Book Review for Asset Based Financing by Dr. Muhammad Hanif

Posted on 8th June 2016 by Camille Paldi , camille@faaif.com



Book Review for Asset Based Financing by Dr. Muhammad Hanif


By: Camille Paldi



Asset Based financing is another blockbuster Islamic Finance textbook by Dr. Muhammad Hanif in Islamabad, Pakistan.  Dr. Hanif is truly gifted in Islamic Finance and Banking and has published a series of excellent books and textbooks on the topic, which are all available on Amazon.com.  Dr. Hanif should consider to go on the international lecturing circuit in order to convey his valuable knowledge and genuine expertise to a worldwide audience.  FAAIF or the Franco-American Alliance for Islamic Finance was happy to sponsor his travelling lecture series to the Hague, Netherlands and Dubai, United Arab Emirates in 2015 and 2016.  Islamic finance offers a momentous occasion at this time in history to convey a positive image of Islam and Islamic knowledge to the rest of the world. I encourage Islamic finance practitioners and people skilled in Islam and Islamic finance to cooperate together in order to fulfill the divine aspiration of world cooperation, harmony, and peaceful co-existence through the platform of FAAIF as well as the preservation of the Muslim Ummah.  Muslims should work together to portray the positive image of Islam as darkness is now surrounding people of this faith across the globe.  Islam is a shining light filled with knowledge, wisdom, and healing for people, the economy, society, the world, and the environment.  It is peering through the clouds, trying to find an avenue through which to shine brightly.


Dr. Hanif makes Islamic finance so interesting and easy to understand with citing the learning objectives of each chapter, providing clear explanations of each topic, illustrating Shari’ah Rulings, and through the use of Illustrations, Tables, Graphs, Examples, and Case-Studies.  He is truly a legendary professor and has been recognized as so by the Higher Education Council in Pakistan through being awarded the prestigious Best Teacher of the Year Award.  My only recommendation is to have the textbook written in perfected English i.e. through hiring a translation company or through FAAIF prior to publication. 


Dr. Hanif examines the modes of sale/financing of murabahah, salam, istisna’a, and ijarah in this succinct academic treasure.  He explains the steps of murabahah as:


  1. 1.       Customer requests to an IFI for purchase of an asset. 
  2. 2.       The asset is purchased by the IFI and the IFI takes ownership and possession of the asset.
  3. 3.       The asset is sold by the IFI to the customer at cost plus mark-up in deferred installments.




Dr. Hanif explains the steps of salam financing as:


  1. 1.       The customer (first farmer) makes a request to an IFI for finance. 
  2. 2.       The customer (first farmer) sells the future delivery of a crop at spot to the IFI.
  3. 3.       The IFI enters into a contract of parallel salam with an end buyer; the IFI receives the payment from the end buyer at spot, which is usually at a higher price, and promises to deliver the goods in the future to the end buyer.
  4. 4.       The IFI receives delivery from first farmer at a lower price.
  5. 5.       The IFI delivers the goods at a higher price to the end buyer in a parallel salam contract.
  6. 6.       The difference in the two prices between the salam (first farmer-IFI)(lower price) and parallel salam (IFI-end buyer)(higher price) is the profit for the IFI.


Dr. Hanif elaborates the steps in istisna’a as:


  1. 1.       Customer (first contractor) requests to an IFI for finance for a construction project.  IFI agrees to pay the first contractor at spot, in lump sum, or in deferred installments for delivery of the construction project in the future. 
  2. 2.       IFI contracts with end-buyer at spot, in lump sum, or deferred installments at a higher price to deliver the construction project at a future date in a parallel istisna’a.
  3. 3.       IFI receives construction project from first contractor at a lower price.
  4. 4.       IFI delivers construction project to end buyer at a higher price through a parallel istisna’a.  
  5. 5.       The difference between the two prices of the istisna’a (first contractor-IFI)(lower price) and parallel istisna’a (IFI-end buyer)(higher price) is the profit for the bank. 



Dr. Hanif differentiates ijarah with conventional leasing.  He explains that the main difference between Islamic and conventional leasing is that in Ijarah, rent is charged when the asset is made available to the lessee while in conventional leasing, rent is charged once the contract is signed irrespective of whether the asset is actually available for use or not.  Furthermore, in contrast to conventional leasing, in ijarah, liability for the leased asset remains with the lessor unless the lessor can prove the negligence of the lessee. In addition, in contrast to conventional leasing, in ijarah, rental payments stop if the asset is destroyed and the lease ends.  Also, in ijarah, in the case of lease to own, the lease and sale contracts are separate.  In contrast to the conventional lease, in ijarah, during periods of repair, the lessor cannot charge rental payments.  In ijarah, penalties for late payments must go to charity while in conventional leasing, penalty payments go to the lessor. 


I recommend this book for anyone interested in Islamic finance including bankers, professionals, academics, students, and practitioners.





Posted on 8th June 2016 by Camille Paldi

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