Trade Finance BD · Original revision handnote · Edition 2026.1
SBB — Shariah-Based Banking
AIBB · Optional · 14 October 2026
Understand the contractual structure, execution and governance of Islamic financial services.
Use this revision pack with the full syllabus and official papers. Important topics are revision priorities, not a promise of future questions.
Contents
- A · Principles and banking functions
- B · Deposit structures
- C · Investment and finance modes
- D · Trade and FX services
- E · Liquidity and risk
- F · Shariah governance and accounting
- Worked example
- Applied case and model response
- Terminology
- Official syllabus and papers
Revision priorities
Investment modes, liquidity and Shariah governance — Reviewed 7th paper: 7th Banking Professional Exam, page 1, Q1–Q4
Salam and Musharakah calculations — Reviewed 7th paper: 7th Banking Professional Exam, page 1, Q5–Q6
Syllabus-mapped handnotes
Module A
Principles and banking functions
Syllabus scope: Riba; ethical trade; interest/profit distinction; functions; permissible activity
Shariah-based finance uses approved contracts and permissible economic activity while avoiding prohibited elements. Interest and sale profit are not distinguished merely by the name of a charge; ownership, risk, sequence and contractual conditions matter. Risk sharing does not mean that every Islamic product is a partnership: sale, lease and agency structures have different obligations. Ethical screening and fair dealing accompany commercial assessment. State the structure and conditions precisely and distinguish a general principle from a detailed Shariah ruling requiring the institution’s supervisory authority.
Apply it in bankingA transaction labelled Islamic should be traced through its actual contracts and execution. Renaming a cash loan cannot establish sale-based compliance.
Practice question: Explain the foundations of Shariah-based banking and why contractual substance matters.
Answer framework: use the explanation above, add the banking example, then address assumptions and controls. Expand to match the question’s marks and command words.
Module B
Deposit structures
Syllabus scope: Wadiah; mudarabah; Hajj/waqf and other savings structures
Deposit products must be understood through their contract and approved terms. In a mudarabah arrangement, one party supplies capital and the other manages the enterprise; agreed profit allocation differs from a predetermined interest obligation. Loss treatment depends on the contract and whether negligence, misconduct or breach is established. Safekeeping and loan-based account structures have different rights and obligations. Special-purpose savings such as Hajj or waqf arrangements require clear use, withdrawal and governance terms. Do not promise a guaranteed investment return merely because past profits were stable.
Apply it in bankingExplain to a depositor the approved contract, profit-allocation method, access terms and applicable protection rather than quoting only an expected return.
Practice question: Compare deposit structures and explain profit and loss treatment under a mudarabah arrangement.
Answer framework: use the explanation above, add the banking example, then address assumptions and controls. Expand to match the question’s marks and command words.
Module C
Investment and finance modes
Syllabus scope: Musharakah; mudarabah; murabaha; mu’ajjal; salam; istisna; ijara; HPSM; qard; social/agri uses
Musharakah shares capital and agreed profit; losses generally follow capital participation, subject to the applicable rules and misconduct issues. Mudarabah separates capital provision from management. Murabaha is a disclosed-cost sale with agreed profit; deferred sale structures require their conditions. Salam involves advance payment for specified future delivery; istisna concerns manufacturing or construction to agreed specifications. Ijara transfers permitted use of an asset for rent while ownership responsibilities remain relevant. HPSM combines approved elements of shared ownership and hire. Each mode needs a correct sequence and allocation of risk.
Apply it in bankingIn murabaha, identify the bank’s acquisition and ownership stage before sale to the customer. In salam, specify goods, quantity, quality, delivery and payment conditions.
Practice question: Compare principal Islamic financing modes and choose a suitable structure for manufacturing or agriculture.
Answer framework: use the explanation above, add the banking example, then address assumptions and controls. Expand to match the question’s marks and command words.
Module D
Trade and FX services
Syllabus scope: Import/export structures; MIB/MTR/MPI; remittance; offshore/UPAS/refinance; regulatory alignment
Trade finance must satisfy both the approved Shariah structure and applicable domestic and contractual rules. Identify the bank’s role as buyer, seller, financier or agent at each step. Documentary credits, collection and payment processes retain their documentary and counterparty risks. A product abbreviation does not explain ownership or the legal obligation. Offshore or deferred-payment arrangements need current permission and an approved contractual design. Assess fees, exchange transactions, guarantees and refinance arrangements through the institution’s Shariah and compliance processes rather than assuming conventional terms can be copied unchanged.
