“General Concept of Islamic Banking”
(Fundamentals of Deposit and Investment Products of Exim bank under Islamic Shariah Principle)
Introduction
Export Import Bank of Bangladesh Limited (Exim Bank) was incorporated on 02 June 1999 as a public limited company under the Banking Companies Act 1991 and Companies Act 1994 and started its operation on 03 August 1999.
Exim Bank is one of the best Islamic Bank in Bangladesh committed to conduct all Banking activities under Islamic Shariah principle since its conversion on 04.07.2004 from conventional banking to “Shariah Based Islami Bank”. The responsibility of the Board of Directors, Management of the Bank is rendering their utmost efforts to ensure that all the activities of the bank and its products are Shariah Compliant. It is also exclusively required to ensure that the activities of Exim Bank are carried out properly and uniformly according to the principles of Islamic Shariah. With this end in view to formulate an integrated handbook embodying different Terminologies, Definitions of the principles, Modes of deposits and Modes of investments has been prepared detailing the particulars including strength and superiority of the specific products for improving the knowledge base of all concerned of EXIM Bank. Though there are specific guidelines/operational manuals for every aspects of Islamic banking business, this will add the key points as ready reference.
This book contains the basic operational/functional termswhich would increase our knowledge base about the banking under “Islamic Shariah Principle” and create bindings/obligations upon its compliances for the benefit of the day of end judgement.
The Term Paper on Development Of Islamic Banking In The UAE
I would like to express my special gratitude to my boss, Prof. Badr Aboul-Ela for his continuous encouragement, support and guidance, special appreciation to my teacher Dr. Al Gielani Al Sherief for his efforts in providing me with the required knowledge and for improving of my research skills. I would also like to thank Ms. Wafaa from the Central Bank for providing me with the required data. ...
Definitions of Terms used in Islamic Banking Operations
a) “Shariah” means such rules and regulations as have their origin in the holy Qur’an and Sunnah to govern all aspects of human life.
b) “Islamic bank” means such a banking company or an Islamic banking branch of a banking company licensed by Bangladesh Bank and follows the Islamic Shariah in all its principles and modes of operations and avoids receiving and paying of interest at all levels.
c) “Islamic Banking Business” means such banking business, the goals, objectives and activities of which is to conduct banking business/activities according to the principles of Islamic Shariah and no part of the business either in form and substance has any elements not approved by Islamic Shariah.
d) “Depositor” means someone who holds any account namely Current account based on Al-Wadiah principles and/or Savings or long/short term deposit accounts with any Islamic Banking Company under Mudaraba principles.
e) “Investment” means any such modes of financing which Islamic Bank Company does in accordance with principles of Shariah or as per the Shariah approved modes like Mudaraba, Musharaka, Bai-Murabaha, Bai-Muajjal, Istisna, Lease, Hire-purchase under Shirkatul Melk, etc.
f) “Compensation” means such financial penalty as is imposed by a Islamic Banking Company over and above the amount of installment when a client fails to repay Bank’s investment on due dates as per the agreement executed by him/her.
EXIM Bank receives deposits under two principles:
1. Al-Wadeeah principle.
2. Mudaraba principle.
Al-Wadeeah:
Fund which is deposited with Banks by the depositors with clear permission to utilize / invest the same is called Al-Wadeeah. Exim bank receives deposits in Current Accounts on the basis of this Al-Wadeeah Principle. Exim bank obtains permission from the Al- Wadeeah depositors to utilize the Funds at its own responsibility and the depositors would not share any profit or loss earned/incurred out of using of this funds by the bank. Exim bank has to pay back the deposits received on the principle of Al-Wadeeah on demand of the depositors. The depositors have to pay government taxes and other charges, if any.
The Essay on Saving: Insurance and Deposit Account
The Life Insurance Corporation of India, which is the biggest Insurance Corporation of India, encourages people to save for the future. The habit of saving should be ingrained in man but there is more people nowadays squandering money than saving it. Even an ant has the sense of saving; a beaver in a forest saves food little by little for the rainy season. The rainy season for the animal indicates ...
EXIM Bank’s Al-Wadeeah product:
Al-Wadeeah Current Deposit Account
Al-Wadeeah Current deposit account is a mode of deposit A/c of EXIM bank under which deposit is received on Al-Wadeeah Principle. This means that clients permit Banks to utilize the fund at Bank’s will. It is a transactional mode of deposit Account. Under this deposit Account, client is allowed to deposit/withdraw any amount of money at any time. No profit is allowed for the Account.
Main features:
a. The account may be opened with a minimum amount of Tk.3000.00
b. Under this mode of deposit Account Bank is allowed by the depositors to utilize the fund at Bank’s will.
c. The weightage of the account is zero. No profit is allowed for this mode of deposit Account.
d. Bank may refuse to process any transaction to any account if Bank suspects fraud or illegality therein.
e. If such type of deposit Account remains inoperative for 01(One) year it will be treated as Dormant Account.
