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Results for Islamic Banking

Musharakah Al Baraka Bank, Islamic Banking,

August 22, 2014

Musharakah

Musharaka is an Islamic mode of financing in the form of a partnership between the bank and its client whereby each party contributes to the capital of the partnership in equal or varying degrees either to establish a new project or share in an existing project.
The accruing profit is divided between the partners pre-agreed formula, while losses are shared on pro rata basis.
The word Musharakah is derived from the Arabic word Sharikah meaning partnership. Islamic jurists point out that the legality and permissibility of Musharakah is based on the injunctions of the Qur'an, Sunnah, and Ijma (consensus) of the scholars. It may be noted that Shirkah in the Islamic Fiqh is divided into two kinds:
  • Shirkat – ul – Milk, defined as joint ownership of this or more person in a property.
  • Shirkat – ul – Aqd, defined as partnership effected by a mutual contract. Shirkat – ul – Aqd is also divided into three kinds: Shirkat – ul – Amwal, Shirkat – ul – Amal and Shirtal – ul – Wujoot.
Constant and Diminishing Musharakah:
Musharakah agreement may be entered into for a short-term or long-term period. The capital contributed by the bank in a Musharaka may remain constant throughout the contracted period.
This is referred to as constant Musharakah. Otherwise the bank gradually transfers its share in the Musharaka to the Musharik so as to decrease its share in order to transfer the ownership of the venture to the other party. This is a diminishing Musharakah.
Profits are shared in accordance with the Musharakah agreement. Losses are normally shared in proportion to the capital contributed by each Musharik.
Musharakah Al Baraka Bank, Islamic Banking, Musharakah Al Baraka Bank, Islamic Banking, Reviewed by BARI.0492 on August 22, 2014 Rating: 5

Saadiq Sahulat Online Account | Standard Chartered Bank Pakistan

August 22, 2014
When you deposit your funds in Standard Chartered Saadiq Sahulat Online Account, you can be sure that your funds will only be used in a Shariah compliant manner. We at Standard Chartered Saadiq are committed to offering Shariah compliant banking services and ensure that your funds remain Riba-free.

Benefits
Peace of mind in placing funds with a bank that uses it in Shariah compliant (Riba-free) transactions.
Complete transactional convenience.
Funds are accessible with Saadiq Visa Debit Card 24 / 7 at over 4,800 ATMs and 50,000 POS terminals in Pakistan.
Saadiq Visa Debit Card is accepted at 1 million VISA network ATMs and 27 million outlets worldwide.
World-class benefits of Internet Banking, SMS and Phone Banking services available 24 / 7.

Salient Features
Shariah compliant current account.
Unlimited deposits and withdrawals.
Free online transaction(s) up to PKR 1,000,000/- per day.
Access your funds with Saadiq Visa Debit Card 24 / 7.
Avail Online Banking, SMS, eStatement and Phone Banking services 24 / 7.
First Cheque Book absolutely free.
No minimum balance requirement.

Product Structure
Saadiq Sahulat Online Account is a non-profit bearing transaction account based on Islamic principle of "Qard", whereby the customer is the lender and bank is the borrower. The funds collected in Saadiq Current Account are invested in Shariah Compliant business ventures only (Islamic Assets like Murabaha, Musharaka, Sukuk, etc).

Useful Information
Shariah Consultants
Mudarib's Profit Share and Weightages
Saadiq Terms and Conditions (Credit Cards)
Saadiq MID
FAQs & Disclosure / Announcement
Saadiq Schedule of Charges
Saadiq Terms and Conditions (Urdu)
Saadiq Account Opening Form (Customer Copy)
Saadiq Home Finance Pricing
Fatwas
Saadiq Terms and Conditions
Saadiq Term Deposit Application Form
Straight2Bank Service Charges
Personal Banking - Saadiq - Standard Chartered Bank Pakistan
Saadiq Sahulat Online Account | Standard Chartered Bank Pakistan Saadiq Sahulat Online Account | Standard Chartered Bank Pakistan Reviewed by BARI.0492 on August 22, 2014 Rating: 5

Saadiq Current Account - Standard Chartered Bank Pakistan

August 22, 2014


Benefits

  • Peace of mind in placing funds with a bank that uses it in Shariah compliant (Riba-free) transactions.
  • Complete transactional convenience.
  • Funds are accessible with Saadiq Visa Debit Card 24 / 7 at over 2,000 ATMs and 50,000 POS terminals in Pakistan.
  • Saadiq Visa Debit Card is accepted at 1 million VISA network ATMs and 27 million outlets worldwide.
  • World-class benefits of Internet Banking, SMS and Phone Banking services available 24 / 7.

