfer the ______________ of a particular property to another person in exchange for a rent claimed from him.
vi	The distinguishing feature of Ijara mode is that the assets remain the property of the _____________________.
vii	The Shariah allows earning profit through renting out of fixed assets provided that the _______________ bears all the ownership related risks attributable to those assets.
viii	It is the view of Shariah Scholars Shariah _____________________ using the conventional market as a benchmark like KIBOR/LIBOR
ix	Tawarruq is the _________________ form of commodity Murabaha, where the bank sells commodities to the customer on deferred payment at cost plus profit.
x	Commodity Murabaha, as it is generally known, is sale of certain specified commodities, through a metal exchange, on a ______________________basis.
xi	Musawamah is a general and regular kind of sale in which price of the commodity to be traded is bargained between seller and the buyer without any reference to the price paid or cost incurred by the former. The seller in Musawamah is _________ to reveal his cost.
xii	In Islamic law it is ________________to penalize a debtor who is financially sound but delays payment of debt without any genuine reason.
xiii	The majority of the jurists hold that if the earlier payment is conditioned with discount, it is _____________________.
xiv	The Mudarib can invest his funds in the business of the Mudaraba with the permission of _________________________.
xv	_____________refers to an agreement between the client and the supplier, whereby the supplier agrees to supply a particular product on an on-going basis, for example monthly.
xvi	Diminishing Musharaka can be created only in _______________ assets.
xvii	In Musharaka loss, if any, should be borne by the partners in the _________________.
xviii	In Diminishing Musharaka the monthly payment would go on ___________ with purchase of ownership units/shares by the Client.
xix	The conduct of business of Mudaraba shall be carried out exclusively by the ________________within the framework of mandate given in the Mudaraba agreement.
xx	Broadly, the classical fiqh literature classifies Khiyar (options) into the following categories, though minor variations in the classification:______________________

Q.4 Define Murabahah, how it is different from conventional bank's financing. Explain practical steps        in a Murabahah transaction with the help of an example. (10)

Q.5 Suggest best Islamic alternate(s) of the following types of financings. Describe reason(s) for        selecting the mode of finance.

       1. Working Capital Finance                                  (02)
       2. Agricultural Finance                                          (02)
       3. Long Term Finance for Plant & Machinery     (02)
       4. Housing Finance- Buying                                   (02)
       5. Housing Finance- Construction                          (02)

Q.6 Give any five differences between Islamic and Conventional Banking. (10)

Q.7 City District Government of a metropolitan city in Pakistan, wishes to ensure completion of different construction projects within the stipulated time period. For this reason they decided to charge interest from the contractors at a rate of 20% p.a. on the total cost of the project for number of days over and above the stipulated construction period. Contractor's Association went to Superior Court, which abolished the said condition, as it is not allowed to pay/receive interest under the laws of Islamic Shariah.

Can you suggest a solution through which the above objective can be achieved in a Shariah compliant manner? (10)