Mudaraba:
Mudaraba is a partnership of labour and capital, where one partner provides full capital and the other one manages the business. The capital provider is called Sahib-Al-Maal and the user of the capital is called Mudarib. As per Shariah principles, the Mudarib will conduct the business independently following Shariah principles. The Sahib-Al-Maal may provide advices, if he deems fit but he can not impose any decision over the Mudarib. Profit, if any, is divisible between the Sahib-Al-Maal and the Mudarib at a predetermined ratio, while loss, if any, is borne by the Sahib-Al-Maal. Mudarib can not avail of any salary or remuneration against his labour as a manager or conductor of the enterprise/business. The deposits, received by Exim bank under this principle are called Mudaraba Deposits. Here, the depositors are called Sahib-Al-Maal and the Exim bank is called Mudarib. Exim bank’s Mudaraba principle is “At least 65% of investment income will be distributed among the Mudaraba depositors as per weightage allocated for each deposit product”.
The Essay on Thirty Years From Now
As I sit here, I wonder what I will become; all I see is pure success like no one has ever seen. My life is full of great and achievable goals that can fulfil my life with happiness. I see myself see myself thirty years from now becoming the most successful person the world has seen. I will have graduated high school and college with 4.0 GPA, majoring in aeronautical engineering while being in the ...
EXIM Bank’s Mudaraba deposit products are:
|A. |Mudaraba Savings Deposit |
|1. |Mudaraba Savings Deposit |
|2. |Mudaraba Savings Deposit (Staff) |
|3. |Mudaraba Savings Deposit (Special) |
|4. |Mudaraba Savings Deposit (Slab) |
| | |
| | |
|B. |Mudaraba Special Notice Deposit (MSND) |
|1. |Mudaraba Special Notice Deposit |
|C. |Mrudaraba Term Deposit |
|1. |Mudaraba Term Deposit 1Month |
|2. |Mudaraba Term Deposit 3 Months |
|3. |Mudaraba Term Deposit 6 Months |
|4. |Mudaraba Term Deposit 12 Months |
|5. |Mudaraba Term Deposit 24 Months |
The Term Paper on Types of bank accounts
A bank is a financial intermediary that accepts deposits and channels those deposits into lending activities, either directly by loaning or indirectly through capital markets. A bank links together customers that have capital deficits and customers with capital surpluses. Due to their importance in the financial system and influence on national economies, banks are highly regulated in most ...
|6. |Mudaraba Term Deposit 36 Months |
|D. |Mudaraba Monthly Savings Deposit Scheme |
|1. |Mudaraba Monthly Savings Deposit Scheme 5 Years |
|2. |Mudaraba Monthly Savings Deposit Scheme 8 Years |
|3. |Mudaraba Monthly Savings Deposit Scheme 10 Years |
|4. |Mudaraba Monthly Savings Deposit Scheme 12 Years |
|5. |Mudaraba Monthly Savings Deposit Scheme 5-12 Years |
|E. |Mudaraba Monthly Income Deposit Scheme (MMIDS) |
|1. |Mudaraba Monthly Income Deposit Scheme 3 Years |
|2. |Mudaraba Monthly Income Deposit Scheme 5 Years |
|F. |Mudaraba Super Savings Deposit Scheme |
|1. |Mudaraba Super Savings Scheme 6 Years |
|2. |Mudaraba Super Savings Scheme 7 Years |
|3. |Mudaraba Super Savings Scheme 8 Years |
|G. |Mudaraba Multiplus Savings Deposit Scheme |
|1. |Mudaraba Multiplus Savings Deposit Scheme 10 Years |
|2. |Mudaraba Multiplus Savings Deposit Scheme 13 Years |
|H. |Mudaraba Student Savings Deposit Scheme |
The Essay on Five Year Performance
... Mudaraba Savings Account. -MSA 3. Mudaraba term deposit Receipt. (3 month / 6 month / 12 month / 36 months term)-MTDR 4. Mudaraba Special Scheme-MSS 5. Mudaraba Hajj Savings Account (1 year ... to 25 year ...
|1. |Mudaraba Student Savings Deposit Account |
|2. |Mudaraba Monthly Student Savings Scheme |
|I. |Mudaraba Cash Waqf Deposit |
|1. |Mudaraba Cash Waqf Deposit Account |
| | |
| | |
| | |
|J. |Mudaraba Hajj Deposit Scheme |
|1. |Mudaraba Hajj Deposit Scheme 5 Years |
|2. |Mudaraba Hajj Deposit Scheme 8 Years |
|3. |Mudaraba Hajj Deposit Scheme 10 Years |
|4. |Mudaraba Hajj Deposit Scheme 15 Years |
|5. |Mudaraba Hajj Deposit Scheme 20 Years |
|K. |Mudaraba Denmohor/Marriage Deposit Scheme |
|1. |Mudaraba Denmohor/Marriage Deposit Scheme 3 Years |
|2. |Mudaraba Denmohor/Marriage Deposit Scheme 5 Years |
|3. |Mudaraba Denmohor/Marriage Deposit Scheme 8 Years |
|4. |Mudaraba Denmohor/Marriage Deposit Scheme 10 Years |
|5. |Mudaraba Denmohor/Marriage Deposit Scheme 12 Years |
The Essay on Bank Deposit Schemes
These accounts are opened for saving purpose only. Some fixed amount is deposited at monthly intervals for a pre-fixed term. These accounts generally earn higher interest than Savings Bank Accounts. View salient features of Recurring Deposit accounts in banks. * Fixed Deposit or Term Deposit Accounts: These accounts are opened for investing funds for fixed terms to earn higher interests. Usually ...
