Bai al '-INAH (sale and repurchase agreement)
The financier sells an asset to the customer on a deferred payment, then the asset is immediately repurchased by the financier money with a discount. The agreement authorizes the purchase of the bank to assume ownership of assets to protect against default without explicitly demand for interest for late payment or insolvency. Some researchers believe that this is not consistent with the principles of Sharia. [26] [27]
[edit] ajil bithaman Bai (deferred payment sale)
This concept refers to the sale of goods on a deferred payment basis at a price which includes a profit margin agreed by both parties. This is similar to Murabahah, except that the debtor makes a single payment at the maturity date of the loan. By applying a discount rate, an Islamic bank can collect the interest rate market
[edit] muajjal Bai (sale)
Bai muajjal literally means a credit sale. Technically, this is a financing technique adopted by Islamic banks that takes the form of Murabaha muajjal. It is a contract in which the bank earns a profit on the purchase price and allows the buyer to pay the price of goods at a later date in a lump sum or in installments. It must specifically mention the cost of the commodity and the margin of profit is mutually agreed. The price paid for the goods in such a transaction may be the same as the spot price or higher or lower than the spot price. (Deferred payment sale)
[edit] Musharakah
Musharakah (joint venture with capital) is an arrangement or agreement between two or more partners in which each partner provides funds to be used in a business. Profits are shared between the partners based on capital invested. In case of loss, each partner loses capital in ratio.If Similarly, the Bank provides capital, the same conditions apply. This financial risk, according to sharia, which justifies the claim of the bank some profits. Every partner may or may not participate in the implementation of the company. The Partner / s, which also works, gets greater margin from the sponsor. The Difference b / w and Musharaka Madharaba is that in Musharaka, every partner involved with some capital, while in Madharaba, there is a provider of capital, ie. a financial institution and a contractor who has no financial contribution. Note that Madharaba and Musharaka are commonly overlapping [28].
[edit] Mudarabah
Main article: Mudarabah
"Mudarabah is a particular type of society where one partner gives money to another to invest in a business enterprise. Investment from the first country which is called "Rabb-ul-Mal, while management and labor is the sole responsibility of the other, which is called" Mudarib.
The Mudarabah (Profit Sharing) is a contract, with one party providing 100 per cent stake and the other party providing its expertise to invest capital and manage the investment project. Profits are shared between the parties according to a pre-agreed ratio. Compared to Musharaka in a Mudaraba Only the lender of the money to take the loss.
[edit] Murabahah
Main article: Murabahah
This concept refers to the sale of goods at a price which includes a profit margin agreed by both parties. The purchase and sale price, other costs and profit must be clearly stated at the time of the sale agreement. The bank is compensated for the time value of its funds in the form of profit. This loan has a fixed income for the purchase of real assets (like real estate or vehicle) with a fixed rate determined by profit margin. The bank is not compensated for the time value of money beyond the contracted term (ie, the bank can not charge additional benefits on late payments), but the property remains as a mortgage with the bank until the default is resolved.
This type of transaction is similar to lease-own arrangements for furniture or appliances that are very common in North American stores.
[edit] Musawamah
Musawamah is negotiating a sale price between two parties without reference by the vendor at cost or price. While the seller may or may not be aware of the cost of the item being negotiated, they are under no obligation to disclose these costs in the process of negotiation. This difference in obligation by the seller is the essential distinction between Murabaha and Musawamah with all the other rules described in Murabaha remaining the same. Musawamah is the most common type of negotiation bargaining seen in the Islamic trade.
[edit] Bai Salam
Bai Salam means a contract in which payment is paid for the goods to be delivered later. The seller undertakes to supply some specific goods to the buyer at a later date in exchange for an advance price fully paid at the time of contract. It is necessary that the quality of the goods intended to be purchased is fully specified leaving no ambiguity leading to dispute. The items in this sale are goods and can be gold, silver, or currency from these metals. Except this, Bai Salam covers almost everything that could be definitely described as to quantity, quality and workmanship.
