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FIBP – Fundamentals of Islamic Banking (Financial Academy): free practice test

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Practice test questions with answers and explanations

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01Which corporate service lets an exporter be paid against presentation of compliant shipping documents?

Practice question Unit: Structure of the Banking System in Saudi Arabia

  1. ADocumentary letter of credit ✓ Correct answer

    A documentary credit provides a bank payment undertaking against complying documents.

  2. BPersonal finance

    Personal finance funds an individual rather than the exporter’s documentary payment.

  3. CStanding order for monthly utility bills

    A standing order makes recurring payments; it is not a documentary trade undertaking.

  4. DPayroll card

    A payroll card distributes employee wages, not payment against export documents.

Reference: Financial Academy, Fundamentals of Islamic Banking, March 2021, glossary: documentary credits, PDF p.151.

02Which principle states that entitlement to profit is linked to bearing risk?

Practice question Unit: Nature of the Islamic Banking Sector

  1. AAl-ghunm bil-ghurm (gain with liability) ✓ Correct answer

    Al-ghunm bil-ghurm links entitlement to gain with bearing the relevant liability or risk.

  2. BAl-yaqin la yazul bil-shakk

    Certainty not being removed by doubt concerns evidential certainty.

  3. CAl-ʿadah muhakkamah (custom is authoritative)

    Custom being authoritative concerns the role of accepted practice.

  4. DAl-darar yuzal (harm is removed)

    Removing harm concerns preventing or remedying harm, not the gain–liability link.

Reference: FIBP – Fundamentals of Islamic Banking (Financial Academy), Nature of the Islamic Banking Sector – Concept, characteristics, objectives and sources of funds

03Who bears an ordinary financial loss in mudarabah when the mudarib has committed no negligence, misconduct or breach of the agreed terms?

Practice question Unit: Islamic Financing Modes

  1. AThe mudarib, in proportion to the profit ratio agreed

    The mudarib’s profit share does not make them liable for ordinary capital loss.

  2. BThe bank's insurer

    Insurance is not the contractual allocation of loss between mudarib and capital provider.

  3. CBoth equally

    Equal sharing is not the default rule for this capital-and-work contract.

  4. DRabb al-mal ✓ Correct answer

    The capital provider bears ordinary capital loss; the mudarib loses their uncompensated effort.

Reference: Financial Academy, Fundamentals of Islamic Banking, March 2021, section 3.3.1: mudarabah, PDF p.53.

04A bank provides 70% of a musharakah’s capital and a managing client provides 30%. Profit is agreed 50/50. An ordinary business loss of SAR 100,000 occurs, with no misconduct, negligence or breach. How much does the bank bear?

Practice question Unit: Islamic Financing Modes

  1. ASAR 100,000

    The bank is not the only capital provider, so it does not bear all the ordinary loss.

  2. BSAR 70,000 ✓ Correct answer

    Ordinary loss follows capital contributions: 70% × 100000 = SAR 70000.

  3. CSAR 30,000

    30000 is the client’s 30% share of the capital loss.

  4. DSAR 50,000

    The agreed 50/50 profit split does not determine the loss allocation.

Reference: Financial Academy, Fundamentals of Islamic Banking, March 2021, chapter 3: Musharakah, PDF pp.51–52; IIFA Resolution 136 (15/2), diminishing musharakah.

05A company wants to lease heavy equipment for 5 years with an option to own. Which product fits?

Practice question Unit: Islamic Banking Products and Services

  1. AOperating ijarah with no ownership

    Operating ijarah as stated provides use without an ownership-transfer option.

  2. BSalam

    Salam is a prepaid sale for future delivery, not leasing equipment.

  3. CIjarah muntahia bittamleek ✓ Correct answer

    Ijarah muntahia bittamleek combines a lease with a separate ownership-transfer arrangement.

  4. DAn outright murabahah sale of the equipment on deferred payment

    A deferred murabahah is a sale, whereas the company requests a lease with an option to own.