|6. |Mudaraba Denmohor/Marriage Deposit Scheme 20 Years |
(A) Mudaraba Savings Deposit (MSD)
Mudaraba Savings Deposit Account is a mode of deposit Account, which is operated under Mudaraba Principles. Under this mode of deposit A/c the clients can deposit money at any time but can withdraw their deposited money under certain conditions if they would like to get profit on the MSD accounts.
Main features:
a. The account may be opened with a minimum deposit of Tk.200.00.
b. Cheque Book is allowed in favor of the client while minimum balance Tk.1000.00 remains in the account.
c. The weightage of the Mudaraba Deposit A/c is 0.75.
d. If such type of deposit Account remains inoperative for 02(Two) years it will be treated as Dormant Account.
e. Govt. tax deduction is applicable.
(B) Mudaraba Special Notice Deposit (MSND)
It is a mode of Deposit Account under which client can withdraw money on short notice. Normally the client will have to inform the Bank before 07(Seven) days for cash withdrawal. It is one kind of transactional mode of deposit Account.
Main features:
a. The account may be opened with a minimum initial deposit amount of Tk.1000.00
b. Profit under this mode is given on daily basis.
c. Weightage of MSND A/c is 0.62
d. Cheque book is issued on maintenance of required documentary formalities
e. No minimum balance, Incidental charge , Ledger Fee or Service charge will be applicable. Only A/c maintenance fee and A/c closing fee will be applicable.
f. Govt. tax deduction is applicable.
(C) Mudaraba Term Deposit
Mudaraba Term Deposit Receipt Account is a non-transactional mode of deposit account which offers profit with principal amount at a provisional rate of profit at maturity. This account may be continued on roll over basis until the customer confirms its closure.
Main features:
a. The account may be opened with a minimum amount of Tk.5000.00 or its above but multiple of Tk.100.00.
b. The tenure of Mudaraba Term Deposit Receipt Account will be 1, 3, 6, 12, 24 and 36 months.
c. The account maybe opened at any day of the month
d. Provisional rate of profit for different tenures changes from time to time by Bank Management.
e. In case of death of account holder(s), the nominee(s) may continue the account till maturity.
f. Weightage of profit increases with the increase of tenure such as weightage for 1 month, 3 months, 6 months, 12 months, 24 months & 36 months are 0.83, 0.88, 0.92, 0.96, 0.98 and 1.00 respectively.
g. One or more account(s) can be opened in the same name at the same branch of the Bank.
h. Government Tax will be deducted @10% from the profit accrued there on.
i. In case of lost of MTDR Receipt, Bank must be informed by account holder without delay and account holder may be allowed a duplicate receipt of the same subject to submission of an indemnity bond and maintenance due formalities.
(D) Mudaraba Monthly Savings Deposit Scheme
Mudaraba Monthly Savings Deposit Scheme is a mode of deposit scheme based on Islamic Shariah principles for mobilizing fund from the interested depositors where people can deposit money on monthly installment basis for a stipulated period of time and withdraw the deposited principal amount with profit at maturity. The product has been designed to inspire the clients for building savings on long term basis under Islamic Shariah principles.
Main features:
a. The account may be opened with a minimm amount of Tk.200.00 or its multiple
b. The tenure of Mudaraba Monthly Savings Deposit Scheme may be as 5, 8, 10 and 12 years. The depositor has the option to choose any of the tenure at the time of opening the account.
c. Once any of the mentioned tenures has been chosen it cannot be changed afterwards during its period.
d. One or more account(s) can be opened in the same name at the same branch of the bank.
e. The weightage for 5, 8, 10 and 12 years are 1.16, 1.17, 1.18 and 1.19 respectively
f. The depositor (except minor) can avail investment facility upto 90% of deposited amount after completion of 03 (three) years subject to application of terms & conditions of investment policy of the bank.
(E) Mudaraba Monthly Income Deposit Scheme (MMIDS)
Mudaraba Monthly Income Deposit Scheme is a special Mode of Deposit Scheme which provides an unique opportunity to the clients for getting monthly profit/benefits from the deposited amount kept for a fixed period of time i,e 03(Three) years. Any adult person (individually or jointly) having sound mind or any institution/organization can open a Mudaraba Monthly Income Deposit Scheme (MMIDS) Account with any branch of the Bank.