Salient Features

  • Shariah compliant current account.
  • Unlimited deposits and withdrawals.
  • Access your funds with Saadiq Visa Debit Card 24 / 7.
  • Avail Internet Banking, SMS, eStatement and Phone Banking services 24 / 7.
  • No minimum balance requirement.

Product Structure

Saadiq Current Account is a non-profit bearing transaction account based on Islamic principle of "Qard", whereby the customer is the lender and bank is the borrower. The funds collected in Saadiq Current Account are invested in Shariah Compliant business ventures only (Islamic Assets like Murabaha, Musharaka, Sukuk, etc).

Useful Information







Saadiq Current Account - Standard Chartered Bank Pakistan Saadiq Current Account - Standard Chartered Bank Pakistan Reviewed by BARI.0492 on August 22, 2014 Rating: 5

Saadiq Non-Profit Current Account - Standard Chartered Pakistan

August 22, 2014
Benefits

  • Peace of mind in placing funds with a bank that uses it in Shariah compliant (Riba-free) transactions.
  • Complete transactional convenience.
  • Funds are accessible with Saadiq Visa Debit Card 24 / 7 at over 2,000 ATMs and 50,000 POS terminals in Pakistan.
  • Saadiq Visa Debit Card is accepted at 1 million VISA network ATMs and 27 million outlets worldwide.
  • World-class benefits of Internet Banking, SMS and Phone Banking services available 24 / 7.

Salient Features

  • Shariah compliant current account.
  • Unlimited deposits and withdrawals.
  • Access your funds with Saadiq Visa Debit Card 24 / 7.
  • Avail Internet Banking, SMS, eStatement and Phone Banking services 24 / 7.
  • No minimum balance requirement.

Product Structure

Saadiq Current Account is a non-profit bearing transaction account based on Islamic principle of "Qard", whereby the customer is the lender and bank is the borrower. The funds collected in Saadiq Current Account are invested in Shariah Compliant business ventures only (Islamic Assets like Murabaha, Musharaka, Sukuk, etc).

Useful Information




Saadiq Non-Profit Current Account - Standard Chartered Pakistan Saadiq Non-Profit Current Account - Standard Chartered Pakistan Reviewed by BARI.0492 on August 22, 2014 Rating: 5

Features and User Benefits - Standard Chartered Bank Pakistan

August 22, 2014
Saadiq Foreign Currency Current AccountWhen you deposit your funds in Standard Chartered Saadiq Foreign Currency Current Account, you can be sure that your funds will only be used in a Shariah compliant manner. We at Standard Chartered Saadiq are committed to offering Shariah compliant banking services and ensure that your hard earned funds remain Riba-free.




Benefits

  • Peace of mind in placing funds with a bank that uses it in Shariah compliant (Riba-free) transactions.
  • Complete transactional convenience
  • World-class benefits of Internet Banking, SMS and Phone Banking services available 24 / 7.

Salient Features

  • Shariah compliant foreign currency current account.
  • Available in USD, GBP and EUR currencies.
  • Unlimited deposits and withdrawals.
  • No minimum balance requirement.

Product Structure

Saadiq Foreign Currency Current Account is a non-profit bearing transaction account based on Islamic principle of "Qard", whereby the customer is the lender and bank is the borrower. The funds collected in Saadiq Current Account are invested in Shariah Compliant business ventures only (Islamic Assets like Murabaha, Musharaka, Sukuk, etc).

Useful Information






















Personal Banking - Saadiq - Standard Chartered Bank Pakistan
Features and User Benefits - Standard Chartered Bank Pakistan Features and User Benefits - Standard Chartered Bank Pakistan Reviewed by BARI.0492 on August 22, 2014 Rating: 5

Standard Chartered Bank - Priority Banking - Priority Solutions

August 22, 2014
Addressing all your financial priorities in life.
From everyday banking to long term investing, we bring to you a suite of world class solutions that help you meet your financial needs.
Convenient Banking Solutions
Enjoy the benefits of a range of banking account solutions that provide you with full transactional capabilities and special pricing privileges.*
You can choose from our local and foreign current and savings accounts for your day-to-day banking requirements.
You can access your accounts through Online Banking, our internet banking which gives you complete control of your accounts thus saving your time and money. With Online Banking, you can view your accounts, transfer funds, view your credit card statement, pay utility bills and much more.

