Bai-Al`Inah

Report
CHAPTER 6:
APPLICATION OF FUNDS
FINANCING FACILITIES AND THE
UNDERLYING SHARIAH CONCEPT
PREPARED BY:
MOHAMMAD SALLEH ABD SAHA
RAZIZI BIN TARMUJI
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6.1 PROPERTY FINANCING (BAI’
BITHAMAN AJIL)
DEFINITION
A normal sale with the payment of the selling
price deferred to an agreed later date @
instalment payment.
PRACTICE
i. The item to be sold exists at the time of
contract.
ii. The Shariah does not require that the
cost price be known to the buyer.
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EON BANK GROUP
EBB sells the assets to
the customer at
3 RM100,00 + profit
margin /mark up (SP)
4
EBB purchase the
asset from the
owner / vendor
(ex: RM100,000)
CUSTOMER
Customer repay the Selling
Price by installments.
1
Customer identifies
the assets to be
acquired.
OWNER/VENDOR OF ASSET
1. Customer identify the property to acquired
2. EBB will purchase the property chosen by customer after determining
their needs , based on their financial status.
3. The properties will then be sold to customer (by EBB) at a pre-agreed
price , which includes EBB’s purchased price and profit margin.
4. Once complete , customer will allowed to pay the selling price(SP) in
monthly installment over a specified period of time.
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6.2 PROPERTY FINANCING
( MUSYARAKAH )
a) DEFINITION:
- Musharakah (joint venture) is an
agreement between two or more
partners, whereby each partner
provides funds to be used in a venture.
- Profits made are shared between the
partners according to the invested
capital. In case of loss, no partner loses
capital in the same ratio.
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1. BANK AND CUSTOMER PROVIDE
CAPITAL FOR THE PROJECT E.G RM6
MILLION FROM CUSTOMER.BOTH
PARTIES AGREE ON PROFIT SHARING
RATIO (E.G 70:30) 70% OF GROSS
PROFIT TO BE DISTRIBUTED TO
CUSTOMER.30% TO BANK.
2. PROJECT
3. PROFIT
4. CAPITAL/LOSS
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CONDITIONS OF MUSYARAKAH
1. The musyarakah capital must comprise assets
which is either money or goods that can be
valued in the terms money.
2. The profit-sharing ratio (which need not be
the same as % shareholding ) shall be
determined at the point of akad (execution of
contract)
3. Each shareholder is ownwer of the Syarikat
and has a right to run the project on his own
behalf an on behalf of other shareholder as
Agent.
4. Loss sharing except for those caused by deceit
or negligence,is according to % shareholding.
5. All Musharakah project must be HALAL
projects.
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6.3 MOTOR VEHICLE FINANCING
( AL-IJARAH/AL-IJARAH THUMMA AL-BAI’)
a) Ijarah
DEFINITION
Ijarah means lease, rent or wage. Generally, Ijarah concept
means selling the benefit of use or service for a fixed price
or wage. Under this concept, the Bank makes available to the
customer the use of service of assets / equipments such as
plant, office automation, motor vehicle for a fixed period and
price.
PRACTICE
i. The property to be leased belongs to the lessor.
ii. The lessor has the right to repossess the property on a
default of the lessee
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ESSENTIAL ELEMENT OF CONTRACTS
( IJARAH)
1. Lessor ( condition of lessor)
i. Capable of taking responsibility. They must to :
-be a sound mind
-have reached the age of puberty ( baligh)
-have reached majority (able to manage their
own affair)
ii. Not prohibited from dealing with their properties
-not declared bankrupts
-not declared prodigals
iii. No coercion is exerted on either of them.
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2. Property
The four necessary conditions of property
are:i. It must be owned by the lessor
ii. It must be ready for use
iii. It must be delivered to lessee
iv. It must be specific by address,
description or specification.
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3. Benefit (use usufruct)
i. It must be permissible
ii. It can be fixed in value
iii. The lessor has the power and
capability to provide the benefit and
allow the lessee to use the property.
iv. It must be specified:- a)for a single
purpose property the period of leasing
must be known . b)for multi purpose
property the type of use must also be
stated clearly.
