Dementia: How and Whom Does It Affect?

Running Head: DEMENTIA: HOW AND WHOM DOES IT AFFECT? 1 Dementia: How and Whom Does it Affect? Liberty University COUNS 502 B-23LUO Instructor: Dr. Richard Pace Shelly M. Becker March 5, 2013 DEMENTIA: HOW AND WHOM DOES IT AFFECT? 2 Abstract Although dementia is often viewed as an â€Å"old person’s disorder, its effects ripple down in many directions such as family, caregivers, finances, and the healthcare system, leaving behind many unanswered questions and confusion for all. The purpose of this paper will be to answer some of these questions, so that a better understanding of dementia will be possible.By doing so through research already performed, articles written on the subject, and information found in books written by experts in the fields of gerontology, developmental disorders (neurological), and dementia specifically, the average reader will be able to define dementia, understand basic concepts and theories of causation, explain the progression of this disorder, and fully appreciate the potential and real effects this disorder has on the individual, caregivers, costs (both for the individual and society), and lastly, learn coping strategies to help all affected make the best out of a debilitating disorder of the brain.Keywords: dementia, gerontology, neurological, developmental disorders, caregivers DEMENTIA: HOW AND WHOM DOES IT AFFECT? 3 Dementia: How and Whom Does it Affect? Introduction Although dementia is often viewed as an â€Å"old person’s† disorder, it affects ripple down in many directions such as to family, caregivers, finances, and the healthcare system, leaving behind many unanswered questions and confusion for all.Based on research and information reported by experts in many fields, this paper will explore the different aspects surrounding dementia, specifically Alzheimer’s Disease, with the goal of helping the average person to better understand this debilitating disorder, become more familiar with how it af fects everyone, and lastly, make available to the reader techniques and strategies that could benefit the afflicted, their caregivers, and medical professionals dealing with patients suffering from dementia. It is safe to say that everyone does, or will, know someone in their lifetime that has dementia.One reason for this is the rapid growing numbers of elderly as a segment of global population. According to Chop and Robnett (1999): Baby boomers first turned 50 in 1996, and since then, every 7 seconds an American will turn 50 until the year 2014. In addition, growth of the older than 65 cohorts will continue to increase as baby boomers began turning 65 in 2010. It is estimated that y 2030, 22 percent, or 70. 2 million, Americans will be older than the age of 65. Even more astonishing, those over 85 years of age are the fastest growing segment of our DEMENTIA: HOW AND WHOM DOES IT AFFECT? population. They are expected to triple in size between 1986 and 2030, and be nearly seven times larger in 2050 than in 1980! (pp. 2-3) The rapid growth of this age group is not only being seen in America, it is occurring globally. In addition to the baby boomers now becoming â€Å"of age†, [quotation marks added] other factors contributing to the larger numbers of elderly, are the advances in the fields of medicine and in technology. It was not too long ago that the average life expectancy was around â€Å"45 years of age in 1900†, according to Chop and Robnett (1999), â€Å"increasing to 76 years in 990†(p. 48). Because dementia is more commonly diagnosed in the elderly, we will be experiencing an increase in numbers of diagnoses. This doesn’t necessarily mean that a greater percentage of the elderly are being affected by dementia, but more likely that this is a reflection of the greater number of elderly surviving to the age that onset is more likely to occur. This in turn will increase the probability that each of us at some point in our lives w ill be affected by this disorder, whether it is through a family member, friend, co-worker, or ourselves.In light of the above, it is more important now than ever, to bring about a greater awareness and understanding to all so that we may better be prepared to meet the needs, at all levels, of this rapidly growing group of our elders. Types and Symptoms of Dementia One of the areas that is of concern, and that research is being aimed at, is the need to find an accurate diagnostic tool(s) that can definitively diagnose dementia in its early DEMENTIA: HOW AND WHOM DOES IT AFFECT? 5 stages. As we age, there is a natural decline in many areas of our functioning and/or appearance.We often see changes in physical capabilities such as balance, strength, and we see changes in our sight, hearing, and general appearance, (hair color, we become shorter, or develop wrinkles). And yes, there are often changes of decline in cognition as we age, changes in comprehension, memory, or clarity of thou ght. In the past, we thought, as a society, that this was normal aging, all of it. Grandma was senile and that was the way life progressed. As stated earlier, our life expectancy was much shorter and we often did not see the final stages of dementia, therefore we didn’t view the decline in these areas as abnormal.The early stages of dementia often mimic the natural decline in some people of their senses. With medical advances, and longer life spans, we began to see that some people didn’t experience this deterioration in the same way. Some people live to be 100 and are still alert and in control of all their functions!! So to answer the question, are individuals with dementia normal? Should we all be afraid that the longer we live, the less capable we will be in living life? The answer is no. â€Å"Progressive severe loss of memory-routinely forgetting conversations or that one ate at a particular restaurant-and impaired thinking abilities are not a normal part of agi ng.Rather, such problems may be signs of a dementia-loss of brain functions due to an organic cause. Dementia is a generic term that includes a host of symptoms related to brain failure. There are several causes of dementia, but Alzheimer’s disease (AD) is the most common cause. † (Kuhn, 1999. p. 11) Dementia is not a disease. It is a condition caused by a number of diseases. Currently, it DEMENTIA: HOW AND WHOM DOES IT AFFECT? 6 is estimated that more than 4 million, to as many as 7 million, people in the United States have dementia and more than 14 million people will be demented by the year 2050. (Levine, 2006. p. 6) The following is a list of the different types of dementia found in the DSM-IV-TR, Fourth Edition (2000): Alzheimer’s; Vascular Type; Type Due to HIV Disease; Dementia Due to Head Trauma; Dementia Due to Huntington’s Disease; Dementia Due to Parkinson’s Disease; Dementia Due to Pick’s Disease; Dementia Due to Creutzfeldt-Jakob Disease; Dementia Due to Other General Medical Conditions; Substance-Induced Persisting Dementia; Dementia Due to Multiple Etiologies; and Dementia Not Otherwise Specified (p. 147).The common feature of these different types is memory impairment. Depending on the etiology, the other features of each vary. For example, with AD, the progression is very slow, lasting 8-10 years or longer, resulting in death. On the other hand, in Vascular Dementia, the onset is abrupt with rapid changes in functioning occurring versus slow the progression of symptoms. Also, early treatment of hypertension and vascular disease may prevent further progression, whereas in AD there is no way at this time, to prevent its progression.For the purpose of this paper there are too many different types of dementia, and their symptoms vary, making it impractical to discuss them all. Therefore, because Alzheimer’s is the most common of the types, the following discussion will be limited to its main features . (Hoffman, 2009. ) Alzheimer's was first described in 1906 by a German neurologist named Dr. Alois DEMENTIA: HOW AND WHOM DOES IT AFFECT? 7 Alzheimer. During that time period, as was pointed out earlier, the symptoms of Alzheimer's disease were viewed collectively as senility. What Dr.Alzheimer found when he performed an autopsy on a woman of 51 years of age was what we call today beta-amyloid plaques between neurons and bundles of protein threads within the neurons. These were the same as what were found in the brains of the elderly who were considered senile and just getting old. It wasn't until the 1960's that these were understood to be intrinsic to a brain disease, Alzheimer's Disease (AD), and that the symptoms of AD were not a normal part of aging, but rather were due to the diseased brain failing and dying off in part due to these plaques and tangles. pp. 2-5) This was not the only organic feature found as a part of AD. The discovery of certain mutant genes present in those suffering from AD, led to evidence of a genetic cause that places one at higher risk. In cases like this, the onset of AD occurs between the ages of 30-50 yrs. This is referred to as early-onset AD, as it occurs between the ages of 30-50 years old. Late on-set AD, typically occurs after the age of 65. Other factors that increase the risk of AD are (Hoffman, 2009, p. 50) high blood pressure, diet, diabetes type 2, women are slightly higher at risk, as well as (Feldman, 2000, p. ) African Americans and Hispanics being at higher risk than Caucasians. (Andersen, Kessing, Korner, Lauritzen, ; Lopez, 2007). Also, disorders such as depression or delusional disorder increase the chances of developing AD (p. 628). Again, the risk factors are there, but little is known as to why how, or if they will affect the outcome of developing AD, or not.So much research has been going on over the last 20 or so years, which has DEMENTIA: HOW AND WHOM DOES IT AFFECT? 8 increased the understanding of AD t remendously. But being able to have a way to detect AD in its earliest stages at this time, is still not possible. The goal of this intense research is that we may be able to use the information learned thus far, like the presence of tangles and plaques, the body's inability to be able to circumvent their build up in the brain, to find a way to stop the progression of AD before the symptoms are too many, and/or re unable to be stopped. So much more needs to be learned before we reach that point. Nevertheless, advances in the field of medicine and in technology are so amazing and rapid. The use of magnetic resonance imaging (MRI's}, and other high tech instruments that are now available to view images of the brain and how it functions, will hopefully lead to answers soon for the victims of AD and other types of dementia, and for their families. The areas that are affected for the individual with AD are many. The most devastating is the affect on memory.There is a normal amount of mem ory loss in most of us as we age. The difference for somebody with AD is that it begins to interfere with their ability to perform daily activities and continues to progress as time moves forward. It can be compared to the disease model of addiction. Something becomes an addiction when it interferes with your life on a daily basis, and it exhibits progression. AD is difficult to diagnose in its early stage. The individual and family members usually notice that something is different, but it doesn't get addressed at this point.This could be for many reasons such as fear, denial, and /or just being plain uninformed about AD. The first 2 or 3 years seem to be a gradual decline, in the short term memory especially DEMENTIA: HOW AND WHOM DOES IT AFFECT? 9 at first. (Kuhn, 1999. ) The brain is so amazing that as humans, we learn to compensate for deficiencies when we have them. (p. 43) For example, someone who has head trauma from an accident and loses some speech can often, with therapy, retrain the brain in another area to relearn how to speak. This applies to AD also.Because of the progression though, this can only be done for so long. After around 2-3 years, the decline in memory, and the effects that this has on other areas of functioning, begins to spiral down at a faster rate. As the brain cells die and the neurons and synapses no longer are working, the person will begin to forget names, places, events, how to use the telephone, where they are, and eventually who they and their loved ones are anymore. In the beginning, the individual is often aware of what is happening, and this will cause a reaction, of course.Their past coping skills, their support system, and their spiritual beliefs concerning life and death, will all influence how they will handle what is happening to them. Often some grieving will occur both in the individual, as well as those close to him. There is the knowledge of impending death, but in addition, now the family members watch as the p erson literally dies away in front of them. And for the afflicted, they grieve as they see themselves losing their sense of self and not knowing how they now will fit into the world ( Feldman, 2000).During the stage of development known as adolescence, one’s cognitive and emotional advances lead to being able to form relationships with others, think abstractly, which aids in the development of spirituality when trying to find one’s identity, and to perform executive functions such as making plans, organizing, projecting oneself into the future mentally, and following steps in an DEMENTIA: HOW AND WHOM DOES IT AFFECT? 