Main features:
a. Any customer can open the account with a minimum deposit of Tk.25,000.00
b. The tenure of the product is 03(Three) Years
c. The account will be accompanied by a MSD A/c at which the monthly profit will be credited.
d. The Weightage for deposit of Mudaraba Monthly Income Deposit Scheme is 1.15.
e. Normally, deposited amount of MMIDS Account is not encashable before maturity. If any depositor intends to encash his/her receipt before maturity due to certain unavoidable circumstances, the following terms & conditions will come into force:
a) No profit shall be allowed for premature encashment within 01 (one) year.
b) Profit shall be allowed at the provisional rate of Mudaraba Savings Deposit Account + 0.75% if it is encashed after 01 (one) year but before maturity.
f. Investment may be allowed up-to 80% of the deposited amount at the request of the client under the terms & conditions of the Investment Policy of the Bank
(F) Mudaraba Super Savings Deposit Scheme
Mudaraba Super Savings Deposit Scheme is a type of deposit account where the clients get the option to turn their deposit into double after a certain period of time. This product is also denoted as Double benefit Scheme. In a nutshell, under this mode of deposit principal amount of deposit becomes double after 06(six) years.
Main features:
a. Any client can open the account with a minimum deposit of Tk.5,000.00 and its multiple amount
b. The tenure of the product is 06(Six) Years
c. The Weightage for deposit of Mudaraba Super Savings Deposit Scheme is 1.17.
d. Normally, deposited amount of Mudaraba Super Savings Deposit Scheme (MSSDS) Account is not encashable before maturity. If any depositor intends to encash his/her receipt before maturity due to certain unavoidable circumstances, the following terms & conditions will come into force:
i) No profit shall be allowed for premature encashment within 01 (one) year.
ii) Profit shall be allowed at the provisional rate of Mudaraba Savings Deposit Account + 0.75% if it is encashed after 01 (one) year but before maturity.
iii)Profit shall be allowed at the provisional rate of Mudaraba Savings Deposit Account + 1.00% if it is encashed after 03 (three) years but before maturity.
e. Investment may be allowed up-to 90% of the deposited amount at the request of the client under the terms & conditions of the Investment Policy of the Bank
(G) Mudaraba Multiplus Savings Deposit Scheme
Mudaraba Multiplus Savings Deposit Scheme Account is also a fabulous beneficial mode of deposit A/c under which client gets opportunity to make their deposit triple after a certain period (at present it is 10 years).
Main features:
a. Any client can open the account with a minimum deposit of Tk.5,000.00 and its multiple amount
b. The Weightage for the Deposit A/C is 1.17.
c. Normally, deposited amount of Mudaraba Multiplus Savings Deposit Scheme Account is not encashable before maturity. If any depositor intends to encash his/her receipt before
maturity due to certain unavoidable circumstances, the following terms & conditions will come into force:
i) No profit shall be allowed for premature encashment within 01 (one) year.
ii) Profit shall be allowed at the provisional rate of Mudaraba Savings Deposit
Account+ 0.75% if it is encashed after 01 (one) year but before 03(Three) years.
iii) Profit shall be allowed at the provisional rate of Mudaraba Savings Deposit Account + 1.00% if it is encashed after 03 (three) years but before 05(Five) years.
iv) If the account is encashed after completing the tenure of Mudaraba Super Savings Deposit Scheme but before maturity, depositor(s) will be entitled to receive full benefit for the completed tenure of Mudaraba Super Savings Deposit Scheme at the provisional rate of profit prescribed there- against. For remaining period, depositor(s) will receive benefit at the provisional rate of profit prescribed for Mudaraba Savings Deposit Account.
v) Investment may be allowed up-to 90% of the deposited amount at the request of the client under the terms & condition of the Investment Policy of the Bank.
(H) Mudaraba Student Savings Deposit Scheme
Under this mode of Deposit Scheme , an account may be opened in the name of any minor student of schools and colleges and the same to be operated by the parents or any legal guardian to deposit their savings at their will.
The motto of the product is to educate the young generation on banking, familiarize them with banking transactions and develop a new segment of customers. At the same time it will help the Bank to mobilize low cost deposit from the students and their parents as well.
i) Mudaraba Student Savings Deposit Account.
ii) Mudaraba Monthly Student Savings Scheme.
Main features:
a. The account may be opened with a minimum amount of Tk.100.00
b. Remarkable provisional rate of profit.
c. No service charge/account maintenance fee.
d. Minimum Account Maintenance balance i.e. Tk. 500/-
e. Half-yearly account statement.
f. Facility for payment of Tuition Fees through the A/C.
g. Debit Card Facility with limited withdrawal.
h. Free ATM Cash withdrawal from all ATMs of EXIM Bank.
i. Free SMS Banking for statement/balance checking.
(I) Mudaraba Cash Waqf Deposit
Mudaraba Cash Waqf Deposit” account is a perpetual savings deposit account based on Islamic Shariah for mobilizing fund from the interested eligible depositors.