Reference: Financial Academy, Fundamentals of Islamic Banking, March 2021, ijarah ending in ownership; self-assessment Q44, PDF p.168.

06Which sukuk generally represent ownership of leased assets or usufructs, rather than only debt claims, and can be traded at market prices subject to Shariah conditions?

Practice question Unit: Islamic Banking Products and Services

  1. ASalam sukuk

    After salam issuance, the holder’s claim to future goods is not ownership of an existing leased asset.

  2. BMurabahah sukuk after the goods are sold

    After a murabahah sale, these sukuk represent the deferred sale receivable.

  3. CIjarah sukuk ✓ Correct answer

    Ijarah sukuk representing leased assets or usufructs may trade at market prices subject to Shariah conditions.

  4. DSukuk representing only receivables

    A certificate representing only debt claims does not have the same asset-ownership trading basis.

Reference: FIBP – Fundamentals of Islamic Banking (Financial Academy), Islamic Banking Products and Services – Treasury and investment; sukuk and securitization

07Which board committee oversees financial reporting, internal control and external audit?

Practice question Unit: Shariah Governance in Islamic Banks

  1. ANomination and remuneration committee for directors and executives

    The nomination and remuneration committee focuses on appointments and compensation.

  2. BShariah committee

    The Shariah committee oversees Shariah rulings and compliance, not the financial-audit remit described.

  3. CExecutive committee

    An executive committee handles delegated executive matters rather than independent financial reporting oversight.

  4. DAudit committee ✓ Correct answer

    Financial reporting, internal controls and external audit are core audit committee oversight matters.

Reference: FIBP – Fundamentals of Islamic Banking (Financial Academy), Shariah Governance in Islamic Banks – Governance in financial institutions

08A Shariah committee member receives a personal bonus linked to the bank’s annual profits. Which governance principle is most at risk?

Practice question Unit: Shariah Governance in Islamic Banks

  1. AConsistency

    Consistency concerns applying judgments coherently, not the incentive conflict itself.

  2. BIndependence ✓ Correct answer

    A personal financial reward tied to bank profits can create pressure on independent judgment.

  3. CCompetence

    A profit-linked reward does not establish whether the member has adequate expertise.

  4. DConfidentiality of the bank's internal Shariah research

    Confidentiality concerns protected information, not dependence on the bank’s financial outcome.

Reference: SAMA Shariah Governance Framework for Local Banks, Articles 5 and 7: committee remuneration, independence and conflicts of interest.

09Which document defines the scope and terms of an external Shariah audit?

Practice question Unit: Internal Shariah Control

  1. AThe Shariah committee minutes

    Committee minutes record decisions, not the external auditor’s agreed engagement terms.

  2. BThe engagement letter ✓ Correct answer

    The engagement letter records agreed scope, responsibilities and terms of the audit.

  3. CThe customer contract

    A customer contract governs a product transaction, not the external audit assignment.

  4. DThe bank's marketing plan and product brochures for the year

    Marketing materials describe products, not the auditor’s mandate.

Reference: FIBP – Fundamentals of Islamic Banking (Financial Academy), Internal Shariah Control – External Shariah audit

10A digital tawarruq app completes buy and sell in seconds. Which control is most important?

Practice question Unit: Internal Shariah Control

  1. ALower profit margin

    A lower margin changes price but does not prove valid ownership before resale.

  2. BPush notifications

    Notifications can inform the user, but do not themselves prove title transfer.

  3. CA faster user interface that reduces the number of screens shown to the customer

    Faster screens improve usability but cannot establish the required legal transaction sequence.

  4. DTime-stamped evidence of commodity ownership transfer before resale ✓ Correct answer

    Time-stamped transaction evidence establishes that ownership transfers before the next sale.

Reference: FIBP – Fundamentals of Islamic Banking (Financial Academy), Internal Shariah Control – Shariah risk and technology in Shariah control

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