Apply it in bankingFor import finance, map purchase, possession, sale, settlement and repayment. Check whether actual documentation follows the approved sequence.
Practice question: Design a Shariah-compliant import financing workflow with documentary and regulatory controls.
Answer framework: use the explanation above, add the banking example, then address assumptions and controls. Expand to match the question’s marks and command words.
Module E
Liquidity and risk
Syllabus scope: ALM; Islamic money markets; BGIBB; sukuk; qualifying capital instruments; liquidity/profitability
Islamic banks face liquidity, credit, market and operational risks with additional Shariah-compliance considerations. Available liquidity instruments must meet the applicable contractual and regulatory requirements. Sukuk represent rights under their particular structure and should not be described as identical to every conventional bond. A capital instrument’s eligibility depends on its terms and current prudential rules. Balance liquidity buffers with sustainable earning assets, and stress deposit withdrawals and market access. An expected profit rate is not guaranteed cash flow; review timing and loss exposure.
Apply it in bankingA bank cannot assume that a long-term sukuk holding is immediately liquid at face value. Evaluate market depth, price risk and usable collateral arrangements.
Practice question: Explain liquidity management and the role and risks of sukuk in an Islamic bank.
Answer framework: use the explanation above, add the banking example, then address assumptions and controls. Expand to match the question’s marks and command words.
Module F
Shariah governance and accounting
Syllabus scope: Supervisory board; AAOIFI context; profit distribution/weights; local regulation; assurance
Shariah governance includes product approval, execution monitoring, review, reporting and correction under the applicable framework. A supervisory board needs suitable expertise, independence and reliable information. Accounting and profit allocation should follow the relevant applicable standards and approved policies. Weighted distribution requires transparent bases, periods and eligible balances; it is not automatically a guaranteed yield. Identify any non-compliance, assess treatment through the authorised process and prevent recurrence. Local regulatory obligations remain relevant even when international standards inform the product.
Apply it in bankingA product approved on paper can become non-compliant through incorrect execution. Test actual purchases, contracts and cash flows rather than relying only on the approval document.
Practice question: Explain Shariah supervisory responsibilities and controls over profit distribution and product execution.
Answer framework: use the explanation above, add the banking example, then address assumptions and controls. Expand to match the question’s marks and command words.
Worked example
Musharakah profit and loss
A bank invests BDT 3 million and a partner BDT 2 million. The agreed profit-sharing ratio is 55:45. Distributable profit is BDT 600,000 with no fees. Alternatively a commercial loss of BDT 400,000 occurs, with no negligence or breach. Calculate allocations under the exercise assumptions.
- Profit: bank = 600,000×55% = BDT 330,000; partner = BDT 270,000.
- Capital proportions: bank 3/5=60%; partner 2/5=40%.
- Commercial loss: bank = 400,000×60% = BDT 240,000; partner = BDT 160,000.
- The agreed profit ratio and capital-based commercial loss ratio are different. Misconduct or breach requires separate analysis.
Common mistake: Do not automatically allocate a Musharakah commercial loss by the profit-sharing ratio.
Case clinic
A sale contract executed too early
An Islamic bank signs a murabaha sale to a customer before its documented acquisition of the equipment. Staff say the final price is unchanged, so the sequence is immaterial. Advise the bank.
Model response
The contractual sequence and ownership risk are substantive issues. A sale-based structure cannot be assessed solely by the final price or the product label.
Establish actual purchase, agency, possession and sale events and preserve evidence. Escalate the execution issue to the authorised Shariah and compliance functions; do not rewrite historical records to create a false sequence.
Apply the authorised remedial treatment and strengthen system checks, staff training and independent testing so sale execution cannot bypass the required acquisition stage.
Practice marking guide · 20 marks- Identify substance and sequence (6)
- Evidence and escalation (6)
- Appropriate remediation (4)
- Prevent recurrence (4)
Terminology and comparisons
| Musharakah / mudarabah | Shared capital participation versus capital provision separated from enterprise management. |
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| Murabaha / ijara | An approved cost-plus sale versus an approved transfer of asset use for rent. |
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| Salam / istisna | Advance purchase of specified future goods versus a manufacturing/construction contract with its own rules. |
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| Profit ratio / loss ratio | Contractually agreed profit allocation versus the applicable capital/loss responsibility rules. |
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Official references
Official papers are linked for comparison; their full text and official model answers are not reproduced. This pack’s explanations, examples and cases are original. Numerical examples are practice assumptions. Current law, instructions and subsequent amendments must be checked for regulatory answers.