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4. Rental
i. Known currency
ii. Absolute amount
5.Contract
i. Acceptance must agree with
the offer
ii. The offer and acceptance
must be made at the same
meeting.
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b)Al-Ijarah Thummal al-Bai
DEFINITION:
Simple leasing for leasing
period with an option for the
lessee to purchase the
property at the end of the
leasing period through a
contract of purchase.
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DEALER
2
1
Purchase to
car
3
Lease car to
hirer
Pay lessor the rental
OWNER/LESSO
R
HIRER/LESSEE
4 Transfer to the
owner
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CONDITION IN AL-IJARAH
THUMMA AL-BAI
• 3 party
• Not a loan but a hiring arrangement
• Ownership does not pass to hirer until
all installments paid
• Hirer has right to return asset.
• Hirer has a right to early termination or
early settlement of hiring arrangement.
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BENEFITS OF HIRE PURCHASE
• 90% financing
• Payments are made towards eventual
ownership
• Early settlement
• Termination via return of goods.
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PERSONAL FINANCING
( BAI’ AL-INAH)
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PERSONAL FINANCING
( BAI’ AL-INAH)
•
Sale of an asset or property by first party(bank)
to a second party(customer) for immediate or
spot payments followed with immediate sale of
the same asset by an immediate sale of the same
asset by the second party to the first party for
a higher unit of differed payment.
•
Selling of an asset by the Bank to the customer
through deffered payments. At a later date, the
Bank will repurchase the asset and pay the
customer in cash terms.
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MODUS OPERANDI
1. BANK SELLS AN ASSET FOR RM 15,600
1.1 Customer pays RM15,600 by 60 equal
monthly
instalment of RM260
2. BANK BUYS THE ASSET FOR RM 10,000
2.1 Bank pays the customer RM10,000 (Cash
Basis)
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Terms and conditions.
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CREDIT CARDS
(Bank Islam Card)
(AL-WADIAH)
(BAI’ AL INAH)
(QARD AL-HASAN)
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CREDIT CARDS (AL-WADIAH, BAI’ AL
INAH, TAWARRUQ, QARD AL-HASAN)
•A credit card is a system of payment named
after the small plastic card issued to users
of a system.
•The difference between Islamic credit card and a
conventional credit card:In Islamic Banking, the profit rate is noncompounding as compared to a conventional credit
card
it cannot be used for transactions prohibited by
Shariah such as gambling, liquor, etc.
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• Bai-Al’Inah (immediate cash)
Bai-Al’Inah refers to the selling of an
asset by the Bank to the customer
through defferred payments. At a later
date, the Bank will repurchase the asset
and pay the customer in cash terms.
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• Qardhul Hassan (benevolent loan)
Qardhul Hassan refers to an interestfree loan. The borrower is only
required to repay the principal amount
borrowed, but he may pay an additional
amount at his absolute discretion, as a
token of appreciation.
• Al-Wadiah (savings with
trust/guarantee)
Al-Wadiah refers to agreement where
customers deposit money in the Bank,
and the Bank becomes wholly
responsible and liable for its
safekeeping
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BASIC ISLAMIC CREDIT CARD
STRUCTURE
1
BANK
CUSTOMER
CUSTOMER
Wadiah
Wadiah
4
5
2
3
Islamic
credit card
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Bai’ Inah
Contract
BAI INAH (SELL AND BUY
BACK TRANSACTION)
1Sells a price od land on deferred payment basis
( profit 18%, RM10,000+RM1800=RM18,000)
Customer
2
Resells the land to BANK for cash at the principal price =RM10,000
3 Disburse RM10,000 to customer’s ICC (Islamic Credit Card) Wadiah account
(QARDHUL HASSAN)/Benevolent Loan
4
Wadiah /
Safekeeping
Allow customer to use more than available balance in ICC Wadiah account.
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Process Flow of Bai’ Inah Transactions (Bank Islam Card)
• The bank sells an identified assets of the Bank to the
customer on deferred basis at cost plus profit which is
equivalent to the maximum amount to be paid by the
customer
• The customer then sells the same asset to the Bank on
cash basis which is equivalent to the limit of the card.