10 order to achieve something (pp. 385-389). All of this leads to a loss of being able to relate to others which can lead to isolation and depression and anxiety at times. Levine, MD. , 2006). Other areas of the person that diminish in capability are language, visual-spatial perceptions, such as depth perception which can interfere with walking for example , as well as getting lost. Behavior is also affected and can be seen when impulses and socially acceptable boundaries are no longer relevant, or controllable because of a lack of comprehension, or they are just forgotten, leading to inappropriate actions or speech. In the late stage, the person is no longer even recognizable as the loved one once known.They become incontinent, unable to feed their self, talk, walk, or interact in any way (pp. 45-47). Effects on Family, Caregivers, and Society Little has been done to study the effects of dementia on children in the families where a parent has been diagnosed with early-onset AD. One study performed in the Uk by researchers Spector, Stott, and Svanberg, in 2009, looked at 12 children under the age of 18. They found that overall, the burden of caring for a parent with AD has a negative impact on their relationships with peers, on their schoolwork and achievement goals, and often led to emotional difficulties.The children often felt that it was their responsibility and downplayed the whole situation. They often felt a loss of their parent and that they were now taking on the role as the parent. Grieving was common. A positive outcome was the possibility of the experience leading to higher self-esteem due to the fact that it DEMENTIA: HOW AND WHOM DOES IT AFFECT? 11 showed the resilience within them to adapt. One finding was that the children had little, to no support system, or anyone to talk to. Their peers had no clue and support groups were / are not set up and available.This would be one way to assist these children. Another would be to educate the school system and train counselors to assist children, who are acting as adults in situations like this (p. 740). According to Harris and Keady (2008), in their study of selfhood in patients with early-onset, the loss of self is often more complex and unique to each family than in those with late-onset. This possibly is due to the fact that between 30-50 years old, o ne’s self-identity has many active components they must face losing such as their work identity, sexual identity, and family identity (p. 437).Some of these may overlap with patients of late-onset AD, but most often they don’t. This area of research is very scarce and in need of more studies so as to be able to help this group of families find strategies to better cope as they work their way through this situation â€Å"The most common form of caregiving relationship in dementia is between spouses or partners† (Clare, van Dijkhuizen, Pearce, & Quinn, 2008, p. 770). Often an adult child takes on the role of caregiver. In all instances, the stress of caring for a loved one with AD is usually very stressful and leads to feelings of depression, anxiety, confusion, and even anger.As an adult child caregiver, the parent-child roles get reversed and this can create uneasiness for both parties. In the early stage of AD, the sources of frustration and stress come more fr om having to learn how to cope with the changes that are required to be a caregiver, such as free time to relax, socialize, etc. Also, the fact that little DEMENTIA: HOW AND WHOM DOES IT AFFECT? 12 information is provided about the condition(s) to families and caregivers makes it more difficult to know what to do and when.Not knowing what to expect next can be a stressor in itself. Not only is there a negative impact on the mental condition of caregivers, but there is also a negative impact on their health. Looking at the overall picture, the story looks grim. Life is full of challenges and not only can they strengthen us to learn new ways to adapt and cope, but they are God-given opportunities to connect at a level so deep with another being, and then use that connection to hopefully relieve some of their suffering and pain.Everyone deserves to be treated with dignity and respect throughout life and at this final life span stage, those who have AD and are losing everything to the d isease, deserve to be treated in such a way that they too may be able to die with dignity. Society in Western Culture often has a negative overall view of old age. If you are non-productive, and unable to care for yourself, many take the view that you are worthless and a drain on society. This is turn influences the decisions made by politicians and government about how this huge group of elderly will be cared for.Seeing the elderly as negative is called ageism, and it is alive and well like many other ‘isms’ of today. The problem now is that the reality of issues concerning healthcare, financial assistance and housing options for the elderly, especially those who are ill with AD and/or other types of dementia, are no longer concerns of the future. These need to be addressed now in order to truly benefit this fast growing cohort and the future for us when we also reach this stage of life. DEMENTIA: HOW AND WHOM DOES IT AFFECT? 13 ConclusionWe now know that dementia is a condition that is caused by underlying diseases such as vascular disease. It is not a normal part of aging and it has genetic component, as well as a malfunction in the brain that causes the buildup of tangles and plaques which kill the neurons, cells, and synapses in the brain. This all leads to the symptoms which slowly rob a person of all their faculties, resulting in death. The effects on the patient are many and can create depression, anxiety, and frustration over what is happening to them. It also has effects of the family members and the caregivers.The majority of these effects seem to be negative (depression, anger, isolation, and illness). But they can also be positive, such as satisfaction and increased affection toward the patient, or higher self esteem due to doing the right thing and being responsible and loving. In our society, we all have to come to grips with our attitudes toward the aging. The enormous numbers of those over 55 can’t be ignored any longer. In creased awareness of AD and its symptoms will hopefully create motivation for creating and developing programs to assist in teaching strategies and coping skills for caregivers.Another avenue for change is creating groups to advocate for national healthcare that will then assist in making healthcare available to those with AD and to the elderly as a whole. And last, continuing research to search for a way to diagnose AD in its early stage with the hope that we can then provide ways to treat the symptoms and possibly slow down the progression of AD. The more knowledge we have, the more empowered we are to make changes. The focus should be on all pulling together to make a difference in the lives of those suffering with DEMENTIA: HOW AND WHOM DOES IT AFFECT? 14AD in their â€Å"Golden Years† instead of enjoying this last stage of life and being able to feel content as we self reflect and pass on our wisdom and/or truths we have learned about life as we complete our passage thro ugh this last stage of existence. Running header: ANNOTATED BIBLIOGRAPHY 1 DEMENTIA AND ITS EFFECTS Shelly Becker Liberty University Introduction to Human Development COUN 502 B-23 LUO Dr. Richard Pace March 6, 2013 ANNOTATED BIBLIOGRAPHY 2Berman, C. W. , & Becker, M. F. (2010). Transference in Patients and caregivers. American Journal of Psychotherapy, 64(1), 107-114 Retrieved February 4, 2013 from http:/search. ebscohost. com. ezproxy. liberty. edu: 2048/login. aspx-? direct=+ rue &db=a9h&AN=48973816&site=ehost-live&scope=site The topic of transference is relevant to all therapeutic relationships. The caregiver and recipient of care are seen as being in such a relationship, which then implies that trans- ference is at high risk of occurring.The article explores counter-transference as well, and how if not dealt with, this can have a negative effect on the overall relationship, and its therapeutic outcome. Braun, M. , Scholz, U. , Bailey, B. , Perren S. , Hornung, R. , & Martin, M. (2009). Dementia care-giving in spousal relationships: A dyadic perspective. Aging & Mental Health, 13(3), 426-436. doi: 10. 1080/13607860902879441 This article investigates the various effects of care-giving for spouses diagnosed with dementia on both the caregiver and the recipient.Previously, the data compiled mostly came from the caregiver only. This study differs in that it takes into account the feedback from both parties to get a better picture of the overall effects on the dyadic relationship. By doing so, hopefully this will lead to new insights and more effective interventions for a better outcome as the article points out. Castelli, I. , Pini, A. , Alberoni, M. , Liverta-Sempio, O. , Baglio, F. , Massaro, D. , & Nemni, R. (2011).Mapping levels of theory of mind in Alzheimer’s disease: ANNOTATED BIBLIOGRAPHY 3 a preliminary study. Aging & Mental Health, 15(2), 157-168. doi: 10. 1080/ 13607863. 2010. 513038 This article specifically deals with how Theory of Mind (To M) is understood in relation to dementia and various forms of dementia such as Alzheimer’s. When neuro-imaging is explained as the basis for learning in cognitive early stages of development, it is easier to understand how it might fit in with dementia and Alzheimer’s.In very simplistic terms, neuro-mirror-imaging underlies ToM and if this is no longer functional in the aging brain, it could explain to an extent, the symptoms exhibited in these brain disorders which in turn could lead to more effective interventions. Clare, Li, Dijkhuizen, M. , Pearce, A. , & Quinn, C. (2008). The experience of providing care in the early stages of dementia: an interpretative phenomenological analysis. Aging & Mental Health, 12(6), 769-775. Retrieved February 8, 2013 from: Academic Search Complete, EBSCOhostMany families, and patients with dementia, are given little to no information on Dementia, especially the early stages of it. It seems that very little is known about the early sta ges. This article is looked at from the point of view of the care-givers and how they interpret the situation and subsequently the care they give to the patient, who is often their spouse or parent. The relationship to the â€Å"patient† prior to the onset of dementia influences the perceptions and actions of both the caregiver and recipient.All of this is reflected in the article. ANNOTATED BIBLIOGRAPHY 4 Diagnosis. (2011). Annals of Internal Medicine, 154(11), 5-8. Retrieved on February 8, 2013 from: http://search. Ebscohost. com. ezproxy. liberty. edu: 2048/login. aspx? Direct=true & db=a9h & AN=62807891 & site = ehost-live 7 scope = site This article is very informative with respect to the importance of early detection of dementia as well as an accurate diagnosis of dementia.The effects of longer life spans in the field of medicine are discussed. We now have to deal with a much longer, and complex unfolding of the aging process than say 50 years ago. What can we do to imp rove diagnostic capabilities of trained medical professionals so as to be able to provide timely and accurate information and treatment interventions so as to increase the outcomes of successful? Harris, P. , & Keady, J. (2009). Selfhood in younger onset dementia: Transitions and testimonies. Aging & Mental Health, 133), 437-444. oi:10. 1080/13607860802534609 Very interesting article! Most often dementia is thought of as only an â€Å"old person’s† disorder. This article indentifies 5 areas of self and discusses how they are affected by the onset of dementia and other brain degenerative disorders, specifically with regard to the younger people if effects (ex. ages 40-67). Personal testimonies were gathered from those afflicted and then carefully interpreted and grouped and validated to reach the conclusions drawn. The results on the self are very informative!ANNOTATED BIBLIOGRAPHY 5 Korner, A. , Lopez, A. G. , Lauritzen, L. , Andersen, P. K. , & Kessing, L. V. (2008). Delusional disorder in old age and the risk of developing dementia-a nationwide register-based study. Aging & Mental Health, 12(5), 625-629. doi: 10. 1080/13607860802343118 The distinction between delusional and demented is discussed. Questions such as if being delusional is a reliable predictor of future dementia were posed, as well as looking for the connecting factor(s), if any, between the two disorders.Symptomology was discussed and the importance of medical professionals being well-versed in this, so as to be able to correctly diagnose, offer appropriate treatment, and increase the chances for predicting future disorders in a fairly reliable fashion. Spek, A. A. , Scholte, E. M. & Van Berckelaer-Onnes, I. A. (2010). Theory of Mind in adults with High Functioning Autism (HFT) & Asperger Syndrome. Journal of Autism & Developmental Disorders, 40(3), 280-289. doi: 10. 1077/s10803-009-0860-y ToM is explained in detail s to how it applies to the two disorders mentioned in the title. The reason I chose to include this article was because it gave a very good historical view of Theory of Mind as well as explained how it is seen as being the ‘possible missing link† between normal cognitive functioning and the functioning of brain disorders like HFA and Aspergers, as well as dementia and Alzheimers. ANNOTATED BIBLIOGRAPHY 6 This article gave me a broader understanding of ToM and its applications. This article also included applications to theories of religion, philosophy, and life in general.I found it very useful and enlightening and intend on researching it much more in depth in the future! Svanberg, E. , Scott, J. , & Spector, A. (2010). ‘Just Helping’: Children living with a parent with young onset dementia. Aging & Mental Health, 14(6), 740-751. doi: 10. 