This mode of deposit provides a unique opportunity for the well off and the rich people of the society to invest in different religious, educational and social services. In this case, Bank issues Cash Waqf Certificate to collect funds from the rich and benevolent people of the society and distributes gains of the managed funds to the poor or any allowed sectors.
Main features:
a. The account may be opened with a minimum amount of Tk. 5000.00 and later on Tk.1000 and its multiple amount can be deposited.
b. Specially designed certificate against cash waqf deposit.
c. Investment of fund as per Islamic Shariah
d. Option of Standing Instruction for depositing installment(s) from MSD/MSSD Account to complete total committed amount of Waqf by Waqif(s).
e. Opportunity for creating “Sada ka-e-Jaria”.
f. Opportunity for managing fund by efficient bodies (Bank) even after the death of Waqif(s).
g. The Weightage of this account is 1.19.
(J) Mudaraba Hajj Deposit Scheme
This is another type of Deposit Account which has been designed to assist the eligible Muslims to perform one of their obligatory responsibilities i.e Holy Hajj. Any Muslim can deposit money on monthly basis for a period of 5, 8,10,15 or 20 years with a view to performing Holy Hajj in future. If the client is unable to perform Hajj for unavoidable circumstances he/she can withdraw the principal with profit at MSD A/C rate.
Main features:
a. An adult person having sound mind can open one account only, in his/her single name with any of the branches of the bank.
b. The tenure of Mudaraba Hajj Scheme will be 5, 8, 10, 15 and 20 years. The client may choose any tenure and deposit the prescribed monthly installment to perform Hajj in the predetermined year.
c. Profit against balance of Mudaraba Hajj Scheme will be credited on daily product basis and it will bear 1.10 profit weightage.
d. There will be 12 installments in a year and accordingly 60 installments for 5 years, 120 installments for 10 years and 240 installments for 20 years.
e. An employee/staff of Exim Bank is also allowed to open this scheme.
f. Incase of death of the client, profit against deposited amount will be allowed to the nominee(s) at the provisional rate of profit prescribed for Mudaraba Savings Account.
(K) Mudaraba Denmohor/Marriage Savings Deposit Scheme
It is a monthly savings deposit scheme account based on Islamic Shariah for mobilizing fund from the interested eligible depositors. The prime objective of this product is to create savings mentality of certain group of people and to help the people of all religions for arrangement of their marital expenses beforehand as well as to prescribe a simple path to the Muslim for performance of a solemn responsibility of every married male to pay Denmohor to his wife as per Islamic Shariah.
Main features:
a. The account may be opened with a minimum amount of Tk.500.00.
b. Handsome return at the maturity of scheme
c. Simple path for payment of Denmohor (Mandatory liability for a husband) to the wife.
d. No service charge/account maintenance fee.
e. Different installment sizes for different earning levels of people.
f. Investment of fund as per Islami Shariah
g. Effective & beneficial way for the guardians to accomplish the marital functions of their dependents smoothly.
Investment under Shariah Principles & EXIM Bank’s Investment Products
As the Islamic bank, Exim Bank does not directly deal in money. They run business with money. The funds of Exim bank are mainly invested in the following modes:
A. Bai Mechanism (Trading Mode)
1. Bai-Muajjal
2. Bai Murabaha
3. Bai-Salam
4. Istisna’a
B. Ijara Mechanism (Rental/Leasing Mode)
1. Izara Bil Baia
2. Hire Purchase under Shirkatul Melk (HPSM)
C. Share Mechanism (Equity Based/Partnership Mode)
1. Mudaraba
2. Musharaka
D. Import Finance
E. Export Finance
F. Quard
G. Fee Based Investment
H. Others
A. Bai Mechanism (Trading Mode)
1. Bai-Muajjal:
“Bai-Muajjal” means sale for which payment is made at a future fixed date or within a fixed period. In short, it is a sale on Credit.
It is a contract between a buyer and a seller under which the seller sells certain specific goods (permissible under Shariah and Law of the Country), to the buyer at an agreed fixed price payable at a certain fixed future date in lump sum or within a fixed period by fixed installments. The seller may also sell the goods purchased by him as per order and specification of the buyer.
In Bank’s perspective, Bai-Muajjal is treated as a contract between the Bank and the Client under which the bank sells to the Client certain specified goods, purchased as per order and specification of the Client at an agreed price payable within a fixed future date in lump sum or by fixed installments.
Exim Bank’s investment products under Bai-Muajjal Mode:
a. Bai-Muajjal (HYPO)
b. Bai-Muajjal (WO)
c. Bai-Muajjal (Share)
d. Bai-Muajjal (FO)
e. Bai-Muajjal (PC)
f. Bai-Muajjal (Export)
g. Bai-Muajjal (Kishan)
h. Bai-Muajjal (LDBP)
Main features:
1. The client offers an order to purchase by the Bank of a particular permissible goods and committing himself to buy the same from the Bank at cost of the goods plus agreed upon profit on Bai-Muajjal mode.
