ISLAMIC BANKING CONCEPT
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WADIAH YAD DHAMANAH
(guaranteed safe custody)
MURABAHAH
WAKALAH
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Bay' Al-Sarf (Foreign Exchange)
Hibah
Bay’ As-Salam (Future Delivery)
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Musharakah
Bay`al-Dayn
Literally: Giving, advance and leaving.
Technically: A contract in which advance cash payment is made for goods to be delivered soon.
Application of Bay' As-Salam: 1)Hybrid Salam Financing 2)Salam Financing Working Capital 3)Parallel Salam Financing
Literally: Sale and purchase of money for money including gold and silver
Technically: The exchange of one monetary from for another in the same or different type
Application of Bay' Al-Sarf: 1) Gold investment savings account 2) Shariah compliant forex investment product
Literally: Gift
Application of Hibah: 1) Hibah in saving/Current Account 2) Hibah in loan 3) Hibah in Al-Ijarah Thumma Al-Bai' contract 4) Hibah in Inter-bank Mudharabah Investment 5) Hibah in Takaful
Technically: A voluntary contract that results in uncompensated ownership transfer between living individuals
DEFINITION
Performing task on behalf of others, preservation and delegation of a job to another.
Authorizing another person to undertake any dealings on one's behalf.
PRODUCT OF WAKALAH
Cash deposit machine (CDM) transfer
Money transfer through bank
DEFINITION
The custodian guarantee the return of the property entrusted to him, and also agrees to return the item upon request
Wadiah: Safe-keeping, Daman: guarantee
PRODUCT OF WADIAH YAD DHAMANAH
Savings deposit account
Current deposit account
DEFINITION
A sale in which the acquisition cost and the markup are disclosed to the purchaser
Increase in capital / profit trading
PRODUCT OF MURABAHAH
Islamic loan
Commodity murabahah (interbank transaction)
Qardh Hassan
CURRENT ACCOUNT & SAVING ACCOUNT
An interest-free loan where the borrower only repays the principal amount
DEFINITON
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- Depositor deposit their money to the bank.
- Bank lend the money from the depositor.
- Bank can utilize the money.
- Bank only owes the depositor the principal amount.
APPLICATION
Definition
Literal: Sale of Debt
Sale of a debt arising from trade and services transaction in the form of a deferred payment sale.
TYPES
Example: Hilmi owes Ahmad RM 3000, Ahmad then sells the debt RM 3000 to Zaki for a motorbike on cash basis.
Example: Ahmad owes Khairul RM500 and Khairul sells the debt to Ahmad for a propotion of land owned bt Ahmad that worth RM500
Sale of debt to the debtor on cash basis
Sale of debt to third party on cash basis
APPLICATION
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ECR is short term financing facility to promote export of manufactured or agricultural that have good added value
BNM on behalf of the Government to issue TB to raise fund
Usually release between 21 days to 100 days of maturity date
Both conventional and Islamic Institution can buy and sell TB-i
- Provided by the bank and accepted by the purchaser or buyer
- Bank can sell the AB-i in the secondary market at discount under the Bay` al-Dayn
Malaysian Islamic Economic Development positively contributed to the use of Bay` al-Dayn
Malaysia has been advocating the application of Islamic securities based on the concept of Bay` al-Dayn
a. Islamic Treasury Bill (TB-i)
b. Islamic Accepted Bills (AB-i)
c. Islamic Bond
d. Export Credit Refinancing (ECR)
- increasingly diminished partnership
- partnership ending with ownership
general partners are responsible for managing funds and directing them to the most promising ventures
literally:sharing
Islamic Jurispridence: joint enterprise formed for conducting business where party investing the capital share equally both profit and loss
Musyarakah Mutanaqisah
Definition
KAFALAH
MEANING : A guaranteed contract on a certain asset, usurfruct or service provided by a guarantor to the parties involved
APPLICATION
LETTER OF GUARANTEE
1) Guarantee facilities refers to contract or assurances made by Islamic bank to third party.
2) In this assurance, bank agrees to assume the liability of its customer in the case of default or breaching of contract as agreed between the customer and the 3rd party.
RAHN
DEFINITION : Taking a property as a security against a debt, whereby the secured property can be utilized to repay the debt in the case of non payment
APPLICATION
AL-BAY' BI THAMAN AJIL (BBA)
DEFINITION:
A sale contract with a differed payment.
A sale of an asset on credit paid in a lump sum or installments with a higher price then its cash price agreed by the contracting parties.
APPLICATION
In the Malaysian Islamic Financial system, BBA is one of the earliest Islamic concepts being introduced for financing asset acquisition such as vehicle, land, house and shares and other financing purposes such as personal and educational financing
BBA is a contract where the financier sells the property to its customer on BBA basis with a higher price (with a profit margin) after buying the same property from the same customer on cash at a lower price
1) In normal al rahn micro financing, the customer pledges their valuable assets such as gold to the pawn shop as the marhun.
2) The marhun will be valued and the customers will be granted a loan based on certain percentage.
3) During the borrowing period, a fee was charged based on daily or monthly calculations for its service safekeep until the reclaimed a debt is settled.
IJARAH
definition
rent,tenancy,lease
A contract of mutual exchange to transfer the ownership of usufruct with compensation
application
house financing
AIA fixed rate home loan
loan requirement
18-70 years old
5-35 years
Rent-A-Car
ImanFiqa
Alza (RM11 per hour)
Axia (RM7 per hour)
MUDHARABAH
definition
A contract where the owner presents his property to labor to do business with it and profits is jointly owned by them according to their agreement
Application
Takaful practices
investment account
ASB, Maybank,CIMB Islamic, Bank Rakyat
capital creation
provided business capital in form of trading goods
profit will be didtributed according pre-agreed profit sharing ratio and any losses will be borne by the capital provider
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BAI INAH
Definition Literal: loan or advanced payment. Technical: the selling of an asset with a mark up price on deffered payment, with the intention to sell the same asset to the debtor with lower cash price, which is meant to settle his debt. : :
APPLICATION
• Personal financing
• Working capital financing
• BBA financing products
• Sukuk BBA
• Sukuk Murabahah
HAWALAH
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Definition
• Literal: to change, to transfer
• Technical:
Hanafiyyah: to transfer debt from debtor(transferer) tp another debtor(transferee)AAOFI: Hawalah Al-Haqq(transfer right)
Hawalah Al-Dayn(transfer debt)
APPLICATION
Bill of Exchange
**Ijarah Thumma Al-Bai
Literal: Lease followeed by sale
Technical: A form of islamic finance arrangement which leasing or renting over a fixed period, and the second contract a buyback contract that triggers a sale or purchase once the term of the leasing/ijarah is complete.
APPLICATION
Usually apply in house and vehicle financing