1080/1360786100371374 With the onset of dementia in younger patient, under 67 or so, the children of this group have been forgotten in the research. I believe this is due in part to th e numbers of this group are small in comparison to the overall age of onset.This has left the families and children, as well as the patient with little information and or helpful interventions aimed at them specifically. These children, as pointed out in the article, suffer effects in their schooling, social lives, and their overall description and responsibilities expected of them in their previous roles as children. Often now they must act as if the ‘parent’ and the ‘parent’ as if the child. The study was helpful in understanding this group better and its implications for the adolescent or younger child.Tremont, G. (2011). Family Care-giving in Dementia. Medicine & Health Rhode ANNOTATED BIBLIOGRAPHY 7 Island, 94(2), 36-38. Retrieve February 2, 2012 from: http:// search. ebscohost. com. ezproxy. liberty. edu: 2048/login. aspx? direct=true & db=a9h & AN=58104122& site=ehost-live&scope=site This article centered around care-giving when the caregiver was a family member of the patient. Most often this was the spouse, then the adult child.The factors that ere isolated were gender, type of relationship (married, parent/child), age, and the general feature of the relationship prior to the onset of dementia. For example, was the marriage controlled by one or the other more, or was it considered to lean toward equality? Did the spouse take on characteristics of the parent prior to onset of dementia? Were there built up resentments? Was this true for either the caregiver and/or the recipient? If it is an adult child, how did the relationship while growing up play into the current care-giving situation?These types of questions are important to all concerned for many reasons. A lot of this article is pertinent to my paper. Running Head: REFERENCES 1 Dementia: How and Whom Does it Affect? Liberty University HSER 502 B-23–LUO Dr. Richard Pace March 5, 2013 REFERENCES 2 REFERENCE LIST American Psychiatric Association: Diagnostic and Stat istical Manual of Mental Disorders, Fourth Edition, Text Revision. 2000). Washington, DC: American Psychiatric Association. Berman, C. W. , & Becker, M. F. (2010). Transference in Patients and caregivers. American Journal of Psychotherapy, 64(1), 107-114 Retrieved February 4, 2013 from http:/search. ebscohost. com. ezproxy. liberty. edu: 2048/login. aspx-? direct=+ rue &db=a9h&AN=48973816&site=ehost-live&scope=site Braun, M. , Scholz, U. , Bailey, B. , Perren S. , Hornung, R. , & Martin, M. (2009). Dementia care-giving in spousal relationships: A dyadic perspective.Aging & Mental Health, 13(3), 426-436. doi: 10. 1080/13607860902879441 Castelli, I. , Pini, A. , Alberoni, M. , Liverta-Sempio, O. , Baglio, F. , Massaro, D. & Nemni, R. (2011). Mapping levels of theory of mind in Alzheimer’s disease: a preliminary study. Aging & Mental Health, 15(2), 157-168. doi: 10. 1080/ 13607863. 2010. 513038 Chop,W. C. , & Robnett, R. H. (1999). Gerontology for the Health Care Professional. P hiladelphia: F. A. Davis Company. Clare, Li, Dijkhuizen, M. , Pearce, A. , & Quinn, C. (2008).The experience of providing care in the early stages of dementia: an interpretative phenomenological analysis. Aging & Mental Health, 12(6), 769-775. Retrieved February 8, 2013 from: Academic Search Complete, EBSCOhost REFERENCES 3 Diagnosis. (2011). Annals of Internal Medicine, 154(11), 5-8. Retrieved on February 8, 2013 from: http://search. Ebscohost. com. ezproxy. liberty. edu: 2048/login. aspx? Direct=true & db=a9h & AN=62807891 & site = ehost-live 7 scope = site Feldman, R.S. (2001). Development across the Life Span. Upper Saddle River, New Jersey: Pearson Foundation, Inc.. Froemke, S. , Golant, S. , & Hoffman, J. (2009). The Alzheimer’s Project Momentum in Science. New York, N. Y. : Public Affairs. Harris, P. , & Keady, J. (2009). Selfhood in younger onset dementia: Transitions and testimonies. Aging & Mental Health, 133), 437-444. doi:10. 1080/13607860802534609 Kuhn, David, MS W. (1999). Alzheimer’s Early Stages. Salt Lake City, Utah: Publishers Press. Korner, A. , Lopez, A. G. , Lauritzen, L. , Andersen, P. K. & Kessing, L. V. (2008). Delusional disorder in old age and the risk of developing dementia-a nationwide register-based study. Aging & Mental Health, 12(5), 625-629. doi: 10. 1080/13607860802343118 Levine, R. A. M. D. (2006). Understanding and Preventing Alzheimer’s and Related Disorders. Lanham, Maryland: Rowan & Littlefield Publishers, Inc. Spek, A. A. , Scholte, E. M. & Van Berckelaer-Onnes, I. A. (2010). Theory of Mind in adults with High Functioning Autism (HFT) & Asperger Syndrome. Journal of Autism & Developmental Disorders, 40(3), 280-289.REFERENCES 4 doi: 10. 1077/s10803-009-0860-y Svanberg, E. , Scott, J. , & Spector, A. (2010). ‘Just Helping’: Children living with a parent with young onset dementia. Aging & Mental Health, 14(6), 740-751. doi: 10. 1080/1360786100371374 Tremont, G. (2011). Family Care-giving in Dementia. Medicine & Health Rhode Island, 94(2), 36-38. Retrieve February 2, 2012 from: http:// search. ebscohost. com. ezproxy. liberty. edu: 2048/login. aspx? direct=true & db=a9h & AN=58104122& site=ehost-live&scope=site

Prospects of Islamic Banking

Texts Articles Cases Internet References 3 Acknowledgment I would like to forward my utmost gratitude to a number of people, for their generous co-operation and assistance, in the course of preparing this monograph. Mr Howard Johnson for reviewing my thesis plan, Professor Bob Lee for his invaluable insight on Chapters 1-5 and finally Dr PaulBridges and Dr Simon Norton for their enlightening views on several issues. I dedicate my efforts to ‘Bhaijan’, who has always been the inspiration and my guide throughout my life. 4 Preface At present times, it would not be inappropriate to state that Muslims the world over face the dilemma that their religion, Islam, prohibits interest in stringent terms and aims at establishing an economy that is not only free from all forms and kinds of interest, but also from anything that bears any resemblance to it.The modern economy is heavily based and reliant on interest and it is hard to envisage any set of economic relations where interes t does not play a part, whether directly or indirectly. Resolving the above-mentioned contradiction seems to be a challenge that Muslim intellectuals, bankers, industrialists, businessmen, policy-makers and ordinary consumers face. In a nutshell, this monograph seeks to provide an analysis of the workings and practices of Islamic banking industry and the products it offers; covering legal, political, social and economic issues as they relate to it.Chapter 1 commences by providing a rationale to the Islamic banking and outlining its historical journey, and ends with a discussion on the riba and its prohibition in Islam. Chapter 2 deals with the modes of Islamic finance, which certainly requires a detailed study, as it is these products that form the cornerstone of the entire Islamic banking industry. Shariah precepts are also introduced at this stage (and are discussed throughout this monograph), as they aid the process of comprehension. This chapter would also serve to introduce a d iscussion on Islamic Project Finance, dealt within the following chapter.Chapter 3 deals with Islamic Project Finance in practice, focussing on the legal and other economic issues as they relate to Shariah-Related Documentation, Construction and Lease Financing and Islamic Bonds. Chapter 4 consists of two case-studies, highlighting the Common law developments in Shariah law, as it relates to the Islamic banking industry. Two recent judgments (one from UK and another from Pakistan) are specifically perused, reflecting the stance that the judiciary in the two countries have adopted towards Islamic precepts, its interpretation and application.Chapter 5 raises issues relating to structuring and offering of Shariah-Compliant investment products. In particular, focussing on the role of financial institutions, fund promoters and Shariah advisors. The chapter concludes by providing a comparative analysis on the legal issues linked to the marketing of Islamic investment products in different jurisdictions. Chapter 6 provides an insight to the regulatory and supervisory practices of Islamic banking in various countries.Obstacles faced by the Islamic banking industry in their progress as regards their set up in interest-based banking jurisdictions is further addressed, which is supplemented by a case study on the regulatory issues of Islamic banks in India. 5 Chapter 7 is meant to be general, and briefly discusses the lessons that Conventional and Islamic banks can learn from each other, addressing issues such as the effect of technology transfer and the Bank-Client relationship, which would ultimately lead to the progress of one another. Chapter 8 concludes this monograph. It ascertains the merits of introducing Islamic banking globally.Reforms and suggestions for the Islamic banks are also appended to this chapter, together with a few conclusive remarks on the subject. It is aspired that this work will be a positive contribution on the subject of Islamic banking and it s practices. Suggestions and criticisms are solely intended to enhance the progress of this relatively nascent banking industry, which has undoubtedly shown major signs of progress. 6 Glossary of Arabic Terms This section explains some of the Arabic words and terms, most of them appearing in this study, whereas others might relate to them and would thus be of interest to the reader.Allah is Arabic for God. Fatawa (singular. Fatwa) are legal decisions or opinions rendered by a qualified religious leader (mufti). Fiqh is Islamic Jurisprudence, the science of religious law, which is the interpretation of the sacred Law, Shariah. Gharar is uncertainty, speculation. Hadith (plural. ahadith) is the technical term for the source related to the Sunna; the sayings- and doings- of the Prophet Mohammed (pbuh), his traditions. Halal means permitted according to the Shariah. Haram means forbidden according to the Shariah. Jualah is the stipulated price (commission) for performing any service.May sir mean gambling, from a pre-Islamic game of hazard. Muslim is on who professes the faith of Islam or is born to a Muslim family. Qard Hasan is a benevolent loan (interest-free). Qiyas means analogical deduction. Quran is the Holy book, the revealed word of God, followed by all Muslims. Riba is literally excess or increase, and covers both interest and usury. Shariah is Islamic religious law derived from the Holy Quran and the Sunna Shirka (or Sharika) is a society or partnership. Surah is a chapter of the Holy Quran. Takaful refers to mutual support, which is the basis of the concept of insurance or solidarity among Muslims.Umma means the community; the body of Muslims. Waqf is a trust or pious foundation. Zakat is a religious levy or almsgiving as required in the Holy Quran and is one of the Islam’s five pillars. (Courtesy: Lewis & Algaoud, Islamic Banking, Edward Elgar, 2001, Glossary, x, xi. ) 7 Chapter 1 Introduction and the Basis of Islamic Banking A. Rationale from an Islamic perspective It is argued by proponents of the Islamic banking that in today’s world, the economic system that is based on interest has resulted in concentrating the wealth in the hands of selected few, creating monopolies and further widening the gap between the affluent and the poor.Islamic finance operates in compliance with the Shariah law. Islam is not anti-commerce (the Prophet Mohammad was himself a merchant). In contrast to the modern Western principles and philosophy, Islam encourages circulation of wealth and considers its role as vital to an economy. As Dr Usmani notes in his book, â€Å"just as clotting of blood paralyzes human body, concentration of wealth paralyzes economy. The fact that, today ten richest men in the world have more wealth than forty-eight poorest countries of the world is relied by the supporters of the Islamic banking as a testament to the fact that the current economical set up is unjust and has failed to distribute the wealth propor tionately, thus leading to the downfall of humanity. 1 On considering the injunctions of the Holy Quran, it is apparent that the system of distribution of wealth laid down by Islam envisages three objects, namely: (a) The establishment of a practicable system of economy. (b) Enabling every one to obtain, what is rightfully due to them. c) Eradicating the concentration of wealth. The traditional concept of Muslims that Islam is a unique way of life distinct from all other isms and ideologies extends to the economic life of the Muslims (Umma). In the process of reshaping the economy, the areas of money, banking and investment are regarded as extremely vital to the process of Islamisation of the economy. The Islamic emphasis on co-operation as the key concept in economic life has led to reliance on profit-sharing and participation as the alternative bases for banking and investments in the Islamic framework. The concept of Islamic banking is regarded as one of the few original and crea tive Islamic ideas that have been successfully tried in recent times. In the not too distant past, the entire banking system in all Muslim countries was designed on the Western banking model; the latter being inconsistent with Islamic law primarily due to the disapproval of Riba (i. e. interest) in Islam. In other words, the elimination of Riba 1 Meezan Bank’s Guide to Islamic Banking by Dr Muhammad Imran Ashraf Usmani, Preface, page 7, Darul-Ishaat, 2002. 2Issues in Islamic Banking, Selected Papers by M. N. Siddiqi, page 9, Preface, 1983. 8 from financial transactions is the raison d’etre of Islamic Banking3. Attempts to avoid dealing in interest led to the introduction of a non-interest based banking system, commonly termed as â€Å"Islamic banking†. McDowall notes that Islamic banking not only provides services that are compliant in terms of the Muslim faith, but through the fundamental concept of profit and loss sharing with their customers, deliver a highly ethical proposition to Conventional banking. As Islamic banking offers services to its customers free from interest, any dealing or transaction that involves interest is seen as erroneous and thus forbidden. Technically, riba refers to the addition in the principal amount of a loan, which the lender receives from the borrower. This deliberately simplified picture of the true complex state of affairs is something I shall return to in the following chapter in detail. B. History The Islamic financial system has a centuries-old history, as noted by Chapra and Khan (2000): From the very early stage in Islamic history, Muslims were able to establish a financial system without interest for mobilising resources to finance productive activities and consumer needs. The system worked quite effectively during the heyday of Islamic civilisation and for centuries thereafter. † However, over the centuries, the centre of economic gravity inclined towards the Western world, and the Western fi nancial institutions (including banks) became dominant and the Islamic tradition remained dormant. 