• The proceeds are disbursed into a Wadi`ah saving
account designated to the customer. The amount
becomes the card limit that may be utilised by the
customer as and when he desires.
• The customer pays the Bank the amount he utilises
either on monthly basis (by paying a specified
minimum amount) or the full amount.
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STRUCTURES OF ISLAMIC
CREDIT CARDS.
1. Periodic service charge
• The card issuer charges the card holder a
monthly or annual charge (fixed fee period)
• Additional charges for any forward credit
balance.
2. Deferred payment sale
• The card issuer allows the customer to use his
card to pay for a good or service under murabaha
type transaction.
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3. Lease purchase agreement.
• The card provider is the owner of the
asset until the card holder makes the
final payment.
• The client can be charged a rental fee.
4. Pre paid credit card.
• The client deposits an amount of money
on their card to pay for goods and
services.
• Due to the nature of the card, client
can not pay for goods in excess of their
debit balance and credit balances do
not occur.
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• Thus, any type of interest
charges are easily avoided.
• The card issuer can invest
the excess balances to
generate a return and must
be in shariah compliant.
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• 1.Syariah Concept
• Tawarruq (Reverse Murabahah /
Monetization)
• 2.Applicant's Requirement
• Applicant's age:
• 21 years old and above for Principal
Cardholders
• 18 years old and above for Supplementary
Cardholders
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Process Flow of Tawarruq Transactions (Bank Islam Card)
•
•
•
•
•
•
The customer enter into an arrangement with the Bank where customer
promises to buy a specified commodity from the Bank. The customer
also appoints the Bank as his agent to sell the said commodity.
The Bank buys a specified commodity from Trader 1 on spot basis.
The Bank sells the same commodity to the customer on deferred basis
at cost plus profit.
As agent, the Bank sells the same commodity to Trader 2 on spot basis.
The Bank pays the selling proceeds to the customer by crediting his
designated Wadiah account and the amount becomes his card limit.
The customer pays the Bank the amount he utilises either on monthly
basis (by paying a specified minimum amount) or the full amount.
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PROJECT FINANCING
(AL-MUDARABAH)
(AL-MUSHARAKAH)
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PROJECT FINANCING
(AL-MUDARABAH) (AL-MUSHARAKAH)
• Defi : Financing of a particular project in
which an investor is satisfied to look initially
to the cash flows and earnings of that
project.
• Goal must put in place that Shariah must
provide clear rulings on certain aspects of
project finance.
• In project financing, the goal is to assemble
funding for a project whose benefit will go to
the sponsor.
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CONCEPT AND STRUCTURE OF
ISLAMIC INSTRUMENTS
• Instrument must be free from interest
(riba), ambiguities (gharar), and gambling
(maisir).
• The requirement of ownership (milikiyah) is
paramount to see the ownership risk
(daman milkiyah) is rightly observed by the
selling parties and lessors.
• The contract of murabahah and ijarah are
usually applied in Middle Eastern countries.
• In Malaysia, most financing based on Bai’
al-Inah and Bai’ al-dayn.
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Project financing techniques
• Primary means for financing broad range
of economic units world-wide.
• Eg : Power generation, oil and gas
industries, mining, various infrastructure
projects, manufacturing and etc.
Technique and instruments – shari’ah
compliant
• Conceptually
• Structurally
• Documentaries
• Modus operandi – execution and
implementation.
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MUDARABAH PROJECT
FINANCING
Contract of Mudarabah
profit sharing ratio (x:y)
Financier
(Rabb al
Mal)
Y: to rabb
al mal
Company
(Amil/
Mudarib)
Capital
profit shared in
accordance to preagreed proportions (x:y)
x% to mudarib
Project
revenue
Loss borne totally
by rabb al mal
Invest in
project
Ex: real estate
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MUSHARAKAH (PROJECT
FINANCING)
Contract of Musharakah
FINANCIER/
BANK
X%
Capital contribution
x:y
CAPITAL
Y%
PROJECT
REVENUE
•
•
•
COMPANY
Profit shared according to agreed ratio.
To ratio of capital contribution.
Loss shared according to ratio of capital contribution.