Please refer to the Privileged Pricing section earlier


World-Class Wealth Solutions

At Standard Chartered Priority Banking, we take a comprehensive portfolio approach when managing your wealth. We customise our solutions and products to meet your individual financial goals, as per your risk appetite. Our certified Relationship Managers are available to guide you on strategies which combine various financial tools to fulfil your needs. With our Priority Wealth Management programmes, we bring to you:
A vast network of qualified wealth specialists
The ability to design and source products based on your needs
Need assessment via state of the art Customer Investment Profiling Solutions (CIPS)
We offer the best products to meet your financial needs and achieve your goals

Our Wealth Specialist will ensure your investment portfolio comprises of wealth generating and wealth protecting instruments designed to help you achieve your financial goals.

We will help you build a portfolio that is suitable for you and optimises your risk return trade off.

Our area of coverage is as follows:
Investment Services
Mutual funds
Fixed income products
Insurance
Term Life insurance plan
Regular investment linked insurance plan
Single premium insurance plan
Treasury Services
Foreign exchange spot
Government debt securities

To read more about Insurance Product click here
To read more about Investment Product click here

Standard Chartered Bank (Pakistan) Limited offers both their own and third party products

Convenient Card Solutions
As a priority banking customer, you have access to a vast range of debit and credit card solutions designed to provide you with unmatched transnational convenience and a vast range of privileges that befit your Priority status. Your Platinum Debit or Credit Card is your gateway to exclusive discounts through our merchant alliances program and to our 24 hours concierge service specially designed to meet your needs.
With your Platinum Debit Card, the world is at your service with features such as:
Local and International access to your bank accounts.
Ability to conduct overseas cash withdrawals and shopping transactions.
Global recognition of your priority status.
Special discounts on foreign exchange services to Travelex outlets worldwide.
You can choose between one of the two cards from our debit cards suite designed especially for our Priority Banking customers.

Platinum Debit Card:
An exclusive offering for our Priority Banking customers, the Platinum Debit Card is the first of its kind debit proposition in Pakistan through which you can earn cashback on all your shopping - guaranteed!

PIA Platinum Debit & Credit Card

Another product available exclusively to our Priority Banking customers, the PIA Platinum Debit Card is a VISA Debit Card with exclusive Airmile rewards. PIA Platinum Debit Cardholders will have exclusive access to the following rewards:
15% discount on domestic and international airfare when travelling through PIA.
Complimentary enrolment in the Diamond Awards +Plus programme which will enable you to accumulate Airmiles faster and open a new world of rewards available exclusively to you as a Diamond Awards +Plus cardholder. Your Airmiles can be redeemed for free tickets, class upgrades, excess baggage options and much more.
Accumulation of Awards +Plus Airmiles for shopping on your PIA Platinum Debit Card everywhere.

VISA Platinum Credit Card
The Standard Chartered VISA Platinum Credit Card symbolises your success. This Priority Credit Card offers you a vast array of exclusive services especially designed to compliment your lifestyle. As a Platinum Credit Cardholder, you have access to:

Our catalogued discount program “Treasures” through which you can earn five reward points of every Rs. 200 you spend on your Platinum Credit Card. These points can be redeemed for a gift of choice from our treasures catalogue.
Exciting offers in Pakistan and across the globe.

MasterCard Titanium Cashback Credit Card
Our MasterCard Titanium Cashback Credit Card will complement your lifestyle.
5% Cashback on fuel transactions; in Pakistan and across the world - Enjoy up to PKR 500 in fuel Cashback every month
5% Cashback on all supermarket transactions; in Pakistan and across the world. Enjoy up to PKR 500 supermarket Cashback every month
3% Cashback on Electronic Outlets, and enjoy upto PKR 500 Cashback on transactions at electronic outlets every month.
There is an upper monthly cap of PKR 1,000 per Card.

Effective 16th August 2012, New Cashback offer will be applied on the Credit Card mentioned above. Click here for more details

Lending Solutions
Priority Lending

As part of your Priority relationship, we have developed an array of premium lending facilities readily available to you. Priority lending solutions have been designed based entirely on your financing needs and expectations.