5 The Muslim society never approbated interest; throughout the thirteen enturies of its history prior to domination by imperialist powers, it managed its economy and carried on domestic and international trade without any involvement of interest. Profit – sharing and different kinds of participation arrangements served as adequate basis for savings and investment and considerable capital was mobilised for mining, shipbuilding, marine trade, textiles and other industries. 6 The issue of interest free banking regained the attention of Muslim intellectuals in the 1940’s and 1950’s. By this time, numerous local and national banks were established along the lines of interest-based foreign banks.By this time, the government of Muslim countries, in particular, those who gained political independence, found themselves compelled to engage in international financial transact ions using banking systems. The necessity for commercial banking was realised. The challenge was to 3 Profit and Loss Sharing, An Islamic Experiment In Finance and Banking by Shahrukh Rafi Khan, Introduction and Overview, page 1, OUP, 1987. 4 Islamic Banking: A Brief Historical Perspective by Bob McDowall, Business and Finance, 27th May 2004. 5 Islamic Banking and Finance by Munawar Iqbal and David T.Llewellyn, Introduction, page 1, para 1, 2002. 6 Ibid at 1, page 9, para 2. 9 avoid the concept of interest within commercial banking. The path to this was the development of the concept of profit and loss sharing (Mudarabah), the key concept from which the structure of most Islamic banking products and services are derived. 7 C. Current Status All over the world, Muslim bankers and economists are faced with the question as to how they should eliminate interest and evolve new institutions and practices, which would enable economic activities to flourish without resorting to Riba in any form? In recent years, there has been a revival of interest in formulating a modern version of the historic Islamic financial system, as many Muslims’ are endeavouring to avoid interest-based practices and transactions. Islamic banking was virtually an unknown concept thirty odd years ago. Now, fifty-five developing and emerging market countries have some nexus with Islamic banking and finance and â€Å"Riba free† has become the buzzword for financial institutions that wish to attract the large and attractive customer base in the form of Muslims all over the world who are looking for Shariah-Compliant modes of investments and financings.In addition, there are Islamic financial institutions operating in 13 other locations. 9 In Pakistan, Iran and Sudan, all banks must operate under Islamic financing principles. As noted by Justice Mufti Usmani, there were 200 Islamic banks and financial institutions in forty-three countries of the world, controlling a financial pool of US$ 100 billion,10 increasing at an annual rate of 10-15 percent. The Islamic financial industry is already one of the fastest growing industries and has tremendous potential as observed by academics in general.The unorthodoxy of Islamic banking model is apparent from the fact that those who argue in favour of Islamic banking are often regarded as ‘utopians’ and ‘romanticists’, but they claim that the best form of realism could be achieved by challenging all those systems that are based on the exploitation of man in one form or the other and in seeking to set up a just socio-economic order. Dr Siddiqi argues that an Islamic economy is capable of freeing modern man from the debt-ridden economy in which he survives, and of guiding him towards a society based on justice and equity, and ultimately leading to the path of growth and stability. 1 D. Riba and its Prohibition in Islam As observed by Lewis, in order to conform to Islamic norms, five religious feature s are well established in the literature, and must be adhered to in investment behaviour. They are as follows: 7 Islamic Banking by Mervin K. Lewis & Latifa M. Algaoud, Chapter 2, Islamic Law, pages 4 & 5, Brief History, 2001. 8 Banking Without Interest by Muhammad Nejatullah Siddiqi, Foreword, para 1 &2, 1983. 9 Australia, Bahamas, Canada, Cayman Islands, Denmark, Guernsey, Jersey, Ireland, Luxembourg, Switzerland, United Kingdom, United States and the Virgin Islands. 0 New Horizon, No. 82, December 1998, p. 17. He is the Chairman of Centre for Islamic Economics, Pakistan, and a judge of the Islamic Shariah Court. 11 Ibid at 1, page 7 & 8. 10 (a) the absence of interest-based (riba) financial transactions; (b) the introduction of a religious levy or almsgiving, (zakat); (c) the prohibition of the production of goods and services that contradict the value pattern of Islam (haram); (d) the avoidance of economic activities involving gambling (maysir) and uncertainty (gharar); (e) the provision of Islamic Insurance (Takaful).These five elements give Islamic banking and finance its distinctive religious identity. 12 For the purposes of our present chapter, we need to focus briefly on element (a), i. e. absence of interest-based transactions, which is indeed the central element among the latter. Islamic finance, like Islamic commercial law in general, is dominated by the doctrine of riba, and it is imperative that we discuss this in some detail, as to its nature and prohibition. The literal meaning of the Arabic word riba is ‘increase’, ‘excess’, ‘growth’ or ‘additional’.According to Sahacht (1964), riba is simply a special case of unjustified enrichment or, in the terms of the Holy Quran, consuming (i. e. appropriating for one’s own use) the property of other for no good reason, which is prohibited. Prohibition of interest is ordained in Islam in all its forms. The latter prohibition is strict, absolute an d certain. The whole concept of interest is fundamentally repugnant to the spirit of Islam, as could be observed from the following verses of the Holy Quran: â€Å"O, believers, fear Allah, and give up what is still due to you from the interest (usury), if you are true believers. (Surah 2: Aayat 278) And: â€Å"If you do not do so, then take notice of war from Allah and His Messenger. But, if you repent, you can have your principal. Neither should you commit injustice nor should you be subjected to it. † (Surah 2 : Aayat 279) 12 Ibid at 7, page 28, para 2, 2001. 11 Chapter 2 Islamic Modes of Financing Introduction One can vividly perceive the transition in the global banking sector, from core/retail banking, to the complex and detailed role of financing, which clearly depicts sophistication and organisation of international banking community.With the passage of time, the banks have undoubtedly become multifunctional bodies, performing various roles and providing their client s with numerous desired products. Speaking of the international banking community, Islamic banking is undoubtedly a part of it. To keep up with this modernised community and to compete with their fellow-competitors, Islamic banking has introduced and refined some alternative Islamic financing products, to the ones available in the Conventional markets, in order to cater for the Muslim community around the globe.Having said that, it is open to anyone, whether a Muslim or a non-Muslim, to take advantage of these products, as long as they comply with the requirements and precepts of Islamic Shariah. At this instance, it helps to add that the prohibition of interest in Islam does not imply that the capital is not to be rewarded, nor that risk is not be priced. The Islamic system has both fixed and variable return modes to price the capital and add ‘risk premia’ in relation to the degree of risk involved.Islamic banks provide financing using two methods. The first is based o n profit-sharing and the second one deals with modes, which rely on fixed return (mark up) and often conclude in creating indebtedness of the party seeking finance. The Islamic modes of finance are unique as the debt related with financing using mark-up modes results from real commodity sale/purchase operations, rather than the exchange of money for interest-bearing debt. Furthermore, unlike the Conventional debt, such debt is not marketable except at its normal value. 3 The whole idea behind the Profit and Loss Sharing (PLS) is seen as an innovation, a modern trend if you like, and it is aspired that it will bring several merits to the industry of investment and finance, thus benefiting the community at large. It must be borne in mind that the Islamic Shariah does not prohibit Islamic banks from issuing guarantees. However, the question of the legality of the commissions and charges received by banks in issuing the guarantees has been a subject of much debate and discourse.Several banks in the Middle East have sought to tackle the latter issue by agreeing to issue guarantees at no charge, while simultaneously asking for cash collateral of a specific percentage (30 %) of the guaranteed amount, which is then invested by the bank for its own account and benefit for the duration of the guarantee. 14 13 Progress and Challenges of Islamic Banking by Abbas Mirakhor, Review of Islamic Economics 4 (2) 1997. 14 Demand Guarantee in the Arab Middle East, J. I. B. L, 7, page 271, 1997. 12In order to circumvent the ambiguities raised, a group of Muslim scholars gave their opinion on the legality of Islamic banking practices as regards guarantees. Their opinion is summarised in two segments and is as follows. 1. The legality of the issuance of a bank guarantee relies on the legality of Shariah principles of the contract in question, in respect of which the guarantee was issued. It is evident that no Islamic bank should issue guarantees in relation to items that are prohibit ed under the Shariah, including guarantees for the payment of usurious interest, the sale of alcohol, drugs, the construction of gaming places, etc.The latter may seem to be an obstacle towards an entirely independent guarantee, but its scope should not be overstated. As long as the contract in question is considered lawful by the standards of Shariah precepts, a guarantee stipulated to be unconditional and payable on first demand would be deemed valid and in force under Shariah, notwithstanding the performance or termination of the underlying contract. . Banks are entitled to receive remuneration for the issue of a guarantee. Having said that, the amount of remuneration, to be in accordance with the Islamic Shariah, ought not be fixed in accordance with the amount of the issued guarantee, but should instead be calculated to provide a reasonable compensation to the issuing bank for the time and effort that the latter spent to issue and manage the guarantee. 5 This chapter will focus on the Islamic modes of finance, other than guarantees, namely Musharakah, Mudarabah, Murabaha, Bai’ Muajjal, Ijaraha, Ijaraha Wa Iqtina, Salam, Istisna’ and Istijrar, which are available in the global financial market today, whilst providing a comparison with the Conventional finance products, wherever possible. A(i). Musharakah The literal meaning of the Arabic word Musharakah is sharing, or Shirkah, which means being a partner.There are several kinds of partnership, and they all come under the heading of Shirkah. Musharakah is perceived as an ideal alternative for the interest based financing with far reaching effects on both production and distribution. 16 The term Musharakah as used in the modern terminology, has been recently introduced by Islamic Scholars writing on the subject and is normally restricted to a particular type of Shirkah, which is Shirkat-ul-Amwal, where two or more persons invest some of their capital in a joint commercial venture.However, at ti mes it could also include Shirkat-al-Aamal, where partnership takes place in the business of services, whereby all the partners jointly undertake to render some services for their customers, and a fee is charged from the latter and is distributed among the partners as per an agreed ratio. 17 15 Shariah Related Documentary Issues in Islamic Project Finance Transactions, J. I. B. L. R 2003, page 272, para(s) 2, 3 & 4. 16 Meezan Bank’s Guide to Islamic Banking by Dr Muhammad Imran Ashraf Usmani, 2002, page 87, Chapter 13 (Definition and Classification of Musharakah). 7 Ibid at 11, page 90. 13 Musharakah is a mutual contract between the parties, and thus all the mandatory ingredients of a valid contract must be present. Furthermore, the capital in Musharakah agreement should be quantified, specified, but not necessarily merged or in liquid form. If all the partners agree to work for the joint venture, each one of them shall be treated as the agent of the other, in all matters con cerning the business. Any act carried out by a single partner, in the normal course of business, shall be deemed as authorised by all other partners. 18All scholars are unanimous on the principle of loss sharing in Shariah, which is based on the saying of Syedna Ali ibn Talib, which is as follows: â€Å"Loss is distributed exactly according to the ratio of investment and the profit is divided according to the agreement of the partners. †19 Termination of the Musharakah agreement: Musharakah agreement will be terminated in the following circumstances. 1. If the purpose of forming the ‘Shirkah’ has been achieved. 2. Every partner can exercise his/her right to terminate Musharkah at any time after giving his partner a reasonable notice. . In the case of a demise of any one of the partners or any partner becoming insane or incapable of effecting the commercial transaction. 