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INVEST
IN
PROJECT
WORKING CAPITAL
FINANCING
MURABAHAH
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MURABAHAH
 Murabahah refers to the sales of goods at a price
which includes cost plus profit as agreed by both
seller and the buyer.
 Allows customer :
To take delivery of the goods immediately
Settle deferred payment agreement with
Bank
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• HADITH :
EVIDENCE
– Some scholars made murabahah analogous to a form of sale
called Tawliyyah (sale at purchase price without making
profit)
– It was reported that when Prophet (s.a.w) was preparing for
hijrah to Madinah, Abu Bakar bought 2 camels for the
journey. The Prophet (s.a.w) said to Abu Bakar : sell to me (at
cost without profit) one of them. Abu Bakar said : it is yours
for nothing. The Prophet (s.a.w) said : I would not take it for
nothing.
– Is a legitimate contract in Islam. Majority of fuqaha
comprising the sahabah (companion of the Prophet), the
tabien (followers the sahabah) and iman of the Mazhab
considered Al-Muharabah as a permissible contract based on
rukhsah principle.
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APPLICATION
• Murabahah can be apply :
Ordinary Murabahah Sale
• Involve 2 parties – seller & buyer
• The seller is an ordinary so trader who buys a commodity without
depending on a prior promise of purchase, then he display it for
Murabahah sale for a price and a profit to be agreed upon.
Murabahah based on Order & Promise
• Widely applicable because used as one of financing tools by Islamic
banks worldwide
• Murabahah to the purchase orderer for a pre-agreed selling price,
this having been specified in the customer’s promise to purchase.
The payment is payable within a fixed future date in lump sum of
by fixed installments.
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USES
• To provide financing for his working capital
requirement to purchase stock & inventories, spare &
replacement/semi finished goods and raw materials.
• Bank purchases or appoints the customer as its agent
to purchase the goods on its behalf.
• Upon delivery, Bank pays the supplier at sight or upon
maturity of credit term based on the invoice value.
• The goods will be acquired in the bank’s name and
with the bank’s funds.
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• Bank subsequently sells the goods to the customer on
deferred payment terms at a price inclusive of the
Bank’s profit (Murabahah principles)
• Customer will undertake to settle the selling price on
the maturity date (30, 60, 90 days or others)
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FLOWS
1) Purchase order
SUPPLIER
OF GOODS
2) Supplier goods to customer
3) Settles the
purchase price on
cash basis
CUSTOMER ACTS
AS AN AGENT FOR
THE BANK
5) Settles the Bank’s
selling price on maturity
BANK
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4) Sells goods on
deferred payment basis
BENEFITS
• Enables customer to settle payment obligation to the
seller.
• Facilitates convenient cash flow management of a
business by having a fixed rate financing nature.
• As a prudent and reliable basis financing.
• Provide up to 100% financing of invoice value.
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Pillars
•
•
•
•
•
Seller
Buyer
Merchandise/goods
Price (mark-up)
Sighah : Offer (Ijab) and Acceptance (qabul)
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CONDITIONS
• The subject of the sale must exist in the ownership
and possession (physical/constructive) of the bank at
the time of sale to its client. As a seller (i.e. owner of
goods) the bank is exposed to ownership risks such as
price risk and risk of destruction of asset before
actual delivery to client. This risk-bearing legitimates
the bank’s profit
• The price of sale must be fixed at the time of
contract. This is important to avoid gharar
(uncertainty) in the transaction.
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• The first sale and purchase between the banks and
the producer of the commodity the second sale and
purchase. i.e the bank must purchase the commodity
from a third party and not the client himself.
• Al-Murabahah must not involve sale of forbidden
commodities such as liquor, pork and the like.
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Bai Salam
DEFINITION-LITERALLY
1
2
• postponed/deferred delivery sale
• the sale of a deferred item in
exchange for an immediate price.