Priority Credit Cards
The Priority Credit Card product suite offers you award winning Credit Cards equipped with the best in class reward solutions and unmatched propositions. The VISA Platinum Credit Card, Standard Chartered VISA PIA Co-Brand Platinum Credit Card and the MasterCard Titanium Credit Card all provide impeccable features that cater to all your transactional needs in Pakistan and across the globe. For more details, please see the Convenient Card Solutions section of this website.

Priority Mortgage
Whether you would like to purchase your dream home or upgrade your existing residence, Priority lending solutions are there to facilitate you in obtaining the right financing to make this dream come true. Allow your Priority relationship to work wonders by fast tracking your applications and providing you benefits on fees and charges (as per the Priority schedule of charges).

Priority Personal Loans
To cater to your liquidity requirements, Priority Lending solutions are equipped with two variants of personal financing. The Personal Instalment Loan facility has been developed to cater to a one time expense that you would like to repay over a specified tenure. Revolving Credit (revolving finance facility) is an evergreen loan designed to cater to your daily cash needs, as and when needed.

Business Solutions
SME Banking

Enjoy the right support to help your business reach its maximum potential. Our SME Banking team offers a one-stop financial solution bringing accessibility, affordability and efficiency to your business banking requirements.

Employee Banking programme
We also understand how important your employees are to the success of your business. That’s why our Employee Banking programme gives you a complete banking package, customised to your organisation and your employees’ needs. Through the Employee Banking programme, you and your employees will enjoy banking convenience and a dynamic approach to help your business grow.

Note: SME Banking and Employee Banking services are also available under Saadiq - Islamic Financial Solutions.

Please contact your relationship manager for further details.

Islamic Financial Solutions
If banking in line with your Islamic principles is your priority, we offer you Standard Chartered Saadiq - a complete range of Shariah compliant solutions delivered with international levels of quality and service. Our dedicated Islamic Banking team combines Shariah expertise with strong business acumen to offer customers a wide range of Shariah compliant financial products based on Islamic values.

Saadiq Accounts
When you deposit your funds in Standard Chartered Saadiq accounts, you can be sure that your funds will only be used in a Shariah compliant manner. We offer a flexible range of bank accounts for you to carry out your daily banking needs, choose from the Saadiq current and savings product suite.

Saadiq Term Deposit
Standard Chartered Saadiq offers Term Deposit account that offers competitive profits on your investments without compromising your religious beliefs.

Saadiq VISA Credit Card
We are pleased to introduce Saadiq VISA Credit Cards - Pakistan’s first riba-free, Shariah compliant Credit Card, which combines the international acceptability of VISA with worldwide reliability and excellent service.

Saadiq Home Finance
Should you wish to buy a house or transfer your existing home finance, you can do this with Saadiq Home Finance.

Takaful Solutions
Now you can save and protect your family’s future with a Takaful plan that is compliant to your beliefs and principles.

For the latest information on service charges and terms and conditions log on to www.standardchartered.com.pk
Standard Chartered Bank - Priority Banking - Priority Solutions Standard Chartered Bank - Priority Banking - Priority Solutions Reviewed by BARI.0492 on August 22, 2014 Rating: 5

Riba Free Banking - Standard Chartered Bank Pakistan

August 22, 2014
Saadiq Saver AccountAt Standard Chartered Saadiq, we believe that banking should come with a peace of mind. Saadiq Saver offers long term savings on your investments without compromising your values and beliefs.



Benefits

  • Peace of mind in placing funds with a bank that uses it in Shariah compliant (Riba-free) transactions.
  • More savings – Higher Profits.
  • Complete transactional convenience.
  • Funds are accessible with Saadiq Visa Debit Card 24 / 7 at over 2,000 ATMs and 50,000 post terminals in Pakistan.
  • Saadiq Visa Debit Card is accepted at 1 million VISA network ATMs and 27 million outlets worldwide.
  • World-class benefits of Internet Banking, SMS and Phone Banking services available 24 / 7.

Salient Features

  • Unlimited deposits and withdrawals.
  • Monthly average balance requirement of PKR 100,000/- only.
  • Tier based profit rates.
  • Profit is calculated on monthly average available balance and paid six monthly (30th June / 31st December).
  • Access your funds with Saadiq VISA Debit Card 24 / 7.
  • Online Banking, ATM / Visa Debit Card, SMS Banking and Phone Banking services available.
  • Access your funds through a network of over 130 online branches in 32 cities and more than 2,000 ATMs across Pakistan.