2. Spot delivery of the goods and payment is deferred.
3. Bank may or may not declare cost of the goods and profit mark-up separately to the client.
4. Ownership and possession of the goods is transferred by the Bank to the client before receipt of sale price.
5. Bank must deliver the specified goods to the client on specified date and specific place of delivery as per agreement.
6. The price of the goods once fixed can not be further increased.
7. Bank may take Guarantee/cash/collateral as security to guarantee the implementation of commitment of the client.
2. Bai-Murabaha:
Contractual buying and selling at a mark-up profit is called Murabaha. In this case, the client requests the Bank to purchase certain goods for him. Exim Bank purchases the goods as per specification and requirement of the client. The client receives the goods on payment of the price which includes mark-up profit as per contract. Under this mode of investment the purchase/ cost price and profit are to be disclosed separately.
Exim Bank’s investment products under Bai-Murabaha Mode:
a. Murabaha (Pledge)
b. Murabaha Import Bill (MIB)
c. Murabaha Post Import (MPI)
d. Murabaha Trust Receipt (MTR)
Main features:
1. The client offer an order to purchase by the Bank of a particular permissible goods and committing himself to buy the same from the Bank at cost of the goods plus agreed upon profit in cash or on any future date in lump sum or by installments.
2. Bank may take Guarantee/cash/collateral as security to guarantee the implementation of commitment of the client.
3. Bank must deliver the specified goods to the client on specified date and specific place of delivery as per agreement.
4. The price of the goods once fixed can not be further increased.
5. The cost of goods sold and profit mark-up shall separately and clearly be mentioned in the Bai-Murabaha agreement.
6. Under no circumstances, the percentage/amount of profit shall have any relation with time or expressed in relation with time.
7. For convenient, it is permissible for the Bank to authorize any third party to buy and receive the goods on Bank’s behalf i.e. appointment of buying agent.
3. Salam and Parallel Bai-Salam:
Salam means advance purchase. It is a mode of business under which the buyer pays the price of the goods in advance on the condition that the goods would be supplied / delivered at a particular future time. The seller supplies the goods within the fixed time.
Parallel Salam:
Parallel Salam is a Salam contract whereby the seller depends, for executing his obligation, on receiving what is due to him – in his capacity as purchaser from
a sale in a previous Salam contract, without making the execution of the second Salam contract dependent on the execution of the first one.
Exim Bank’s investment products under Bai-Salam Mode:
a. Bai Salam (ECC)
Main features:
1. Salam is a sale of a deferred commodity against a present price or purchase of a deferred commodity for a present price.
2. The seller gets in advance the money he wants in exchange of his commitment to deliver the commodity at a definite future date.
3. The Bank has also the option of waiting to receive the commodity and then sell it for cash or deferred payment.
4. The specification, quality & quantity of the commodity must be determined to avoid any ambiguity.
5. Date & place of delivery must be agreed upon but can be changed with mutual consent of the parties.
6. Salam can not be effected in respect of goods which must be delivered on spot.
7. In order to ensure that the seller shall deliver the commodity on the agreed date the Bank can ask him to furnish a security.
4. Istisna and parallel Istisna:
A contract executed between a buyer and a seller under which the seller pledges to manufacture and supply certain goods according to specification of the buyer is called Istisna. An Istisna agreement is executed when a manufacturer or a factory owner accepts a proposal placed to him by a person or an Institution to produce/manufacture certain goods for the latter at a certain negotiated price.
Here, the person giving the order is called Mustasni, the receiver of the order is called Sani and the goods manufactured as per order is called Masnu.
An order placed for manufacturing or producing those goods, which under prevailing customs and practice are produced or manufactured will be treated as Istisna contract.
Parallel Istisna:
If it is not stipulated in the contract that the seller himself would produce/provide the goods or services, then the seller can enter into another contract with third party for getting the goods or services produced/ provided by the third party. Such a contract is called Parallel Istisna. This may be treated as a sub-contract.
Main features:
a. The Istisna’a sale is a contract in which the price is paid in advance at the time of contract or deferred or in installments & the object of sale is manufactured and delivered later.
b. It is a contract with a manufacturer to make something and it is a contract on a commodity on liability with the stipulation of work.
c. The product to be manufactured should be duly described in the contract in clear manner.
d. If the seller fails to deliver the goods within the stipulated period the price of the commodity can be reduced by a specific amount as per contract.
e. Istisna’a is specially practiced in manufacturing & Industrial sector.
B. Ijara Mechanism (Rental/Leasing Mode)
1. Ijara: The mode under which any asset owned by the bank, by creation, acquirement/or building-up is rented out is called Ijara or leasing. In this mode, the leasee pays the Bank rents at a determined rate for using the assets/properties
and returns the same to the Bank at the expiry of the agreement. The Bank retains absolute ownership of the assets/properties in such a case. However, at the end of the leased period, the asset may be sold to the client at an agreed price.