4. In the case of damage to the share capital of one partner before mixing the same in the tota l investment and before affecting the purchase, the partner will stand terminated and the loss will be borne by that particular partner. However, if the share capital of all the partners has been mixed and could not be identified singly, then the loss will be shared by all and the partnership will not be terminated. 0 Termination of Musharakah without the closure of the business: If one of the partners intends to terminate the Musharakah, in disagreement with the other partners, the latter issue could be resolved by mutual consent. The partners intending to run the business may purchase the share of the partner who wants to terminate his partnership, as the termination of Musharkah with one partner does not affect the Musharkah between the other partners.The latter seems to be a just and a viable approach, especially in the modern situations, where the success of a particular business is conditional upon its continuity, and the liquidation or separation at the instance of a single p artner may only cause irreparable damage to the other partners. 21 18 Ibid at 11, page 91 & 92. Ibid at 11, page 94 (Rules of Distribution). 20 Ibid at 11, page 95 (Termination of Musharakah). 21 Ibid at 11, page 96. 19 14 Security in Musharakah:As regards a Musharakah agreement between the bank and the client, the bank should in its own right and discretion, obtain adequate security to ensure that the capital invested/financed and the profit that may be earned are safe. As part of the usual practice, the securities obtained by the bank, are kept comprehensively insured at the party’s cost and expenses, till the Islamic mode of insurance (Takaful) becomes operational. It is understood that the purpose of the latter security is a precautionary measure to cover for damage(s) or loss of the principal amount due to the client’s negligence. 2 Differences between interest-based financing and Musharakah: 1. As regards interest-based financing, a fixed rate of return on a loan , advanced by the financier is predetermined, irrespective of the profit earned or loss suffered by the debtor. Mushrakah agreement does not envisage a fixed rate of return, it is in fact based on the actual profit earned by the ‘joint venture’. 2. The financier cannot suffer loss in an interest-based financing. The financier under a Musharakah agreement can, possibly suffer a loss, if the joint venture fails. 3.It is argued by Islamic scholars and other academics that the interest-based financing results in injustice, either to the creditor or the debtor. If the debtor suffers a loss, it is unjust on the creditor’s part, to claim a fixed rate of profit. And, if the debtor earns a high rate of profit, it is injustice to the creditor to provide him with only a small proportion of the profit, while the debtor taking the chunk of it. As regards a Musharkah agreement, the returns of the creditor are tied up with the actual profits earned through the enterprise, which he/she financed.The greater the profits of the enterprise, the higher the rate of return to the creditor. If the enterprise earns ‘substantial’ profits, the creditor cannot acquire all of it, but has to share it with the common people, e. g. depositors in the bank. 23 Tenure of Musharakah: As regards the determination of the period of the Musharakah agreement, the following conditions operate. (a) The partnership is fixed for such a duration that at the end of the tenure, no other business can be conducted. 2 23 Ibid at 11, page 97 (Security in Musharakah). Ibid at 11, page 98. 15 (b) The partnership can be for a very short term, during which neither partner can dissolve the partnership. 24 A(ii). Diminishing Musharakah Another form of Musharakah, which has developed in the recent years, is known as Diminishing Musharakah. It involves the participation of a financier and his client, either in the joint ownership of a property/equipment, or in a joint commercial enterpr ise.The financier’s share is further divided into several units, and it is intended that the client will purchase the financier’s units of the share, one at a time, periodically, increasing his own share, until all the units of the financier are purchased by him, so as to make him the sole owner of the property or the commercial enterprise, whichever be the case. 25 B. Mudarabah This is also a kind of partnership, whereby one partner provides finance to the other for investing in a commercial enterprise.The investment is provided by the first partner called the ‘Rab-ul-Maal’, while the entire responsibility for the management and work falls upon the other partner, who is called the ‘Mudarib’. The profits generated, are shared in a predetermined ratio. There are two kinds of Mudarabah – restricted and unrestricted. Rab-ul-Maal may specify a particular business for the Mudarib, in which case he shall invest the money in that specified bus iness only. This is known as ‘Al-Mudarabah-alMuqayyadah’ (restricted Mudarabah).But if he leaves it open for the Mudarib to undertake whatever business he wishes, the Mudarib shall be authorised to invest the money in any business he wishes. This type of Mudarabah is called ‘Al-Mudarabah-al-Mutlaqh’ (unrestricted Mudarabah). A Mudarib cannot forward the money lent to him, or carry out any activity that is beyond the course of his business, without the Rab-ul-Maal’s express permission or consent. Rab-ul-Maal is entitled to oversee the activities carried out by the Mudarib. The former can also work with the Mudarib, provided the latter gives his consent.A Rab-ul-Maal can contract Mudarabah with more than one person through a single transaction, for instance, he can offer financial assistance to X and Y both so that each of them becomes a Mudarib, and the capital of the Mudarabah transaction shall be utilized by both of them, jointly. 26 It is imperativ e that both the parties should decide in advance, on the proportion of profit that each one of them should receive. However, the parties cannot suggest a lump sum amount of profit, nor can they determine the share of any party ‘at a 24 Ibid at 11, page 102 (Tenure of Musharakah).An Introduction to Islamic Finance by Muhammad Taqi Usmani, Chapter 2, page 82, para 1 (Diminishing Musharakah). 26 Ibid at 11, pages 105-108. 25 16 specific rate tied up with the capital’. If the business has suffered loss in a few transactions and made profit in some others, then the profit should be used to offset the loss/losses incurred, and whatever remains, shall be a distributed between the parties according to the agreed ratio. 27 Roles of Mudarib: He is an Ameen (trustee), who is responsible to look after the investment, with an exception of natural calamities.He is a Wakeel (agent), as he makes the purchases from the funds provided. He is also a Shareek (partner), thus sharing the pro fits with Rab-ul-Maal. He can also possibly be a Zamin (liable), and thus will have to compensate for any loss suffered during the course of Mudarabah, due to any erroneous act on his part. 28 Termination of Mudarabah: The Mudarabah will come to an end when the specified period in the contract expires. It can also be terminated by either of the two parties, at any time, by giving notice.Furthermore, in case Rab-ul-Maal has terminated the services of Mudarib, the latter will continue to perform his acts under the contract, until he is informed about the termination. 29 C. Murabaha In this particular kind of sale, the seller clearly mentions the cost of the sold commodity, and then sells it to the buyer by keeping a profit margin. Thus, Murabaha should not be seen as a loan given on interest, it is rather a sale of a commodity for cash/deferred price. As regards Bai Murabaha, the bank purchases a commodity, on a client’s behalf, and then resells it to the latter, on the basis o f plus-profit.Under this kind of agreement, the bank discloses its cost and profit margins to the client. Thus, unlike Conventional banks (which advance money to a borrower), the bank will buy the goods from a third party and sell it onwards to a customer for a pre-agreed price, thus abstaining from interest. The growing use and vitality of Murabaha agreement is proven by the fact that in Islamic banks world over, 66% of all investment transactions are through Murabaha. 30 It is argued by critics of Islamic banking that Murabaha agreements are in reality interest-based contracts, under the garb of a notional sale and buy ack transaction, profit being synonymous to interest in this case. Islamic scholars have reverted to this argument by stressing that a ‘true’ Murabaha financing structure is quite different 27 Ibid at 11, 109-111. Ibid at 11, page 111, para 5. 29 Ibid at 11, page 112, para 2 (Termination of Mudarabah). 30 Ibid at 11, page 125, Chapter 16 (Murabaha). 28 17 from an overdraft provided by Conventional banks and the former offers various benefits to the bank and its customers, namely that depositors have a share in the bank’s profits.Furthermore, the basic difference is the Aqd (contract), which specifies the Islamic conditions, as against the interest element in Conventional banking transactions. 31 Basic Rules for a Murabaha transaction: 1. The subject of sale must be in existence at the time of the sale. 2. The seller must have the ownership of the commodity in question. 3. The subject of sale must be in physical or ‘constructive possession’32 of the seller while he is selling it. 4. The sale must be instant and absolute; no provisions for contingencies should be made part of the contract. . The goods/commodity to be sold, must reflect a value and must be specified to the buyer, leaving no room for ambiguities or confusion as between the parties. 6. The sale must be unconditional and the price of the commodity sh ould be certain. 33 If a client defaults on any payment(s) by the due date, the price cannot be changed nor can the penalty fees be charged, as against him. Nevertheless, as regards dishonest clients, who knowingly and deliberately default, they should be made liable to compensate the bank, subject to the following two conditions. a) The defaulter must be given a grace period of at least a month. (b) It must be proved beyond reasonable doubt that the client is a defaulter, and he has no justifications for his latter behaviour. 34 Murabaha can only be used when a commodity is to be purchased by a customer/client. It is highly pertinent to peruse the subject matter of the Murabaha, as the documents must be signed for obtaining funds for a specified purpose only. It needs to be stressed that the Murabaha consists of several different contracts and they all play their part one after another, in respective stages. 5 31 Ibid at 11, page 126, para 2 (Arguments against Murabaha). It refers to a situation where the possessor has not yet taken the physical delivery of the commodity, yet all rights and liabilities of the commodity are passed on to him including the risk of its destruction. 33 Ibid at 11, page 126-127 (Murabaha Rules). 34 Ibid at 11, page 129, para 1 (Penalty for Default). 35 Ibid at 11, page 130-131 (Basic Mistakes in Murabaha Financing). 32 18 D. Bai’ Muajjal This is basically a sale on deferred payment.The deferred payment becomes a loan, which the buyer pays in a lump sum or instalment (as agreed between the parties). In Bai’ Muajjal all those items/commodities can be sold on a deferred payment, which come under the heading of capital, where quality does not make a difference but the natural or intrinsic value does. The price to be paid must be agreed and fixed at the time of sale. The buyer must be given complete possession of the commodity in question, whilst the seller is free to ask the buyer to provide him with guarantee in the form of a mortgage or any other item. 6 E. Ijaraha In an Islamic leasing (Ijaraha), the owner of the asset, while retaining the corpus of the asset, transfers its usufruct to another person for an agreed period, at an agreed consideration. All the liabilities arising from the ownership must be endured by the lessor. The period of lease must be determined in clear terms and the asset must be clearly identified as between the parties. 37 The lessee is liable to compensate the lessor for all the damage(s) caused to the leased asset by any misuse or negligence on his part.The rental should be determined at the time of the contract for the whole duration of the lease. The lessor cannot increase the rental unilaterally, and must consult the lessee in that regard. 38 Lease was not originally a mode of financing, however, certain financial institutions have adopted leasing as a mode of finance instead of a long term lending arrangement, which is based on interest. The transaction of ‘fina ncial lease’ may be used for Islamic financing, subject to certain conditions. It does not suffice for the latter purpose to interchange the term ‘interest’ by ‘rent’ and ‘mortgage’ by ‘leased asset’.It must be emphasised that there is a difference between leasing and an interest-bearing loan, as regards Islamic Shariah. 39 Unlike the contract of sale, an Ijaraha agreement can be based on a future date, thus it is different from a Murabaha agreement in that respect. In majority of the cases concerning ‘financial lease’, the lessor (financial institution) will purchase the asset through the lessee himself. The lessee makes the purchase on behalf of the lessor who then pays the price to the supplier, either directly or through the lessee. 0 The lessor, being the owner of the asset, and having purchased it through his agent (lessee), is liable to bear all the expenses incurred in the process of its purchase and its import to the country of the lessor (if that is the circumstance), e. g. expenses of freight and customs duty etc. 41 36 Ibid at 21, pages 102-103 (Bai’ Muajjal). Ibid at 21, pages 158-160. 