Product Structure

Saadiq Saver is a 'Special Savings Account' based on the Islamic principle of Mudaraba whereby the account-holder is the investor (Rabb-ul-maal) and the bank acts as an investment manager (Mudarib) who invests the account-holders' funds in Islamic assets to earn profits and share with them based on their pre-determined weightages declared at the start of every month, details of which are available on the bank's website or can be obtained from our branches upon request.

The product structure is based on a profit & loss sharing concept hence it may lead to a possibility of a net loss in any given period in which case the same will be passed on to the account-holders (investors) on pro rata basis and the Mudarib will not be compensated for its efforts and expenses incurred on investment activities performed on behalf of the account-holders.
We at Standard Chartered Saadiq are committed to offering Shariah compliant banking services and ensure that your funds remain Riba-free.

Useful Information










Personal Banking - Saadiq - Standard Chartered Bank Pakistan
Riba Free Banking - Standard Chartered Bank Pakistan Riba Free Banking - Standard Chartered Bank Pakistan Reviewed by BARI.0492 on August 22, 2014 Rating: 5

Saadiq Saver Plus Account - Standard Chartered Bank Pakistan

August 22, 2014
Saadiq Saver Plus AccountAt Standard Chartered Saadiq, we believe that banking should come with a peace of mind. Saadiq Saver Plus is a monthly savings account that offers competitive profits on your investments without compromising your value and beliefs.




Benefits

  • Peace of mind in placing funds with a bank that uses it in Shariah compliant (Riba-free) transactions.
  • More savings – Higher Profits.
  • Complete transactional convenience.
  • Funds are accessible with Saadiq Visa Debit Card 24 / 7 at over 2,000 ATMs and over 50,000 POS terminals in Pakistan.
  • Saadiq Visa Debit Card is accepted at 1 million VISA network ATMs and 27 million outlets worldwide.
  • World-class benefits of Internet Banking, SMS and Phone Banking services available 24 / 7.

Salient Features

  • Unlimited deposits and withdrawals.
  • Monthly average balance requirement of PKR 100,000/- only.
  • Tier based profit rates.
  • Profit is calculated on monthly average available balance and paid at the end of each month.
  • Online Banking, ATM / Visa Debit Card, SMS Banking and Phone Banking services available.
  • Access your funds through a network of over 130 online branches in 32 cities and more than 2,000 ATMs across Pakistan.

Product Structure

Saadiq Saver Plus is a 'Special Savings Account' based on the Islamic principle of Mudaraba whereby the account-holder is the investor (Rabb-ul-maal) and the bank acts as an investment manager (Mudarib) who invests the account-holders' funds in Islamic assets to earn profits and share with them based on their pre-determined weightages declared at the start of every month, details of which are available on the bank's website or can be obtained from our branches upon request.

The product structure is based on a profit & loss sharing concept hence it may lead to a possibility of a net loss in any given period in which case the same will be passed on to the account-holders (investors) on pro rata basis and the Mudarib will not be compensated for its efforts and expenses incurred on investment activities performed on behalf of the account-holders.
We at Standard Chartered Saadiq are committed to offering Shariah compliant banking services and ensure that your funds remain Riba-free.

Useful Information













Personal Banking - Saadiq - Standard Chartered Bank Pakistan
Saadiq Saver Plus Account - Standard Chartered Bank Pakistan Saadiq Saver Plus Account - Standard Chartered Bank Pakistan Reviewed by BARI.0492 on August 22, 2014 Rating: 5

Saadiq Basic Saver Account - Standard Chartered Bank Pakistan

August 22, 2014
Saadiq Basic Saver Account
At Standard Chartered Saadiq, we believe that banking should come with a peace of mind. That's why we are happy to present Saadiq Basic Saver that offers basic banking solutions.




Benefits

  • Peace of mind in placing funds with a bank that uses it in Halal (Riba-free) transactions.
  • Complete transactional convenience.
  • Funds are accessible with Saadiq VISA Debit Card 24 / 7 at over 2,000 ATMs and over 50,000 POS terminals in Pakistan.
  • Saadiq VISA Debit Card is accepted at 1 million VISA network ATMs and 27 million outlets worldwide.
  • World class benefits of Free Internet, SMS and Phone Banking services available 24 / 7.

