Test your knowledge

Mutiple Choice Questions

Here are fifteen Multiple Choice Questions (MCQs) that will test your knowledge about the basic Islamic economic principles and the rulings that apply to Islamic contracts, Islamic banking and finance, and takaful (the alternative to conventional insurance. The Islamic principles and rulings form a part of Shari'ah and a moral code aimed at promoting fairness and justice.

Take the test to build a knowledge profile of the ethical and moral mode emphasised in financial dealings.

The correct answer of each MCQ can be viewed at the end of the test.

Have a go. Good luck.

1 / 15

Islam upholds contractual obligation and disclosure of information as

As a model for an interest-free banking system

A reason for incurring debt

An option for the parties to a contract

A sacred duty

2 / 15

Islam’s Prophet Muhammad was honoured with others as one of the greatest lawgivers of the world, by

British Parliament

Sultan Suleiman I the greatest ruler of the Ottoman Empire

Grand Mufti of Saudi Arabia

Supreme Court of U.S.A.

3 / 15

Investment account holders in Islamic banks can be compared with customers who

Expect to receive a share the capital gains on their deposits invested by the bank in property and land development

Receive a fixed return on their deposits invested by the bank in interest bearing bonds

Expect to receive a share of the profits on their deposits used by the bank for trading in stocks and shares of large companies

Receive a share of the profits earned on their deposits invested by the bank in activities that are lawful and allowed by Shari’ah

4 / 15

How do Sukuk, the Islamic alternative to bonds, differ from conventional bonds?

They always have a higher risk of default

They are based on speculative transactions

They represent a share of ownership in a tangible asset

They are short-term financial instruments

5 / 15

What does the Higher Objective of the Shari’ah, known as Maqasid al Shari’ah, imply

Keeping fast with regular prayers during the month of Ramadan

Well-being, meaning that whatever action is taken and whatever is done should be in line with the well-being of all

A valid sale contract

Performing Hajj (pilgrimage) once in the lifetime

6 / 15

What is the simple definition of Fatwa

Defining the rules of spending and expenditure for Muslims

Islamic judgement in criminal cases

Opinion to a ruling of a learned Islamic scholar

Qualified Islamic scholar

7 / 15

What is an alternative to conventional bonds in Islamic banking that complies with Shari’ah

Sukuk, similar to bonds that comply with Shari’ah

Treasury bills

Stocks

Commercial paper

8 / 15

The quote "The rulers, being aware that their power rests upon their wealth, refuse to curtail by law the extravagance of the spendthrift youth because they gain by their ruin; they take interest from them and buy up their estates and thus increase their own wealth and importance......”, is from

Das Kapital by Karl Marx (d.1883)

The Tripitakas, the teachings of Lord Buddha

The Republic (VIII, 555) by Plato the ancient Greek philosopher (d.347 B.C.), one of whose disciples was Aristotle

The Mahabharata, traditionally attributed to Krishna Dvaipayana better known as Vyasa, a revered Hindu sage, as the author/compiler

9 / 15

What basic principle must usually be followed in foreign exchange trading to be permissible in Islamic banking?

High-profit margins

Immediate settlement of transactions

Long-term holding

Speculative trading

10 / 15

Why is excessive risk or uncertainty (Gharar) prohibited in Islamic banking transactions?

It is equivalent to speculation

It is an interest-free loan

It is equivalent to gambling

It is an international money transfer

11 / 15

What is a central bank responsible for

Handling all foreign exchange business of a country

Monetary policy and the banking system of a country

Managing all the gold and silver reserves of a country

Lending money to businesses and government banks

12 / 15

The Islamic economic system is a rule-based system formulated by Islamic rulings known as

Akbar

Shari'ah

Shirkah

Al-Mulk

13 / 15

What aspect of excessive uncertainty (Gharar) makes it prohibited in Islamic finance?

Its association with interest

Its potential to lead to dispute and injustice

Its association with high risk

Its fixed return nature

14 / 15

Why is conventional life insurance generally objected to in Islam?

Because it only benefits the wealthy

Due to its long-term contracts

Because it is considered as a form of gambling on the death a person

Due to its association with banks

15 / 15

Which Islamic principle/ruling is fundamental to the way contributions (insurance premiums) are treated in Takaful?

Gharar (uncertainty)

Riba (interest)

Kafalah (guarantee)

Tabarru' (donation)

Your score is

The average score is 65%

Have a go. Good luck.

Islamic Finance Qualifications

Institute of Islamic Banking and Insurance
Viglen House Business Centre
Office # 120, Alperton Lane
Wembley, Middlesex, HA0 1HD
United Kingdom

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