38 Ibid at 11, pages 148-149. 39 Ibid at 11, page 149 (Lease as a Mode of Finance). 40 Ibid at 11, page 150 (The Commencement of Lease). 41 Ibid at 11, page 152, para 3 (Expenses Consequent to Ownership). 37 19 Variable Rentals in Long Term Leases:Several Islamic banks use the rate of interest as a benchmark to calculate the rental amounts, e. g. London Interbank Offered Rates (LIBOR), which is the rate of interest at which Conventional banks borrow funds from other banks, in marketable size, in the London interbank market. The idea is to earn the same amount of profit through the mode of leasing, as earned by the Conventional banks by advancing loans on interest. Instead of fixing a definite amount of rental, the Islamic banks calculate the cost of purchasing the asset that is to be leas ed and intend to earn an amount equal to the rate of interest.Thus, the agreement between the parties provides that the rental will be equal to the rate of interest or to the rate of interest in addition to something. Since the rate of interest is variable, it cannot be set for the whole duration of the lease. The latter arrangement has been objected to on the following two grounds:42 (a) By subjecting the rental payments to the rate of interest , the transaction is made to resemble an interest-based financing. The modern Islamic scholars have denied that argument and have stressed that the rate of interest is only used as a benchmark.As far as the requirements of Shariah are concerned, they must be fulfilled for a valid lease to be executed, and it is the latter that counts, as regards the legality of the Islamic financial lease. The vital difference between an interest-based financing and a valid Islamic lease does not lie in the amount that has to be paid to the financier or the lessor. However, it is recommended that the use of rate of interest as a benchmark must be avoided at times, where possible, so as to distinguish it with the non-Islamic transaction. 3 (b) The second criticism relates to the situation that the variations of the rate of interest are not determined and the tying up of rental with that rate of interest implies Jahalah and Gharar (uncertainty, especially in a contract that may lead to disputes later on), which are not permissible by Shariah precepts. It is one of the basic tenets of Islamic Shariah that the parties must be well aware of the consideration in every transaction they enter into.This objection has been responded by looking at the reasons of prohibition for Jahalah, namely that Jahalah may lead to disputes between the parties and it might render the parties susceptible to an unforeseen loss. As regards the first objection, both parties make their decisions with mutual consent upon a welldefined benchmark serving as a criterio n for determining rent, thus no question of dispute arises. Relating to the second objection, several contemporary scholars suggest that the relation between rent and the rate of interest is subjected to a limit.E. g. the base contract may provide that the rental amount given after a specified period will be altered according to the change in the rate of interest, but in no instance, it will be higher than 15% or lower than 5 % of the previous monthly rent. The latter implies that if the increase in the rate of interest is more than 15%, the rent will be increased only up to 15%, and if it decreases by more than 5%, the rent shall not be decreased to more than 5%. 44 42 Ibid at 11, page 154 para 1. Ibid at 11, page 155. 44 Ibid at 11, pages 155 & 156. 43 20 F.Ijaraha Wa Iqtina It is permissible in Islamic Shariah that instead of there being a sale, that the lessor signs a separate agreement, making a promise to gift the leased asset to the lessee at the end of the lease period, on c ondition that the lessee makes all the payments due for his/her rent. The latter arrangement is known as Ijaraha Wa Iqtina. It has been affirmed by a large number of contemporary Islamic scholars and is widely practised by the Islamic banks and financial institutions. Although, the validity of this arrangement is subject to two conditions.They are: (a) The agreement of Ijaraha itself should not be subjected to signing of sale or gift. The promise should be made in a separate document. (b) The promise must be unilateral and binding on the promisor only. If the leased asset is used by numerous users, the lessee cannot sub-let the asset, except with the express permission of the lessor. The lessor can sell the leased property to a third party, whereby the lessor is replaced by the new owner, and the lease agreement would then be between the new owner and the lessee. 5 This form of financial leasing has been subjected to criticism as it is not compatible with the modern financing agreem ents, as a non-binding promise cannot be enforced before courts and is thus not a legally satisfactory solution. In an attempt to reconcile Ijaraha Wa Iqtina with the modern financial structure, it is suggested that the lessor’s failure to honour his non-binding promise should be subjected to a pre-contractual liability, or culpa in contrahendo.In civil law jurisdictions, this concept of pre-contractual liability contemplates that the contracting parties will conduct their pre-contractual dealings in good faith and also points to any relevant facts, which are within the commercially usual limits, to the other party. If a party is unsuccessful in carrying out its duties, and thus in breach of contract, then it will have to pay the damages to the other party for not fulfilling the agreement. By adopting this suggestion, the promisor in breach, is made liable for the promisee’s costs, in finding another similar object to purchase. 6 G. Salam This mode of financing can be used by modern banks and financial institutions, especially in order to finance the agricultural sector. In Salam, the seller undertakes to supply specific goods to the buyer at a future date, in exchange of an advanced price fully paid at the spot. The payment is made in cash, and the supply of purchased goods is deferred. 45 Ibid at 11, pages 161-162 (Ijaraha Wa Iqtina). Construction and Lease Financing in Islamic Project Finance by Klarmann, J. I. B. L. R, page 65 (Lease Financing: Ijaraha Wa Iqtina). 6 21 Purpose of Salam Contracts: The purpose is to meet the need of farmers, who operate on a small scale, and thus need the finance for farming purposes, so that they can carry out their day-to-day activities. Moreover, it is designed to assist the traders, in their export/import transactions. Salam proves beneficial to the seller, as he receives the price in advance, and at the same time, advantageous to the buyer, as the price under the Salam arrangement is normally lower than th e price in spot sales. 7 The permissibility of Salam is seen as an exception to the general rule that prohibits forward sale and thus it is subject to certain stringent conditions, which are as follows: Conditions of Salam: 1. The buyer must pay the full price to the seller at the time of effecting the sale. The basic idea behind the Salam agreement, is to satisfy the ‘instant need’ of the seller. If it is not paid in full, the latter purpose is not achieved. 2. The quantity and the quality of the goods must be specified. 3. Salam cannot be effected on a particular commodity or on a roduct of a particular field or farm. 4. The contract must expressly state the quality of goods, thus leaving no room for ambiguities, which might lead to disputes later on. Same is the case as regards the quantity; it must be agreed upon in absolute terms. 5. The exact date and place of the delivery must be specified. 6. Salam cannot be effected in respect of things, which require them to b e delivered at the spot. 7. Since the price in Salam agreements is generally lower than the price in spot sales, the difference between the two prices may be a valid profit for the bank. . A security in the form of a guarantee, mortgage or hypothecation may be required in order to ensure the delivery from the seller. 9. The seller must deliver to the buyer, the commodity, and not the money at the time of the delivery. 48 H. Istisna’ Istisna’ is a sale transaction whereby a commodity is transacted before it comes into existence. It is an order for a manufacturer to manufacture a certain kind of commodity, to be used by the purchaser. The manufacturer uses his own material to 47 48 Ibid at 11, page 133 (Purpose of Use).Ibid at 11, pages 134-135 (Conditions of Salam). 22 manufacture the required goods. The price must be fixed with consent of all the parties involved. All other vital specifications of the commodity must also be fully settled. Subject to the acknowledgment or receipt of prior notice, either party can cancel the contract before the manufacturing party has begun the work. The time of delivery need not be fixed, however a time limit may be imposed as between the parties. 49 I. Istijrar Istijrar means purchasing the goods from time to time, in different quantities.It is an agreement, whereby the purchaser buys something at regular intervals, without any formal offer or acceptance mode or bargaining. There exists one master agreement, which contains all the terms and conditions of the purchases in a finalised form. There are two kinds of Istijrar: (a) where the price is determined after all the transactions/purchases are completed; (b) where the price is determined in advance, but the purchase payment is made from time to time. As regards the Islamic mode of financing, only (a) is relevant. Istijrar can be adopted as a viable mechanism, in the case of suppliers of the borrower.In the latter case, the bank enters into a Murabaha agreement ( Agreement to Purchase) with the suppliers (mainly trading companies), that it will purchase the assets from them at a market price or at a pre-determined discount from the market price. Whenever the customers demand, the bank can purchase that particular asset from the suppliers on the basis of Istijrar, and sell it onwards to the customer, on the basis of Murabaha. 50 49 50 Ibid at 11, pages 139-142. Ibid at 11, page 143-145 (Istijrar). 23 Chapter 3 Application of the Islamic Modes of Finance: A Research on Islamic Project Finance A. Shariah-Related Documentary and Other IssuesIn recent years, Islamic financial institutions have actively started to structure and participate in transactions, which are associated with long-term trade, as opposed to the short term trade related transactions (e. g. Murabaha). This transition has given rise to a number of important Shariah and documentary issues. The prevalent backdrop is that the Islamic bankers and their advisers now face even more st ringency, regarding the setting up of Shariah-compliant structures that are accepted commercially and are also in conformity with the existing governing law of that particular jurisdiction where they operate. 1 As noted earlier, one of the basic principles of Islamic finance is that at a particular stage in the transaction, the financial institution will be the owner of all or part of the asset that is being financed, and under Shariah precepts, several forms of risk related with being an owner cannot possibly be passed on to the customer or a third party. The latter is the most defining difference between an Islamic financial system and a Conventional one. These additional ownership risks become more serious when the transaction involves complex capital assets, e. . a power plant or an aircraft, as the potential exposure faced by the Islamic financier as an owner can be very critical and significant. It is expected that since the Islamic financial institutions are willing to take g reater risks as compared to their Conventional counterparts, this should result in greater rewards for the former. It is submitted by the academics that this is not necessarily the case. 52 In several countries, e. g. the idea of interest is sanctioned by an Act of Parliament, and the latter being affirmed by the courts.Having said that, it is imperative to notice that laws of several states are embedded in Shariah law and concepts, if not in whole then in part. It is observed that a proposed Islamic structure that has the approval of a Shariah board must be examined against the local statutes of that particular state to check whether the structure raises any adverse issues under those laws, and if so, then the proposed structure will surely need amendment and another approval from the Shariah Board.For example, under the Shariah precepts, a transfer of an interest in real estate is effective upon an agreement, signed between the buyer and seller. However, such an agreement may not be recognised by the local laws (at least as regards the bona fide third parties) until and unless the transfer is recorded in the concerned land registry. Sometimes, the problem might be such that a person to whom a real estate interest has been validly transferred under Shariah principles, would not necessarily be recognised as the legal owner under the local municipal 51 2 Ibid at 14, page 317. Ibid at 39, page 317 (Risk Reward Issues). 24 laws. In such situations, the legal and financial consultants, giving their expert advice on such structures, are required to strike a balance, so that the Shariah conditions and requirements are satisfied and are also accepted and applicable under the governing law. 53 There are certain issues relating to the nature of Islamic financing that come up too often and thus need to be discussed. Some of these are discussed below but the list is not intended to be exhaustive. Indemnities:The Shariah principle governing the operation and conditions of Islamic financing expressly prohibits indemnity for a loss or damage that is not caused by the customer’s default. Shariah sees the whole idea of seeking indemnity from the customer as unfair, notwithstanding the fact that the particular asset may have been chosen by the customer. Matters relating to the title to the asset, its fitness for its intended purpose and taxes that are imposed on ownership raise some serious and significant credit issues when one is dealing with a major capital asset, e. . aircraft or a vessel. Having said that, there must be some alternate basis for an Islamic financier to claim indemnity. Suggestions have been forthcoming in the form of seeking indemnities based on the concept of public need or necessity or by other methods, to cover the risks. E. g. such methods could include obtaining the benefit of warranties from the supplier or the manufacturer of the asset and assurances that the asset(s) are in perfect condition and have been validly perfe cted for the intended use.The financial position of the assignor (and any available insurance protection relating to the assignor) would also have to be assessed. 