Exim Bank’s investment products under Izara Mode:
a. Izara Bil Baia (Machinery)
b. Izara Bil Baia (HB)
c. Izara Bil Baia (Transport)
d. Izara Bil Baia (NBFI)
e. Izara Bil Baia (Syndication)
f. Izara Bil Baia (Abalamban)
g. Izara Bil Baia (Kishan)
h. Izara Bil Baia (1st Principal)
i. Izara Bil Baia (Others)
j. Izara Bil Baia (Staff – HB, EIS, Exe. Car Scheme)
Main features:
a. In Ijara mode, the asset shall be acquired on participation of ownership & rent shall be charged as per equity participation.
b. Possession of the asset shall be passed on to the client for use.
c. Bank shall retain the ownership till payment of equity portion of the Bank along with the rental.
d. The ownership of the Bank gradually passes on to the client upon payment of Bank’s equity.
e. Rent must not be compounded in any case.
f. Purchase price of the assets shall preferable be paid to the seller of the assets. However cash can be paid to the credit of client’s account and in such case, the purpose for which cash is disbursed must be ensured.
2. Hire-purchase Musharaka Mutanaqasa (HPMM):
Hire-purchase Musharaka Mutanaqasa means purchasing and acquiring ownership by one party by sharing in equity and paying rents for the rest of the equity held by the Bank/or other party. Under this mode, the Bank and the client on contract basis jointly purchase vehicles, machineries, building, apartment etc. The client uses the portion of the assets owned by the bank on rental basis and acquires the ownership of the same assets by way of paying banks portion of the equity on the assets in installments together with its rents as agreed upon.
Exim Bank’s investment products under HPSM Mode:
a. HPSM – Machinery
b. HPSM – Real Estate
c. HPSM – Transport
Main features:
C. Share Mechanism (Equity Based/Partnership Mode)
1. Mudaraba:
Mudaraba is a shared venture between labour and capital. Here Exim Bank provides with entire capital and the investment client conducts the business. The Exim Bank, provider of capital, is called Sahib-Al-Maal and the client is called Mudarib. The profit is being distributed between the Bank and the investment client at a predetermined ratio while the bank has to bear the entire loss, if any.
Main features:
a. Bank supplies the capital as “Sahib-Al-Maal” and the client invest it in the business.
b. Mudaraba is generally limited to trading activities.
c. Administration and Management is maintained by the client.
d. Before undertaking the venture, a written agreement shall be executed by both parties incorporating all terms and conditions.
e. Profit is divided as per predetermined ratio.
f. Bank solely bears the actual loss.
g. Without prior permission of the Bank, the client can not take another investment for that specific business.
h. The client has no right to mix the Mudaraba funds with his own funds, unless he was permitted to do so by the Bank.
2. Musharaka:
Musharaka means partnership business. Every partner has to provide more or less equity funds in this partnership business. Both the Exim Bank and the investment client reserve the right to share in the management of the business. But the Bank may opt to permit the investment client to operate the whole business. In practice, the investment client normally conducts the business. The profit is divided between the bank and the investment client at a predetermined ratio. Loss, if any, is to be borne by the bank and the investment client according to capital ratio.
Main features:
a. Bank and client jointly supply capital equally/unequally.
b. Profit is divided as per agreement.
c. Actual loss is divided as per equity.
d. The Bank is not guaranteed a fixed return on its participation.
e. Client will maintain all accounts; Bank or its agent may verify or audit it.
D. Import Finance:
1. Import under Bai-Murabaha mode of investment: In the import business, the importer provides an irrevocable letter of authority to the Bank to import specific goods on behalf of him (the client) from the foreign seller and promises to buy the same from the Bank. In this case, the Bank is designated as a consignee in the Bill of lading and later on the Bank hands over the same to the importer through endorsement i.e. the ownership of the goods is transferred to the importer. As per uniform customs and practices, the seller lodges his claim or places claim for dues to the buyer’s Bank through the bill of exchange and the buyer’s bank discharges the claim on behalf of the buyer. The above import system is fully approved/ supported by the Islamic Shariah.
Main features:
a. The client provides an irrevocable letter of authority to the Bank to import specific goods on behalf of him
b. The Client appoints the Bank as its agent or wakil for the purpose of executing the transaction.
c. The Bank ask the Clients to place a deposit to the full/part amount of the price of goods to be imported, which is accepted under the principal of al-wadiah.
d. The Bank establishes the Letter of Credit and makes payment to the negotiating Bank representing the counterpart, utilizing the Client’s deposit. Subsequently the pertinent documents are released to the Client.
e. Bank charges the Client fees and commissions for its services under the principle of agency fee or ujr.
1. Murabaha Post Import (MPI):
The importers apply for investment facility against imported goods after shipment for payment of the invoice values of the goods to the seller/supplier including custom duty, VAT and other expenses. In such a case, Islamic banks allow a Bai-Murabaha investment facility under single deal concept. It is so called as the Letter of Credit. Bills and the handling of Post-shipment are settled under one agreement while opening the letter of credit for importing the goods.
