An Introduction to Islamic Finance: Theory and Practice

164 AN INTRODUCTION TO ISLAMIC FINANCE

versed in both Shari’ah matters and modern banking, means that many of
these scholars sit on a number of boards, so that each institution may claim
strong endorsement to enhance the credibility of its practices. The existence
of Shari’ah boards provides satisfaction to the depositors that the board is
monitoring the institution’s compliance with Shari’ah principles.
Table 8.7 shows the actual balance sheet of the Dubai Islamic Bank as
of December 2009. On the liabilities side, customers’ deposits are the main
liabilities and there is no breakdown of types of deposits. On the assets side,
there are four major assets. Of course, Islamic investments are the biggest
contributor but there is no information on what mode of investment is used.
After investments, cash reserves with the central bank are signifi cant. The
reason for keeping large cash reserves is that there is a lack of liquid invest-
ment vehicles available to Islamic banks. In addition, after the fi nancial cri-
sis, several fi nancial institutions raised their cash reserves to show ample
liquidity and to send a signal to their customers that their liquidity needs can
be met easily. The third - largest category of assets is sukuk (Islamic bonds),
investments which are part of the trading book. There is also noticeable size
of real estate and property investments.

Trade Finance

(Murabahah/

Bay’

al-muajjil)

Asset-backed

Securities

Ijarah/Istisna’

Fund

Management/

Private Equity/

Venture Capital

(Special

Mudarabah/

Musharakah)

Fund

Management

(Mudarabah/

Special

Mudarabah/

Musharakah)

Fee-Based

Services

Research/

Advisory

(Wikala/Jo’alah/

Kifala)

Capital

Owners’ Equity

(Musharakah)

Custodial

Services

(Amanah/Wadia)

Deposits/

Investments

(Mudarabah/

Wikala)

Assets

Commercial

Banking CommercialBanking

Investment

Banking

Investment

Banking

Liabilities

FIGURE 8.1 Conceptual balance sheet of an IFI