Salient Features

  • Initial deposit of PKR 100/-.
  • No minimum balance requirement.
  • No transaction charge.
  • Profit is calculated on monthly average available balance and paid six monthly (30th June / 31st December).
  • Online Banking, Saadiq Visa Debit Card, SMS Banking and Phone Banking services available.
  • Access your funds through a network of over 132 online branches in 32 cities and more than 2,000 ATMs across Pakistan.

Product Structure

Saadiq Basic Saver is a 'Regular Savings Account' based on the Islamic principle of Mudaraba whereby the account-holder is the investor (Rabb-ul-maal) and the bank acts as an investment manager (Mudarib) who invests the account-holders' funds in Islamic assets to earn profits and share with them based on their pre-determined weightages declared at the start of every month, details of which are available on the bank's website or can be obtained from our branches upon request.

The product structure is based on a profit & loss sharing concept hence it may lead to a possibility of a net loss in any given period in which case the same will be passed on to the account-holders (investors) on pro rata basis and the Mudarib will not be compensated for its efforts and expenses incurred on investment activities performed on behalf of the account-holders.
We at Standard Chartered Saadiq are committed to offering Shariah compliant banking services and ensure that your funds remain Riba-free.

Useful Information













Personal Banking - Saadiq - Standard Chartered Bank Pakistan
Saadiq Basic Saver Account - Standard Chartered Bank Pakistan Saadiq Basic Saver Account - Standard Chartered Bank Pakistan Reviewed by BARI.0492 on August 22, 2014 Rating: 5

Ijarah and Ijarah Muntahia Bittamleek

March 07, 2014

Ijarah and Ijarah Muntahia Bittamleek

Ijarah is an operating lease whereby the bank will buy and lease out equipment required by the customer for an agreed rental fee. The agreement does not include a promise that the leased asset at the end of the lease term will be transferred to the lessee.
Ijarah is defined in Fiqh as a “possession of a usufruct or benefits for consideration in the Islamic Fiqh. This term is used to denote two things:
  • To employ the services of a person on wages given to him as consideration for hhis hired services.
  • It relates to the usufruct of assets and properties. Here it means “ To transfer the usufruct of a particular property to another person and exchange for a rent claim from himâ€‌.
Ijarah is divided into two kinds:
Operational Lease
According to this mode, the Islamic bank maintains a number of various assets to respond to the needs of different customers. These assets usually have a high degree of marketability. The bank lets these assets to any party so desirous to utilize for a term to be agreed upon. After the termination of the lease period the assets return to the bank, on its part the bank looks for a new lessee.
The distinguishing feature of this mode is that the assets remain the property of the Islamic bank to put them up for rent every time the Lease period terminates so as not to remain unutilized for long periods of time.
Under this mode the bank bears the risk of recession or diminishing demand for these assets.
The operation lease divides into:
  • Specific or determined lease: It is the lease of real property or other assets that one can point to.
  • Lease described on liability: It is the Lease of benefit determined by specifications agreed upon to be on liability such as a car or a ship, not particular but precisely described to forbid dispute.
Ijarah Muntohia Bitamleek
It is a lease whereby the bank will buy and lease out equipment required by the customer for an agreed rental fee. However, it differs from Ijarah in that such an arrangement provides an option for the customer to acquire the ownership at the end of a specified period.
The bank may also enter into a sale and leaseback agreement with the customer whereby the bank will purchase the asset from the customer and leaseback under Ijarah or Ijarah Muntohia Bittamleek arrangement.The accounting implications for the bank will remain the same as for Ijarah / Ijarah Muntohia Bittamleek transactions.
The option for the lessee to acquire the leased asset may be exercised during the tenor of the total lease period or at the end of the lease term as stipulated in the lease agreement.The purchase option is obligatory for the customer (lessee).
Ijarah Muntohia Bittamleek concludes with the legal title in the leased asset being passed
to the lessee. This includes the following types:
  • gift (transfer of legal title for no consideration)
  • transfer of legal title (sale) at the end of a lease for a token consideration or other
    amount as specified in the lease contract
  • transfer of legal title (sale) prior to the end of the lease term for a price that is
    equivalent to the remaining Ijarah instalments applicable under gradual transfer of legal title
    (sale) of the leased asset.
Ijarah and Ijarah Muntohia Bittamleek contracts have three major elements:
  • offer and acceptance
  • two parties: the bank as lessor (the owner of the leased asset) and the client as lessee (the party who reaps the services of the leased asset)
  • the object of the Ijarah contract, which includes the rental amount and the service (transferred to the lessee).