2. Import under the Bai-Muajjal mode of investment:
Under this mode of investment a contract is made between the buyer and seller for buying and selling of goods approved by Islamic Shariah and law of the land on the stipulation to pay the agreed price at a specific future date or by fixed installments.
Most of the features of Bai-Murabaha and Bai-Muajjal are alike excepting the following:
a. Bai-Muajjal sale is executed completely on deferred payment system
b. The sale price is determined adding the profit with cost price. It is not necessary to disclose the cost price and the profit mark-up separately to the client.
But in Bai- Murabaha, the cost price and the profit mark-up ratios are to be disclosed separately to the client.
3. Import under diminishing proprietorship method (Hire Purchase under Shirkatul Melk-HPSM):
Capital machineries and other re-usable goods are imported under this mode. It combines three modes: rent (Ijara), partnership (Shirkat) and buying and selling.
Main features:
a. The Bank and the client invest their capital jointly through a contract called partnership (Shirkat).
b. The bank leases its portion at a certain rent.
c. The Bank sells its portion to the client on receipt of the price under this system.
4. Import under Musharaka mode of investment:
Musharaka is a Shariah compliant mode of investment wherein the bank and the client jointly provide the capital. Here no pre- fixed profit is earmarked like in Bai-Murabaha or Bai-Muajjal. Profit, if any, is distributed as per agreement between the client and the bank while the loss, if any, is shared according to capital ratio.
5. Import under Mudaraba mode of investment:
Under the Mudaraba mode of investment, the client or businessman or capital user does not invest any capital. In this case, the bank alone invests all the required capital and the entrepreneur (the client) directly manages and looks after the business.
The bank bears all the expenditures related to imports. In this case, the Bank supervises the use of capital, system of business operation and income of the business etc. The client maintains all the registers, documents and accounts concerning buying & selling of the goods.
In this case, profit, if any, is distributed between the bank and the client as per the agreed ratio and loss is fully borne by the Bank.
E. Export Finance:
Pre Shipment Finance:
a. Back to Back Letter of Credit (Back to Back L/C): Bank extends Back to Back letter of credit (L/C) facility to exporters to procure/import raw-materials for producing/manufacturing exportable goods at pre-shipment stage under the mode of Bai-Muajjal. Initially, no financial facility from the Bank is required when the back to back L/C is opened. But if the exporter fails to pay the L/C value at maturity or on due date, the bank provides financial facilities to the client under Bai- Muajjal mode.
b. Bai-Murabaha TR (Trust Receipt): To procure/purchase raw-materials for executing export order the bank provides investment facilities to the client under the mode of Murabaha TR. In this case, the bank obtains Trust Receipt signed by the client and handover the imported goods to the exporter.
c. Bai-Salam: Under the Bai-Salam mode of investment, payment is made in advance to purchase the goods and the supplier makes promise to deliver the goods at a future date. Investment under Bai-Salam mode is made to meet other expenses of the exporter excepting the manufacturing cost of exportable goods. The Bank purchases a portion of the exportable goods under the Bai-Salam mode and makes advance payment for the same on the condition that
arrangements will be made by the exporter to export the goods purchased by the bank along with other goods of the exporter.
d. Musharaka: Pre-shipment investment may be made under Musharaka mode of investment if there is any pre-determined investment arrangement.
Post-Shipment Investment: Bank provides post-shipment investment facilities through Negotiation (FBN) and purchase of export bills. It normally
negotiates or purchases the export documents if the documents/bills prepared by the exporter are found in order/correct in all respect. The bank adjusts the liabilities against FBN/FBP after receiving the export proceeds and earns exchange income from this. This mode of investment is in compliance with the Islamic Shariah.
F. Quard:
If a bank provides its client any investment, it can receive actual expenditure relating to the investment as service charge only once. It cannot charge annually at a percentage rate. If a investment is provided against the money deposited by a client in the bank, it has the right not to pay any profit against the amount of money given as investment. But profit should be paid on the rest of the amount deposited as per previous agreement.
Exim Bank’s investment products under Quard:
a. Quard –E-Hasan
b. Quard against MTDR
c. Quard against CA
d. Quard (General)
It is a mode to provide financial assistance with the stipulation to return the principal amount in the future without any increase thereon. This is a benevolent loan that obliges a borrower to repay the lender the principal amount borrowed on maturity. The borrower, however, has the discretion to reward the lender for his loan by paying any amount over and above the amount of the principal provided there will be no reference (explicit or implicit) in this regard.
G. Fee Based Investment:
These are distinct from products and services that are fund-based. Since these do not require an employment of funds, but still contribute significantly to the bottom line, their importance can be hardly overemphasized.
Exim Bank’s investment products under Quard:
a. Murabaha Letter of Credit.
b. Letter of Guarantee.
c. L.D.B.C.
d. L.D.B.P.
e. Locker services.
H. Others:
1. Visa Islamic Card
2. Consumer Finance – Sahayak, Bahan, Abasan
3. SME Investment – Uddog, Abalambon
4. Agri Investment – Exim Kishan