54 In contrast, in the case of Conventional financing, the customer often provides wideranging indemnities in order to protect the bank from any risks related with the ownership or use of the asset. The banks are not concerned with the issue of fault and are more keen to ensure that they are insulated from credit risks, arising from the ownership, use or operation of the asset. 55Warranties: As the owner of the asset, the Islamic financier may not be able to exclude the benefit of some warranties to its customer under the Shariah principles. In few instances, the Islamic financier has the benefit of the warranty from a third party that can be assigned to the customer (i. e. from a manufacturer). It has been permitted that the Islamic financier could expressly exclude any warranty from the Islamic financial institution in t he customer’s favour to the extent that it is covered by the assigned warranty.This does not seem to be an adequate solution in that it is often impossible to describe with accuracy the extent of the warranty being assigned. Inevitably, some of the warranties may not be covered by a third party assignment and thus the Islamic financier will still be providing the benefit of some warranties to the customer. In a Ijaraha (leasing) transaction the balance of such warranties, which cannot be excluded under Islamic principles may possibly be covered by insurance. 3 Ibid at 39, page 318, para 2 & 3. Ibid at 39, page 319 (Indemnities). 55 Ibid at 39, page 319. 54 25 Thus, if warranties will raise Shariah related issues, the Islamic financier must immediately try to identify those residuary warranties that cannot be covered to decide whether or not this renders the transaction commercially unacceptable, particularly, if its financial return will not reflect these additional risks. 56 Compensation and Liquidated damages:In Conventional financing, if the borrower defaults on any payment due on him, default interest is charged as against him, thus compensating the banks. This approach is unacceptable as regards Islamic financing, due to the obvious reason of any such compensation/liquidated damages tantamount to charging interest. Unfortunately, the experience of Islamic financiers in trusting their customers, that they would pay on time, has not really been successful, and there is a general agreement that there must be some form of penalty if a customer does not pay on time.The Islamic financier can only claim compensation if it suffers loss or damage due to the true fault of the customer. The compensation must reflect the actual loss of the financier. Most Islamic financings have a compensation provision dealing with failure to pay on a due date and which uses a benchmark linked to LIBOR, as discussed above. The entire purpose of such provisions is not to compe nsate the financier, but to treat it as an incentive to the customer to make payments by the due date. 57 Events of default:In a Conventional financing, there will be a progression of events of default, which will give rise to rights in the favour of the banks, and in particular, the right to demand the repayment of outstanding debts. As a general principle, the latter view is accepted by the Shariah law, as long as the customer is at fault. In a Conventional financing, there will be events of default that are not within the customer’s control. It is considered as unviable to include such events of default in an Islamic financing, and each event must be diligently drafted to take account of the latter. 8 This, however, raises credit risks, which if not compensated for by the customer in the form of an increased return to the Islamic financier, may force the latter to take on extra risk, which will be without any reward. This issue becomes even more vital in the case of a co-f inancing that involves both Islamic and Conventional financing. The Conventional banks will surely not like the idea of Islamic facility not going into default at the same time as them, and this could possibly have adverse effects on the security sharing under inter-creditor arrangements.It has been argued that in these circumstances the Conventional banks should accept the position of Islamic financiers, however, the prevailing position is that the Conventional financing is the controlling financial force in the world and thus it is often arduous for Islamic financial institutions to have their views stand in a co-financing. Examples of events of default that can potentially cause dispute between Conventional and Islamic financiers would be nationalisation, requisition, loss of air traffic rights and force majeure. If there is disagreement as regards any of the above mentioned events of 56Ibid at 39, page 320, para(s) 2 & 3. Ibid at 39, page 321, para 1. 58 Ibid at 39, page 321, (E vents of Default) para 1. 57 26 default, then it is advised that they must be put into a separate category of events called by some other name, such as events of ‘mandatory prepayment’. 59 If there is an event of default the customer may be obliged to purchase the asset, at a predetermined price. That obligation must not be listed in the same document (i. e. the lease) to avoid concerns regarding conditionality but should be contained in a separate document, e. g. an option or a deed of covenant.If the event of mandatory prepayment arises, the customer will not be in default but the happening of such an event will enable the financier to exercise a right or option granted to it by the customer in a separate document requiring the customer to purchase the asset. The conclusion to this whole procedure being that, on the face of the document, the events of default will be Shariah-compliant and for events of mandatory prepayment, there will be a Shariah-compliant system tha t results in the asset being purchased, thus clearing the amount that the customer owed the Islamic financier. 0 Set-off: It has often been disputed that the grant of set-off rights that are solely in favour of the Islamic financier, is against the Shariah precepts, which require an Islamic finance transaction to be fair and reasonable when taken in the context of the customer. The aforementioned issue has been resolved in various transactions by providing that there are statutory set-off rights that cannot be waived and which keep an acceptable balance as regards favouring the financier and the customer. 61 B. Construction and Lease FinancingSpecific Issues in Relation to Ijaraha (Leasing) Transactions Insurance and Maintenance Obligations: As per the Shariah principles, the lessor must remain liable for several insurance and major maintenance obligations. Obligation and the financial consequences cannot be transferred on to the lessee, pursuant to the terms of the lease. The insur ance obligations relate to the structural or property insurance. However, the lessee can be held responsible and liable for the cost of operational insurance, such as the business interruption insurance and third party insurance (to the extent that it relates to operational risks).The latter mentioned principles can possibly have serious implications for an Islamic financier. The direct costs involved in, e. g. maintaining an aircraft and the indirect costs and liability resulting from the failure to perform such maintenance can prove to be very significant. 62 There must be some mechanism to transfer some risk on to the lessee, or sharing of risk if you like, which, on the face of the document is Shariah-compliant. 59 Ibid at 39, page 321, para 3. Ibid at 39, page 321, para(s) 4 & 5. 61 Ibid at 39, page 321, (Set-off), para 1. 62Ibid at 39, page 322, (Insurance and Maintenance Obligations). 60 27 The most obvious approach is to appoint the lessee as the ‘service agent’ of the lessor (Islamic financier) in order to perform these activities, which would include paying the insurance premiums and the maintenance costs. The service agency agreement must specify that the service agent will indemnify the lessor for any default on his part, in the performance of these obligations. However, on the basis of general precepts, an agent must be compensated for any costs properly incurred on behalf of its principal.Usually, a nominal fee is paid to the se

Media ethics in advertising

Media ethics is defined as, the norms or standards of behavior that guide moral choices about the conduct of dealing with particular ethical principles applied by the media organizations, while advertising ethics is an emotional process that is normally applied by the media organizations to reach the general public, with a core objective of creating persuasion to the audiences to take a particular action on a particular product or event being advertised.Although there are no laws governing the communication process carried out by most advertising agencies, the media organisation pursuing the advertisements are basically regulated by the self organisation so as to ,maintain the standards and reputation of the media organisation to the public. The advertising media may include; advertising agencies, news papers, films, television stations and radio stations depending on the preferences of the product manufactures.[1]In this case, we find that most businessmen use the media as their mea ns of promoting their products to the market, through advertising, which is said to increase the audiences’ need for consuming particular products that are presented by the media, and its through this advertising that the society is notified of the presence of a new product in the market, we see that once a product is bought, another product emerges in the market. Therefore, advertising is used to influence the decision making process of a particular audience to purchase a particular product due to desires created by the media through its attractive presentation of the products quality.In this case, the audiences are said to be a major factor in median advertising communication, since it is through the audiences that the conveying and sourcing of information by the media for business organizations is made successful. The media itself regards the audience as being passive in the interpretation of media messages. And it is in this messages that the media gets the power to influ ences the audience. These audiences can be noticed by the specific needs that are always specific, whereby they are forced to look upon the media so as they can derive their satisfaction.[2]The audiences are therefore, forced to tolerate various advertising information done by the media depending on their desire to fulfill their specified needs.   Personality under this, we find that the audience have the urge of using the advertisements on the media wanting to compare themselves with other people in the society, or even compare their lifestyle and situations with others so that they can identify their status in the society, therefore they are forced to watch, read or listen to particular media items despite the fact that they are adverts.The need for dependency makes the audience to be looking upon the media to be given information about the events taking place and the products present in the market globally, so they have to tolerate the messages by the media so as they get the i nformation about a particular event taking place. In this case we find that the audience read, listen and interpret the message depending on their socio-economic class, gender, age, education and their ethnic backgrounds, in this manner we find that they are influenced by the media to carry out a particular action or even to copy the concepts of life shown in the message that is put across to them through advertisements.We see that the audience is made aware of the product and how they are to obtain it. Awareness is a stage where a consumer or the audience must have the knowledge of the existence of a particular product in the market, this is because, if a buyer is not aware of the product then there will be no action taken on the purchasing process and the business owner is likely to undergo losses due to lack of the market for its product. The media also creates interest to the audience about a particular product, he intends to buy, and therefore, he is persuaded by the content of the message presented by the media that the product is relevant to his needs.