Ijarah and Ijarah Muntahia Bittamleek Ijarah and Ijarah Muntahia Bittamleek Reviewed by BARI.0492 on March 07, 2014 Rating: 5

Mudarabah - Modes of Islamic Banking

March 07, 2014

Mudarabah

Mudarabah is an Islamic mode of financing between the bank, providing a specified amount of capital, and the Mudarib, providing management for carrying out the venture, trade or service with a view to earning profit. It is a special kind of partnership where one partner gives money to another for investing it in a commercial enterprise. The former is called Rabb - ul - mal and the latter is called Mudharib.
Thus, Mudaraba is a contract between those who have capital and those who have expertise, where the first party provides capital and the other party provides the expertise with the purpose of earning Halal (lawful) profit which will be shared in a mutually agreed upon proportion. This type of business venture serves the interest of the capital owner and the Mudarib (agent).
The capital owner may not have the ability or the experience to run a profitable business. On the other hand, the agent (the Mudarib) may not have adequate capital to invest in a business or project. Therefore, by entering into a contract of Mudarabah each party complements one another, allowing a business venture to be financed.
  • The bank provides to the customer (Mudarib) all the capital to fund a specified enterprise.
  • The customer does not contribute capital but contributes management expertise (or entrepreneurship).
  • The customer is responsible for the day to day management of the enterprise and is entitled to deduct its management fee (Mudarib fee) from the enterprise's profits.
  • The Mudarib fee could be a fixed fee (to cover management expenses) and a percentage of the profits or a combination of the two.
  • Classical Mudarib fee is based on percentage of the profits only.
  • The balance of the profit of the enterprise is payable to the bank. If the enterprise makes a loss, the bank (as the fund provider or rab al maal) has to bear all the losses unless the loss has resulted from negligence on the part of the Mudarib. The Mudarib, in turn, will lose his efforts. 
Mudarabah - Modes of Islamic Banking Mudarabah - Modes of Islamic Banking Reviewed by BARI.0492 on March 07, 2014 Rating: 5

Murabaha - Modes of Financing

March 07, 2014
  Modes of Financing
  
 

Murabaha

Murabaha is a financing arrangement whereby the bank agrees to purchase an asset at the request of the customer. The bank takes legal possession of the asset that is then sold to the customer at an agreed sale price consisting of the amount of financing plus the profit margin. It is a cost plus transaction.
RESPONSIBILITY OF THE PARTIES
  • the bank buys the asset from the supplier for P
  • the customer then buys the asset from the bank at a marked up price (P+X), which is payable on a deferred payment basis
  • the period covering the deferred payment is effectively the period of financing
  • The title to the assets is transferred to the customer at the time of purchase but usually the bank requires its customers to pay an amount as an initial advance in order to secure the sale of the Murabaha asset to the customer (Hamish gedyyah). Hamish gedyyah (security from customer) is presented as an obligation by the
    customer in the financial statements.
Murabaha Sale is divided into two types:
Ordinary Murabaha Sale
There are two parties to it, the seller and the buyer. The seller is an ordinary trader who buys a commodity without depending on a prior promise of purchase, then he displays it for Murabaha sale for a price and a profit to be agreed upon.
Murabaha Sale connected with a promise
There are three parties to it. The seller, the buyer and the bank as an intermediary trader between the buyer and the seller. The bank here does not purchase unless the buyer specifies its desire and a prior outstanding promise to purchase.
The mode of Murabaha sale connected to a promise is used by the Islamic banks which
undertake the purchase of commodities according to the specifications requested by the
customer and then resell them on Murabaha to the one who promised to buy for its cost price plus a margin of profit agreed upon previously by the two parties.
Murabaha - Modes of Financing Murabaha - Modes of Financing Reviewed by BARI.0492 on March 07, 2014 Rating: 5

What is an Islamic Bank

March 07, 2014

What is an Islamic Bank

There is no standard way of defining what is an Islamic bank is, but broadly speaking an "Islamic bank is an institution that mobilize financial resources and invest that money in an attempt to achieve pre-determined islamically - acceptable social and financial objectives. Both mobilization and investment of money should be conducted in accordance with the principles of Islamic Shari'a".
What is an Islamic Bank What is an Islamic Bank Reviewed by BARI.0492 on March 07, 2014 Rating: 5

Principles of Islamic Banking

March 07, 2014


What is an Islamic Bank?
There is no standard way of defining what an Islamic bank is, but broadly speaking an "Islamic bank is an institution that mobilises financial resources and invests them in an attempt to achieve predetermined islamically -acceptable social and financial objectives. Both mobilisation and investment of funds should be conducted in accordance with the principles of Islamic Shari'a". 

