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Objective:
Consequent upon globalization, the size of international trade and intricacies of foreign exchange
transactions are increasing day after day. Keeping in pace with these developments, IBP has
revised the existing syllabus to familiarize changing economic mechanisms and further update
the level of knowledge of our Bankers. Accordingly the course outline has been made more
specific to provide a clear understanding of the subject and highlights the areas of expertise and
its application in live banking transactions.
Curriculum:
The subject “International Trade and Foreign Exchange” is intended to meet challenges under
the present scenario and provide an in depth knowledge on the following:
The entire course is divided in to the following three parts under the sub-headings Conceptual,
Operational and Procedural:
A) International Trade
B) Foreign Exchange – Markets, Rates and Products
C) Foreign Direct Investments and International Lending
A. International Trade:
Introduction to International Trade Finance: International trade --- nature and substance;
risks and complexities inherent in foreign trade. Modes
andmethods of international debt settlement, an overview --- Nostro Account; Vostro
Account; counter trade; documentary collection; documentary credit.
Conceptual
Overview – what is international trade, how it differs from domestic trade, the economic reasons
in support of international trade, its implications on balance of trade and balance of payment; its
advantages and drawbacks. The role of WTO, the policies of Government of Pakistan and
foreign exchange regulations of State Bank of Pakistan.
• Open Account
• Documentary Collections
• Documentary Credits
• Transferable Letters of Credit and Back-to-Back Letters of Credit -
Operational:
• Transport documents
• Incoterms
• Counter trade
• Imports: Under LC
• Exports
FOREIGN EXCHANGE
Conceptual:
• What is meant by “Foreign Exchange” and why foreign exchange; The Foreign Exchange
Markets; The forward exchange market; The relationship between spot, forward, relative
interest rates and relative inflation rates; Different types of exchange rate regimes; The
European currency (the Euro); The Asian Clearing Union (ACU).
• The Globalization of Financial Markets - The Euro Markets; The Foreign Exchange
Market; Liberalization; Innovation
• The Exchange Rate Forecasting and Risk - Forecasting the spot exchange rate; The role
of exchange risk; Portfolio balance effects on the exchange rate
• Operational
• Treasury
• Portfolio Investment;
• International Loans;
SUPPLEMENTARY READINGS
-.-.-.-.-
ISLAMIC BANKING AND FINANCE
Objective
Islamic Shariah
• Shariah; key to understanding Islamic banking
• Resources of Shariah
• The concept of Lawful and unlawful as per Shariah
Murabaha
• Introduction to Murabaha
• Murabaha as a Financing Mode
• Murabaha terminology and its variants
• Characteristics and essentials of Shariah compliant Murabaha
• Practical steps for Murabaha transactions
• Issues and mistakes in Murabaha: Rebate in early payment, penalty on late payment
• Roll over of the transaction etc.
• Difference between Murabaha based financing and conventional bank lending
• Risks for Islamic banks in Murabaha transactions
• Scope and application of Murabaha
• Overview of a Model Agreement of Murbaha and Case Study
Ijarah
• Basic rules of Irarah
• Lease as a mode of Islamic financing
• Rights and Obligations of Lessor and Lessee
• Conditions of Ijrah/Lease
• Differentiating Islamic Ijarah from Conventional Leasing
• Overview of a Model Agreement of Ijarah
Salam
• Salam : Definition and Concept
• Background and purpose of Salam
• Rules for Valid Salam Contract
• Difference between Salam and Murabaha
• Taking delivery of Salam goods
• Parallel Salam
• Application of Salam and parallel Salam
• Risks in Salam application
• Penalty for non performance
• Scope and Potential Salam
Istisna
• Concept and definition of Istisna
• Rules for valid Istisna contract
• Payment in Istisna
• Defference between Salam and Istisna
• Parallel Istisna
• Application of Istisna and Parallel Istisna
• Risks associated with Istisna
• Istisna as Mode of Financing
Mudarabah
• Mudarabah defined
• Mudarabah Capital
• Profit/Loss distribution
• Unrestricted and Restricted Mudarabah
• Difference between Mudarabah and Mushrakah
• Termination of Mudarabah
• Scope of Mudarabha for banking system
• Problems and Risks for Islamic banks providing Mudarabah based financing
Diminishing Mushrakah
• Concept of Diminishing Musharakah
• Basic features of Diminishing Mushrakah
• Steps in a Diminishing Mushrakah Transaction
• Lease rentals in Dimnishing Musharakha
• Unilateral Promise and transfer of ownership title
• Diminishing Mushrakah as a financing mode
Core Readings
1. Pakistan, State Bank of Islamic Banking and Finance Theory and Practice
Muhammad Ayub
Supplementary Readings
In this subject students learn the concepts of money and its functions; creation of money; its
demand and supply. Evolution of monetary theory and monetary policy. The channels through
which monetary policy affects the economy. Various tools of monetary management.
A critical analysis of current issues in monetary policy, with particular reference to economic
development and price stability. Coordination of monetary policy with fiscal policy and
exchange rates policy. Examinees are expected to be in touch with the latest monetary and credit
developments in Pakistan. Examinees should also be familiar with the objectives and working of
International Monetary Fund.
After qualifying this subject the examinees will acquire broad understanding of the working of
financial system and the place of monetary policy in the financial and economic management.
SYLLABUS
I. Money
Definition and basic functions of money. Evolution of various forms of money as means of
payment; credit cards, ATMs and electric means specially computer.
SUPPLEMENTARY READINGS
2. Pakistan, State Bank of Annual Reports for the last five years; chapter I
& chapters on money and banking only.