[edit] The basic characteristics and conditions of Salam
1. The transaction is considered Salam if the buyer paid the purchase price to the seller in full at the time of sale. This is necessary so that the buyer can demonstrate that they do not penetrate into debt with a second part to eliminate the debt with the first part, an act forbidden by sharia. Salam's idea is to provide a mechanism which ensures that the seller has the liquidity they expected to go into operation first. If prices have not been fully paid, the basic purpose of the operation would have been defeated. Muslim jurists are unanimous in their opinion that full payment of the purchase price is the key Salam to exist. Imam Malik also believes that the seller may delay the acceptance of funds from the buyer for two or three days, but the delay should not be part of the agreement.
2. Salam can be effected in these products only the quality and quantity that can be pinpointed. The things whose quality or quantity is not determined by the specification can be sold through the contract of salam. For example, the gems can not be sold on the basis of Salam, because every piece of precious stones is normally different from each other either in quality or size or weight and their exact specification is not generally possible.
3. Salam can not be performed on a particular product or a product of a particular field or farm. For example, if the seller undertakes to supply wheat of a particular field, or the result of a particular tree, the salam is not valid because there is a possibility that the harvest of this particular product or This tree is destroyed before delivery, and, given this possibility, the delivery remains uncertain. The same rule applies to all commodities whose supply is uncertain.
4. It is necessary that the quality of the commodity (intended to be purchased through salam) is fully specified leaving no ambiguity may lead to a dispute. All possible details in this respect must be expressly mentioned.
5. It is also necessary that the quantity of goods agreed in no uncertain terms. If the commodity is quantified in weights according to the usage of its traders, its weight must be determined, and if it is quantified through measures, its exact measure should be known. What is normally weighed can not be quantified in measures and vice versa.
6. The exact date and place of delivery must be specified in the contract.
7. Salam can not be made in respect of things that must be given in cash. For example, if gold is purchased in exchange for money, it is necessary, according to the Shariah, the delivery of both be simultaneous. Here, Salam can not work. Similarly, if wheat is exchanged cons of barley, the simultaneous delivery of both is necessary for the validity of the sale. Therefore, the contract of salam, in this case is not allowed.
[edit] Hibah (gift)
This is a token given voluntarily by a debtor to a creditor in exchange for a loan. Hibah usually occurs in practice when Islamic banks voluntarily pay their customers a "gift" on the balances of savings accounts, which represents a portion of profits through the use of these balances savings account other activities.
It is important to note that, if it seems like interest, and may in fact have the same result, Hibah is a voluntary payment made (or not) at the discretion of the bank, and can not be "guaranteed . However, the ability to receive and draw high Hibah savings customers, the bank providing the capital needed to create profits; if companies are profitable, while some of these benefits may be gifted back to its customers as Hibah [29].
[edit] Ijarah
Ijarah means lease, rent or wages. Generally, Ijarah concept is to sell the benefit of the use or service for a fixed fee or salary. According to this concept, the Bank provides customer service usage of assets / equipment such as facilities, office, a motor vehicle for a fixed period and price.
[edit] Advantages of Ijarah
Ijarah offers the following advantages for the tenant:
Ijarah remains the capital of the lessee, since it can finance up to 100%.
Ijarah gives the tenant the right to access the equipment on payment of first installment. This is important because access and use (not ownership) of equipment that generate income.
Ijarah arrangements for planning and budgeting aids business by enabling the negotiation of flexible arrangements
Ijarah is not considered debt financing so that it does not appear on the balance sheet of the lessee "as a liability. This method of "off-balance sheet" financing means that it is not included in the ratios of debt used by bankers to determine the funding limits. This allows the tenant to enter into other lease financing irrelevant on the rating of the overall debt.
All payments to the Ijarah contracts are treated as operating expenses and are fully tax deductible. Leasing offers tax advantages and operations to "nonprofit.
Many types of equipment (computers) become obsolete before the end of their useful life real. Ijarah contracts allow the transfer of risk to the Lesse lessor in exchange for a higher rent. This higher rate may be regarded as insurance against obsolescence.
If the equipment is used for a period of relatively short time, it may be more economical to rent than buy.