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TECHNICALLY
1
2
• A sale with an immediate payment to the
seller while the delivery of the sold good is
postponed until a specified date in future
• A sale which the monetary payment is fully
made in advance in exchange for a delayed
delivery of goods in future
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ESSENTIAL CONDITIONS
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PRICE
1
• The price must be paid in full by the
buyer to the seller at the time of the
effecting the sale because sale of a
debt against a debt is expressly
prohibited by Rasulullah (pbuh)
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GOOD
1
• The quality of the commodity must be expressly
specified – precious stones cannot use contract of al
salam
2
• The quantity of the commodity is agreed upon in
absolute terms
3
• Cannot be effected on a particular commodity or on a
product of a particular field
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DELIVERY
1
• The exact date and place of delivery must be specified in the
contract
2
• Cannot be effected in respect of commodity which must be
delivered at spot
3
The seller must deliver the commodity and not money to the buyer
at the time of delivery
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IMPORTANCE
To meet the need of small farmers who need money to grow their crops and
to feed their family up to the time of harvest
To meet the need of traders for import and export business
The financial institution can sell the salam commodity through a parallel salam contract
and earn profits provided that:
1. There must be 2 different and independent contracts
2. Cannot be used as a buy back facility
The financial institution can obtained a promise to purchase from a 3rd party
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MODUS OPERANDI BAY’ SALAM
(BETWEEN FARMER AND BANK)
1) This is a contract of sale of goods where the
purchase price is paid in advance while the
goods are delivered in the future.
2) Under this contract, the farmer will
undertake to supply crops of a specific
quality and quantity to the bank at a
future date in exchange of an advance
price fully paid at the time of contract. It
is necessary that the quality of the
commodity intended to be purchased is
fully specified leaving no room for
ambiguity.
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MODUS OPERANDI BAY’ SALAM
(BETWEEN FARMER AND BANK)
3) The bank will then sell the crops and the
difference between the selling price and the
purchase price is therefore the bank's
maximum profit.
4) In essence, Bay’ Salam is a
prepayment sale, i.e. contract of sale
whereby payment is made today by the
bank and goods are delivered in
the future. Such an agreement benefits
both parties.
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ISB 654
ADVANCE FIQH MUAMALAT
BAI’ ISTISNA’
Siti Khadijah Ab Manan
UiTM
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DEFINITION-LITERAL MEANING
1
• Making, manufacturing or constructing
something
2
• According to ibn Manzur: it occurs when
someone invited, induced or caused another
to make the thing
3
• According to al Fayrozabadi: it occurs when
someone asked for something to be made
for him
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TECHNICAL MEANING
1
• al Zarqa’ defined Istisna’ as contract of selling a manufactured
thing with an undertaking by the seller to present it
manufactured from his own material, with specified
descriptions and at a determined price.
2
• According to the Mejelle, Istisna’ is to make a contract with a
skilled person to make something. The person who makes the
thing is called Saani’, the person who causes it to be made
Mustasna’ and the thing made Masnu’.
3
• A contract of selling a manufacturable thing with an
undertaking by the seller to present it manufactured from his
own material, with specified descriptions and at a determined
price
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CONDITIONS-OBJECT
1
2
• The object must be precisely determined in
the contract – its essence and quality
• To avoid ignorance which may lead to dispute
• The recommended manufactured goods
should be the things that people customarily
deal with in the field of manufacture – Hanafi
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CONDITIONS-DELIVERY
1
• The time of delivery
must be specified
• To avoid ignorance
which may lead to
dispute
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Current Practise:
AREAS OF FINANCING
1. Food processing, drying, or canning industries or
beverage manufacturing.
2. High technology industries such as aircraft industry,
locomotive and ship building industries, in addition to
the different types of machines produced in large
factories or workshop.
3. Finance intangible assets, such as electricity and gas.
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BIMB
• BIMB utilize Istisna’ contract in Project
Financing or Bridging (Istisna') to sell to
or buy from a customer a non-existent
asset
(such
houses
and
commercial/industrial building) which is
to be built based on the specifications
outlined by the ultimate buyers at an
agreed pre-determined selling price and
the date of delivery.
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QATAR ISLAMIC BANK (QIB)
• In 2010, Qatar Islamic Bank (QIB), has signed
an Istisna' agreement with Al-Khor & Dakira
Schemes & Services Co. for the financing of a
major residential project in al-Khor (North of
Qatar).
