2. Group Members

3. Islamic Modes
of
Financing

4. Agenda

5. Introduction

6. Islamic Principles of
Transactions

7. Cont‟d

8. Cont‟d

9. Cont‟d

10. History

11. History Cont‟d

12. History Cont‟d

13. Current Position:

14. Islamic Modes of Financing

15. Cont‟d

16. Mushaarakah
• “Mushaarakah” literally means sharing
• It is derived from “shirkah” which means
“being a partner”
• Joint enterprise formed for conducting
business
• Profit & loss

17. Rules of Mushaarakah
• Assets of Mushaarakah are jointly
owned in proportion to the capital of
each partner.
• loss [by general consensus] is always
subject to the ratio of investment.

18. Cont‟d
Ratio of profit:
Must be equal to ratio of investment - Imam
Malik & Imam Shaafi„ee
Does not have to be equal – Imam Ahmad
May differ, except that a sleeping partner
cannot share the profit more than the
percentage of his capital – Imam Abu Hanifah

19. Management of Mushaarakah
• Each partner has a right to take part in
Mushaarakah management.
• The partners may appoint a managing
partner by mutual consent.
• One or more of the partners may decide not
to work for the Mushaarakah and work as a
sleeping partner.

20. Cont‟d
• If one or more partners choose to become
nonworking or sleeping partners, the ratio
of their profit cannot exceed the ratio of
their capital investment.
• Any partner can liquidate his shares and
leave the partnership according to the
contract or by mutual consent of other
Partners.

21. Mudaraba
• An arrangement in which two entities
are involved
Mudarib
Rabbulmal

22. Cont‟d
• Mudarib who runs the business can be
a natural person, a group of persons, or
a legal entity and a corporate body.
• Rabbulmal (Investor) shall provide his
investment in money or species

23. Cont‟d
• Conduct of business shall be carried out
exclusively by the Mudarib within the
framework of mandate given in the
Mudaraba agreement
• The profit shall be divided in strict
proportion agreed at the time of contract

24. Cont‟d
• Financial losses of the Mudaraba shall be
borne solely by the Rabbulmal, unless it is
proved that the Mudarib has been guilty
• The loss, if any, shall be shared in
proportion to the capital of the parties.

25. Cont‟d
• The liability of Rabbulmal is limited to his
investment unless otherwise specified in the
Mudaraba contract
• Mudaraba may be of various types
• The Mudarib can invest his funds in the
business of the Mudaraba with the
permission of Rabbulmal

26. Murabaha

27. Murabaha

28. ISLAMIC SALE

29. SOLD GOOD OR SUBJECT MATTER
( Mube‟e )

30. CONTRACT
SUBJECT
MATTER
CONTRACTORS
WORDING OF
CONTRACT
•Specified
•Quantified
•Non-restricted
•Sane
•Mature
•Present
•Unconditional
•Non-contingent

31. 31
Step by Step Murabaha

32. 32
Stage One (a) for Murabaha
financing
1- Promise stage
Facility
approved
Bank Client

33. 33
Stage One (b) for Murabaha
financing
Cont’d
Murabaha
Facility
Agreement
MOU
Bank Client

34. 34
Stage One (c) for Murabaha
financing
Cont’d
purchase
requisition
/Promise to the
bank.
Bank Client

35. 35
2- Agency stage
Agency
Agreement
Bank Client
Agreement to
Murabaha

36. 36
Cont’d
Stage Two for Murabaha financing
Agreement to
Murabaha
Agency
Agreement
Disbursement to
the Supplier
Islamic
BankBank Client

37. 37
3. Acquiring Possession
Stage three for Murabaha
financing
Client purchases
goods and takes
possession
Transfer of Risk Vendor
Bank Client

38. 38
4. Execution of Murabaha
Stage four (a) for Murabaha
financing
Offer to
purchase
Bank Client

39. 39
4. Execution of Murabaha
Stage four (b) for Murabaha
financing
Murabaha
Agreement
+
Transfer of Title
Bank Client

40. 40
Cont’d
Stage four (b) for Murabaha financing
Payment of PriceBank Client

41. Cont‟d

42. Cont‟d

43. IJARAH

44. Ijarah

45. 45
BASIC RULES OF IJARA

46. BASIC RULES OF IJARA

47. BASIC RULES OF IJARA

48. BASIC RULES OF IJARA

49. Cont‟d

50. Salam & Istisna

51. Salam

52. Conditions

53. As mode of Financing

54. Istisna

55. validity of Istisna‟a

56. Terms and conditions

57. Conclusion

58. Cont‟d