If the equipment is used for a short period, but has a very low value for resale, rental avoids having to account for and depreciate the equipment under normal accounting principles.
[edit] Ijarah thumma al bai "(leasing)
Parties entering into contracts which come into force in series to form a comprehensive lease / purchase transaction. The first Ijarah is a contract that outlines the terms of hire purchase or lease over a fixed period, and the second contract is a Bai triggers a sale or purchase once the term of Ijarah is completed. For example, in a house of car financing, a customer enters the first contract and lease of the car owner (bank) at an agreed amount over a specified period. When the period expires, the second contract comes into force, allowing the customer to buy the car at a price agreement.
The bank generates a profit by determining in advance the cost of the item, its residual value at the end of the period and the time value or profit margin for funds invested in the purchase of the product to be commended for the duration. The combination of these three figures is the basis of the contract between the Bank and the client for the initial rental agreement.
This type of operation is similar to the Trinius contractum, a legal maneuver used by bankers and traders in Europe during the Middle Ages to circumvent the prohibition of the Church on interest loans. In contractum, two parties enter into three contracts with concurrent and interrelated legal, the net effect is to pay a fee to use the money for the loan. The use of concurrent interdependent contracts is also prohibited by the Shariah.
[edit] Ijarah-wal-iqtina
A contract under which an Islamic bank provides equipment, construction, or other assets to the client against a rental agreement with a unilateral commitment by the bank or the customer at the end of the lease period, the ownership in the assets would be transferred to the lessee. The undertaking or promise does not become part of the lease to make it conditional. Rents and purchase prices are set so that the bank gets back its principal amount and profit during the rental period.
[edit] Musharakah (joint venture)
Musharakah is a relationship between two or more parties, which invest capital in a company and divide the net pro rata. This is often used in investment projects, letters of credit, or the purchase of real estate or property. In the case of property or assets, the bank assess the rent charged and will share as agreed in advance. [28] All providers of capital are entitled to participate in management but not necessarily required to do so. The profit is shared between the partners in pre-agreed ratios, while the loss is borne by each partner strictly in proportion to respective capital contributions. This concept is different from fixed-income investment (eg the issuing of loans). [Edit]
[edit] Qard Hassan / Qardul Hassan (Good Loan / Loan Charity)
This is a loan on a basis of goodwill, and that the debtor is only required to repay the amount borrowed. However, the debtor in May, at its discretion, pay an additional amount beyond the principal amount of the loan (without promising) as a token of appreciation for the creditor. Where the debtor fails to pay an additional amount to the creditor, this transaction is a genuine interest free loan. Some Muslims believe it is the only type of loan that does not violate the prohibition of usury, since it is the only type of loan that does not really compensate the creditor for the time value of money [30 ].
[edit] sukuk (Islamic bonds)
Main article: Sukuk
Sukuk is the Arabic name for a financial certificate but can be regarded as an Islamic equivalent of bond. However, fixed income, interest-bearing bonds are not allowed in Islam. Consequently, Sukuk are securities that comply with Islamic law (Sharia) and its investment principles, which prohibit the charging or paying interest. Financial assets that comply with Islamic law can be classified according to their tradability and non-tradability in secondary markets.
[edit] Takaful (Islamic insurance)
Main article: Takaful
Takaful is an alternative form of coverage that a Muslim can avail himself against the risk of loss due to misfortunes. Takaful is based on the idea that what is uncertain with respect to a person may cease to be uncertain with respect to a very large number of similar individuals. Insurance by combining the risks of many people enables each individual to enjoy the advantage provided by the law of large numbers. Takaful See for details.
[edit] Wadiah (guard)
In Wadiah, a bank is considered a guardian and trustee of the fund. A person deposits funds in the bank and the bank guarantees refund of the full amount of the bond, or any part of the sum due where the applicant demands it. The applicant, at the discretion of the bank, may be rewarded by Hibah (see above) as a form of recognition for the use of funds by the bank.
[edit] Wakalah (proxy)
This occurs when a person appoints a representative to transact on behalf like a proxy.
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