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Modus operandi of Istisna’ Financing.
1) The buyer (mustsni’) places an
order to purchase an asset (e.g.
building, house) to be delivered
in the future.
2) The buyer (mustasni’) requires
the seller (sani’) to construct the
asset based on the specification
that stipulated in the sale and
purchase contract that agreed by
both of the contracting parties.
These specifications include the
nature, type, quantity of the asset
and also delivery date.
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Modus operandi of Istisna’ Financing.
3) Then, both of the parties
decide and agreed with the sale
and purchase price and any
changes cannot be making after
that.
4) The payment can be made
either spot cash or installment.
It’s no required for the (mustsni’)
to pay the full price at the time of
contract.
5) Lastly at the delivery date, the
seller (sani’) will deliver the order
to the buyer (mustsni’).
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Different ISTISNA’ AND SALAM
NO.
ITEM
ISTISNA’
SALAM
1.
SUBJECT MATTER
Is always a thing which needs to
be manufactured.
Can be anything that need
manufacturing or not.
2.
PRICE
Does not necessarily need to be
paid in full in advance.
Not even necessary to pay the
full price at delivery.
Can be deferred to any time
agreed upon by both parties.
May be made in installments.
Has to be paid in full in advance.
3.
TIME OF DELIVERY
Does not have to be fixed
It is an essential part of the
contract
4.
CANCELLATION OF
THE CONTRACT
Can be cancelled before the
manufacturer starts the work.
Cannot be cancelled unilaterally.
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Different ISTISNA’ AND IJARAH
NO.
ITEM
ISTISNA’
IJARAH
1.
MATERIAL
Provided by the
manufacturer.
Provided by the
customer.
2.
RIGHT OF
REJECTION
The customer has a right Right of rejection of
to reject the goods after goods after inspection
inspection.
does not exist.
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The Similarities between Bay’ al Salam and Istisna’.
Criteria
1.
Not include riba
2.
Contract involves non-existing items.
3.
Full knowledge regarding to the contracts.
4.
The object of sale
5.
Location of delivery
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LETTER OF
CREDIT
(WAKALAH)
(MUSHARAKAH)
(MURABAHAH)
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WAKALAH
Under this concept, the Bank acts as
agent on behalf of the Buyer/Applicant.
Customers have to pay for fee and
commissions under the concept of Ujrwal-Umulah.
Refers to any agency relationship where
a Bank acts an agent on behalf
company/individual.
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PROCEDURS
• The Buyer/customer informs the Bank of their LC
requirements and request the Bank to provide
facility.
• Buyer/Applicant will place deposit to the full amount
of goods to be purchased/imported which Banks
accepts under the contract of Wadiah.
• Bank Islam establishes the LC and remits the
payment to the Seller/Beneficiary utilizing the
customers’ deposit and releases the documents to the
customer.
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MUSHARAKAH
• A partnership agreement between two
or more individuals or bodies.
• Each contributing capital.
• Profit or loss is shared between the
partners according to the ratios.
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PROCEDURS
• Customers who interested have to admit the LC
requirement and negotiates the term of Musyarakah
financing, following the project financing under the
contract of Musyarakah.
• A deposit required for his share of the costs of
goods to be purchased or imported.
• Banks established the LC and pays the proceeds to
the negotiating bank utilizing the customers deposits
as well as its own share of financing and releases the
documents to the customer.
• Customers takes possession and dispose these off in
the manner agreed in the agreement.
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Profit-Sharing
• Bank together with customer share the
profit from the venture as provided for
in the agreement.
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MURABAHAH
Refers to the sale of goods at a price, which includes
cost plus as agreed by both seller and the buyer. This
is a contract where the commodity exchanged for is
delivered immediately and the price is paid in lump sum
at late date.
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PROCEDURES
• The customer/buyer require the LC together with
financing over a certain period of time.
• The Bank will establish the LC and remit the payment
to the Seller/Beneficiary utilizing its own funds.
• The banks appoints the customer as its agent to
purchase the required goods on its behalf.