 1- Prohibition of Interest or Usury
The principles of Islamic finance are established in the Qur'an, which Muslims believe are the exact Words of God as revealed to the Prophet Mohammed. These Islamic principles of finance can be narrowed down to four individual concepts.
The first and most important concept is that both the charging and the receiving of interest is strictly forbidden. This is commonly known as Riba1 or Usury. Money, on its own, may not generate profits. When Riba infects an entire economy, it jeopardises the well-being of everyone living in that society. When investors are more concerned with rates of interest and guaranteed returns than they are with the uses to which money is put, the results can only be negative.
Adherents of Islam believe that the Qur'an is the final book of God's word following both the Torah and the Bible. As a result, there are a number of similarities between the Islamic, Christian and Jewish faiths.
Quoting Shaikh Saleh Abdullah Kamel, Chairman and Founder of Albaraka Banking Group; Usury is forbidden in all the three religions, Judaism, Christianity and Islam, but it is the people who forget the rules of Allah. All societies, nowadays - Muslims, Christians and Jews - deal with Usury.
2- Ethical Standards
The second guiding principle concerns the ethical standards. When Muslims invest their money in something, it is their religious duty to ensure that what they invest in is good and wholesome. It is for this reason that Islamic investing includes serious consideration of the business to be invested in, its policies, the products it produces, the services it provides, and the impact that these have on society and the environment. In other words, Muslims must take a close look at the business they are about to become involved in.
In all facets of the financial system, Islam has certain rules, certain regulations as to how Muslims should go about participating in these activities. For example, in share trading or the securities market, Islam looks at the activities of the companies, to establish whether or not the companies are involved in activities which are in line with Sharia'a.
3- Moral and Social Values
The third guiding principle concerns moral and social values. The Qur'an calls on all its adherents to care for and support the poor and destitute. Islamic financial institutions are expected to provide special services to those in need. This is not confined to mere charitable donations but has also been institutionalised in the industry in the form of profit-free loans or Al Quard Al Hasan.
An Islamic bank's business includes certain social projects, as well as charitable donations. Islamic banks provide profit-free loans. For example, if an individual needs to go to hospital or wants to go to university, we give what is called Quard Al Hasan. This Quard Hasan is normally given for a short period of one year and the Islamic bank does not charge anything for that.
4- Liability and Business Risk
The final principle concerns the overarching concept of fairness, the idea that all parties concerned should both share in the risk and profit of any endeavor. To be entitled to a return, a provider of finance must either accept business risk or provide some service such as supplying an asset, otherwise the financier is, from a Sharia'a point of view, not only an economic parasite but also a sinner. This principle is derived from a saying of the Prophet Mohammed (May Peace be upon Him) "Profit comes with liability". What this means is that one becomes entitled to profit only when one bears the liability, or risk of loss. By linking profit with the possibility of loss, Islamic law distinguishes lawful profit from all other forms of gain.
In order to insure that these principles are followed, each Islamic institution must establish and provide itself with an advisory council known as a Sharia'a Board. The members of Sharia'a Boards can include bankers, lawyers or religious scholars as long as they are trained in the Islamic law, or Sharia'a.
In 2001, the Industry witnessed a remarkable development in this regard by the initiative of the
Accounting and Auditing Organization for the Islamic Financial Institutions or AAOIFI. At that time, AAOIFI's standards were enhanced to include elements that aim at broadening the role of the external auditor. Now according to these new developments the external auditor is also required to look for compliance with Sharia'a rules as defined by the Sharia'a supervisory board of each bank and in accordance with the Sharia'a standards AAOIFI has begun to issue.
Principles of Islamic Banking Principles of Islamic Banking Reviewed by BARI.0492 on March 07, 2014 Rating: 5
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