[3]Through the media, understanding is imposed on the audience whereby, the consumer should be able to know how the particular product will meet his needs, thus the media includes the benefits and the procedures of using a particular product, under this, and the media practices its role of educating its audience. Media ethics plays a major role in the creation of attitude of the audiences; under this, the consumer must be able to develop a positive feeling towards the product, depending on the persuasive message given by the media about the product. And finally we see that the audience is led to the purchase of the product, although it may take some time later after trying to get the shop that stocks the favorite this also enriches both the business and the media when the goods are sold.So, most media houses take this advantage of their presentation of the product to give various products false information so that, it may get its awareness by the audience. We find the advertisers use various methods to influence the society at large, this include:Disinformation is the passing of false information by the media. This act include   the giving out of counterfeit information or photographs   about a particular product, with an intention of misleading the audience by convincing them to believe the untruth statements, so that they engage in a particular activity so as the source of the particular information may benefit.This practice is not only practiced by the business owners, but it is also used by various political leaders and the government, who influence the media organizations to disseminate certain information that is meant to undermine other leaders in the government and through this, we find that the audience are led to take an action depending on the message given to them by the media who are surely, aware that the information included in the advertisement is not true.   Th is is usually referred to as false advertising in which the advertising agencies use a deliberate untrue statement to gain a profitable advantage; under this many consumers are persuaded to engage in business transactions or activities that will fulfill the need of the advertisement.[4]The business owners are said to using the following methods to influence the consumers to purchase their products this includes: Pricing Methods; this is the most applied practice by most business owners, it is said to be the prime way to deceit consumers into paying more than the advertised price, we find that, they advertise a particular sale price and when one gets to the shop he finds that the price is not the exact advertised price in the media.The other method applied by the business men is the introductory offer, this applied only for a period of time, where we see that when a new product is brought into the market, there is always an introductory offer to the consumers and after the expiry of the introductory time, the consumers who had accepted the first offer are not noticed on the changes and they are found to be buying the products thus benefiting the producers. The intention for this is to have the consumers to get used to the first offer whereby they continue buying the products without the knowledge of an increase in the price; this practice is usually used on the selling of electronic appliances.The other deceptive method used by the advertisers is the; misrepresentation; this is a situation where, a particular product is given some descriptive values that it actually doesn’t carry, this is mainly used to mislead the consumers that a particular product posses, an example of this is the case where most consumers were misled by a message showing that a higher level of animal care is provided, than was actually the case by the United Egg Producers’ logo on egg cartons   which said â€Å"Animal Care Certified† [5]Other producers are better know n for misleading their consumers by the use of over sizing and under sizing the packages of the products, we find that most of the packages are packed leaving some vacant spaces at the top, this is basically found in products that are normally packed in cans and this character is not noticed until it is purchased and opened by the consumer, this is mostly deceptive where the consumer is convinced that the weight and size of the product is worth the money he is paying for the product.This method is deceptive in a manner that we find that the packaging is of the same size but it carries a less product than before. Thus the consumers continue buying the products knowing that the quantity of the product is still the same as it was in the beginning, and the unethical practices appears when the label on the product is changed to be a sign of the new amount of the product, but it is always presented in a manner that is not easily noticeable.Sexuality is another concept used by most busines ses whereby, it is argued that this method is the most effective for drawing the consumers’ immediate interest, holding it and, in the long run, introducing a product that associates with that interest created by the media. In this case we find that various images of pretty women are related to an advertisement which does not accurately connect with the characteristics of the product being advertised.This method is normally used in advertising cosmetic products, whereby the display of sexual acts are highly said to be explicit to the consumers thus enhancing attractive features of the products. The sex appeal may be presented in an electronic media such as the radio, where there is a limitation on visual activities; therefore the advertisers opt to use a voice that reveals a particular emotion after the use of the particular good, while in print and television media the use of sexual images is exclusively used.[6]  Though this advertising may also have some negative impacts on the audience whereby, we may find that the person may not be able to fulfill the desires created in him on the purchasing of that particular good due to the economic status of the audience, then the person ends up creating anxiety, stress and frustration depending on the kind of information given by the media. The media organizations and the business owners are advised to be loyal to its audience and the consumers of their particular products so that they can keep the ethical standards and reputation of their organizations.ReferencesCouldry, N. and Curran, J. (2003): Contesting Media Power, Alternative media in aNetworked world, Lanham and Oxford, Rowman and Littlefield.Christians, C. G. et al. (2004): Media Ethics, Cases & Moral Reasoning; 7th Edn: New York, Allyn and Bacon.Croteau, D. and Hoynes, W. (2000): Media Society: Industries, Images and Audiences,Second Edition, Thousand Oaks, Pine Forge Press.Patterson, P. L.   and Wilkins, C. (2004): Media Ethics, Issues & Cases, 5 th edition: New York, McGraw HillRichards, J. I. (1990): Deceptive Advertising; Erlbaum at p. 20.[1] Richards, J. I. (1990): Deceptive Advertising; Erlbaum at p. 20. [2] Richards, J. I. (1990): Deceptive Advertising; Erlbaum at p. 20. [3] Patterson, P. L.   and Wilkins, C. (2004): Media Ethics, Issues & Cases, 5th   edition: New York, McGraw Hill [4] Patterson, P. L.   and Wilkins, C. (2004): Media Ethics, Issues & Cases, 5th   edition: New York, McGraw Hill [5] Couldry, N. and Curran, J. (2003): Contesting Media Power, Alternative media in a Networked world, Lanham and Oxford, Rowman and Littlefield. [6] Croteau, D. and Hoynes, W. (2000): Media Society: Industries, Images and Audiences, Second Edition, Thousand Oaks, Pine Forge Press.

Water level determination, measurement and datums Essay

Water level determination, measurement and datums - Essay Example Moreover, by performing all these activities, the exact location to extract ground water for irrigation purposes might be analysed effectively. However, if the exact place might be evaluated then many other processes of agriculture as well as human requirements might be improved to a significant extent. Therefore, due to all these purposes, the process of sea level measurement, changes of atmospheric pressure, winds, topographical changes, alteration of oscillations etc are calculated with high attention in these recent years as compared to prior age. The rationale of this essay is to analyse the importance and effectiveness of water level determination, tidal water measurements as well as datums. However, the entire essay is divided into four parts, introduction, discussion, analysis and conclusion. The level of sea is not uniform. It varies with time and distance and it’s mainly due to its steady motion. However, the motion of the sea is highly influenced by winds, tidal waves, atmospheric pressure, temperature, gravitational forces and many other forces of nature. Therefore, due to the presence of numerous uncertain forces and pressure influencing the level of water, a highly inventive technology named GPS Buoys is utilised. GPS Buoys is a sort of wave antenna of extremely light-weight used to analyse, whether the level of water in the sea is increasing or not. The prime purpose to utilise such type of instruments is to analyse the environment and the measurement of tidal waves. However, if any sort of difficult scenario arises, then it would surely get highlighted within this device and the engineers and the sea surveyors might take corrective actions for it. However, due to global warming, the ice caps or snows in high mountain peaks are melting at a rapid pace and this is increasing the level of water. But, due to increase of water level, the rate of dry land is decreasing and such a scenario

Enhancing Cyber Situational awareness through Active Defence Research Paper

Enhancing Cyber Situational awareness through Active Defence - Research Paper Example They include: i. Visualization of Situation Awareness data/ information ii. Metrics iii. Dynamic Risk Assessment for Mission Assurance However, Cyber Situation Awareness is still considered a new field of research that made its mark with Denning’s (1987, 2002) pioneering work on using expert systems to detect computer attacks in 1987, followed by a plethora of experiments thereafter. The early stage of experiments shaped the concept of tactical fusion, which was proposed by the JDL (Joint Director’s Laboratory) model in 1992. This model contains five functional levels such as 0, 1, 2, 3, and 4. It was published by Hall, and Llinas (1997). It focused solely on data management to prevent cyber attacks. In it, most of the tasks are concentrated on level 0, 1, and 4. Tadda finds JDL model as a bottom-up, data driven model (Figure 3). The significance of JDL model lies in the fact that it highlights the significance of algorithmic techniques towards supporting situation awar eness (Salerno, Hinman, & Boulware 2005). Figure 3: Tactical Fusion/JDL Model [Adapted from (Tadd 2008)] Explanation From a simple point of view, SA refers to the knowledge about ongoing events in the cyber environments. According to Ensley (2000: 3), SA defines three essential drivers which include perception, comprehension, and projection. As per Ensley, perceptions of cues (which he refers to as Level 1 SA) are fundamental, since in the absence of basic perception of important information the chance of wrongly visualizing the situation drastically increases. In support of this argument she cites a finding that showed 76% of SA errors of the pilots emanated from lack of perception of the required information (Jones & Ensley 1996). Comprehension on the other hand, refers to an outcome of how people interpret, associate, store, and retain information, and thus makes its place in SA process as Level 2 SA in Ensley’s (1995c). The Level 3 SA, i.e., Projection helps operators to perform at the highest level of SA, since it enables the operators to forecast on situation events and its dynamics, Ensley (2000). Ensley further explains that SA is all about â€Å"knowing what is going on,† while from a formal point of view it is all about â€Å"the perception of the elements in the environment within a volume of time and space, the comprehension of their meaning and the projection of their status in the near future† (Ensley 1995b: 36). In a nutshell, Ensley consolidated the theoretical perspective of SA by adding human factors in it, thereby opening a new horizon of developments towards achieving quality SA (Wickes 2008: 397). Endorsement of the above view from a host of researchers (Ensley 1993, 1994; Ensley & Rodgers 1994; Ensley & Robertson 1996; and Endsley et al. 1998) highlighted the temporal aspects of time, as the above view showed that both perception of time and temporal dynamics associated with events play crucial roles in the formulatio n of SA, and a critical part of SA involves understanding of the amount of time available in the occurrence of an event or in the course of an action. Such developments helped researchers to underpin time as an integral part of Level 2

Dropout in community colleges Essay Example | Topics and Well Written Essays - 1000 words

Dropout in community colleges - Essay Example These are the exact students that get underserved in the colleges beating the logic behind the purpose that these colleges were designed to accommodate as they also serve the interest of the local community. As these students come in and out of the higher education, it may be because of the conditions that surround their learning environment in the colleges. This paper seeks to validate that the vice of the college dropout exist and propose appropriate action to help cub the problem Managing school dropouts and completion become a very important entity that is very key to meeting the visions and missions of educating our children. It is of importance to spend most of the time to address the changing landscape of the higher education which may be as a result of the increased public demand and low public (Felgueroso, Florentino, Gutià ©rrez-domà ¨nech, and Sergi Jimà ©nez-martà ­n, 2014). College dropout in most cases has been associated and seen as evidence of failure resulting from the untapped human capital. But the fact remains that failure is one of the strengths and the drive of higher education system in the community colleges. A good school by definition should bring almost all the students to graduation as this will bring greater economic return and ensure that the mantle of the worlds most educated population is retained( Luke, Mphale, 2014). To achieve this the colleges should avoid high stake tests that consigns students to either to educated clas s or the working class, this kind of system is narrowly focused on the learning on testing that only promote students to memorize than to learn. When you get only one shot at the college level, you get motivated and work hard to get it right for example in the united states there are a lot of shots where there is nation to nation comparison of the lazy students to hardworking students to help