• The banks will sell the goods to the Buyer/Applicant
at a sale price comprising its cost and a profit margin
(cost plus basis - al-Murabahah)
• Buyer/Applicant is given a deferred payment term for
the settlement the purchases.
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ISLAMIC ACCEPTED BILLS
BAI’ AL-DAYN
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•"Dayn" means "debt" and "Bai' " means sale. "Bai'-al-dain",
therefore, connotes the sale of debt.
•Al-Dayn can be either monetary, or a commodity, i.e food or metal.
•Bay' Al-Dayn or debt trading can be defined as the sale of payable
right or receivable debt either to the debtor himself, or to any third
party.
•This type of sale is usually for immediate payment or for deferred
payment.
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•The Shariah permits the selling of debt by its equivalent in quantity
and time of maturity by way of hawalah. This form of debt trading is
accepted by all schools of Islamic law provided it is paid in full and thus
gives no benefit to the purchaser.
•According to most Hanafis, Hanbalis and Shafie jurists, it is not allowed
to sell Al-Dayn to non debtor or a third party at all. However Malikis,
and some Hanafis and Shafie jurist allowed selling of debt to third party
with some conditions which are :a- The ability of seller to deliver the debts;
b- The debt must be mustaqir or confirmed and the contract must be
performed on the spot;
c- The debt cannot be created from the sale of currency (gold and
silver) to be delivered in the future and the payment is not of the same
type as debt, and if it is so, the rate should be the same to avoid Riba.
d- The debt should be goods that are saleable, even before they are
received. This is to ensure that the debt is not of the food type which
cannot be traded to the debtor.
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ACCEPTED BILLS -i
• Can be drawn to finance domestic purchases or
imports and domestic sales or exports.
• Financing facility using the Murabahah contract,
granted to the buyer or importer to finance their
purchase of tradable goods that includes raw
materials, semi-finished and finished goods.
• Payments to suppliers will be made immediately by
Bank Islam, and customer may match the deferred
payment according to the aging of credit terms.
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IAB - IMPORT
• Financing facility using the Bai’ Dayn
contract, granted to the seller or exporter
to finance their sales or export of goods
on credit terms that includes raw
materials, semi-finished and finished
goods.
• Bai’ Dayn or debt trading is a short-term,
financing facility whereby Bank Islam
purchases the customer’s right to the
debt, which is normally securitised in the
form of Accepted Bills.
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• Contract : Bai’ al-Dayn (debt trading)
• The previous working capital financing under alMurabahah which gives rise to debt or al-Dayn may
indeed be securitized.
• The Bank drawn a Bill of Exchange to be accepted by
the customer.
• This bill will be drawn for full amount of the Bank’s
selling price on the maturity date of the financing.
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USES
• Bank Islam appoints the customer as the agent to
purchase goods on its behalf.
• Upon delivery the goods, Bank Islam pays the
supplier at sight or maturity of credit term for
the cost of the goods based on the invoice value.
• Bank Islam will subsequently sell the goods to the
customer on deferred payment terms at a price
inclusive of the Bank’s profit.
• The deferred payment terms on sale on sale of
goods granted the customer, constitute creation
of a debt. This is securitized in the form of AB-I
drawn by Bank Islam.
• Upon maturity, the customer pays Bank Islam the
agreed sale price of the financing.
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IAB - EXPORT
• Contract : Bai’ al-Dayn (Debt Trading)
• The Bank finance exports and sales on the concept of
bai’ al-Dayn.
• Bai’ al-Dayn or debt purchase is short-term financing
facility whereby the bank purchases the customers
rights to the debt which is normally securitizes in the
form of Bill Exchange.
• Under this facility, an exporter who wishes to avail
himself of this facility. Prepares export documents as
required under the sales contract or letter of credit.
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• He presents this documents to the bank to be
purchased. As the exports documents have to be sent
to buyer overseas, the bank request the exporter to
drawn another Bill of exchange drawn on the Bank,
known as IAB-Exports.
• The IAB-Exports may subsequently be sold in the
secondary market.
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BENEFITS
• Provide up to 100% financing of invoice value.
• Improves customer’s cash flow as sales proceeds are
received immediately while payment is made only upon
maturity of IAB-i.
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