1-murabaha-bynajeebkkhan-110105051231-phpapp01.ppt

8/14/2019 1-murabaha-bynajeebkkhan-110105051231-phpapp01.ppt

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Sale Contract /Murabaha .

Muhammad Najeeb Khan


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CONTRACT IN ISLAM

CONTRACT

SUBJECT

MATTERCONTRACTORS

WORDING OF

CONTRACT

Specified

Quantified

Non-restrictedSane

Mature

PresentUnconditional

Non-contingent


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Law of Contract

Islamic Contract: It is connection

between the offer and the

acceptance in a manner that

results the proper affects.

Offer

Acceptance

Subject matter


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ISLAMIC SALE

DEFINITION OF SALE(BAI)

exchange of a thing of value with

another thing of value with mutual

consent.

the sale of a commodity in exchange

of cash.


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ISLAMIC SALE

(1)-VALID SALE ( Bai Sah ih)

a sale is valid if all elements together with

their conditions are present

elements of valid sale are

Contract ( Aqd ) Subject matter ( Mabee)

Price ( Thaman ) Possession or delivery ( Qabza )


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CONTRACT ( Aqd )

Offer & Acceptance ( Ijab-o-Qobool) Oral ( Qaul i )

Impl ied ( hukm i )

Buyer and seller ( Mutaaquadeen ) must be

Sane

Mature

Condit io ns o f con tract ( Sharaet-e-Aqd )

sale must be non-con t ingent

sale mus t be immediate

SOLD GOOD OR SUBJECT MATTER


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SOLD GOOD OR SUBJECT MATTER

( Mubee )

Existing

Valuable

Usable

Capable of ownership/title

Capable of delivery/possession

Specific & Quantified

Seller must have title & risk


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MURABAHA

Murabaha is a particular kind of

sale where the seller discloses its

cost and profit charged thereon.

The price in this sale can be

both on spot and deferred.


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Difference between

Murabaha & Musawima

Murabaha is a particular kind of sale

where the seller discloses its cost and

profit charged thereon.

Musawima is a sale on agreed price

without referring to the first price on

which the seller has purchased


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BANKING MURABAHA

It is a contractwherein the institution,

upon request by the customer, purchases

a asset from the third party usually a

supplier/vendor and resells the same to

the customer either against immediate

payment or on a deferred payment basis.


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BANKING MURABAHA

It is called Murabaha to the purchase orderer

.

It is a bunch of contracts completed in stepsand ultimately suffices the financial needs of

the client.

The sequence of their execution is extremely

important to make the transaction Shariah

compliant.


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SCOPE OF MURABAHA

As it is a kind of sale, there mustbe a seller and buyer and some thingthat is bought and sold . Theinstitution is the seller and theclient is buyer.

It cannot be used as a substitute

for running finance facility , whichprovides cash for fulfilling variousneeds of the client.


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SCOPE OF MURABAHA

It is a fixed price sale and normally

is done for short term.

The transaction can be used in

order to meet the working capital

requirements however it cannot beused to meet liquidity requirements.


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Step by Step Murabaha


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Stage One (a) forMurabaha financing

1. Client approach the bank for

facility through Murabaha.

1- Promise stage

Facilityapproved

Bank Client


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Stage One (b) forMurabaha financing

1. Client and bank sign an

agreement to enter into

Murabaha.

1- Promise stage

MurabahaFacility

Agreement

MOU

Bank Client


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Stage One (c) forMurabaha financing

. Client submit the purchase

requisition to the bank.

1- Promise stage

purchase

requisition

/Promise to the

bank.

Bank Client


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2. Client appointed as agent to

purchase goods on banksbehalf

2- Agency stage

Agency

Agreement

Bank Client

Agreement toMurabaha


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. Bank gives money to supplier

through clients account for

purchase of goods.

2- Agency stage

Stage Two for Murabahafinancing

Agreement toMurabaha

AgencyAgreement

Disbursement to theSupplier

Islamic

BankBank Client


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. Client purchases goods on banks

behalf and takes their possession.

3. Acquiring Possession

Stage three for Murabaha

financing

Client purchasesgoods and takespossession

Transfer of Risk Vendor

Bank Client


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. Client makes an offer to

purchase the goods from bank.

4. Execution of Murabaha

Stage four (a) for Murabahafinancing

Offer topurchase

Bank Client


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. Bank accepts the offer and

sale is concluded.


Stage four (b) for Murabahafinancing

MurabahaAgreement

+Transfer of TitleBank Client


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. Client pays agreed price to bank

according to an agreed schedule.

Usually on a deferred payment basis

(Bai Muajjal)


Stage four (b) for Murabaha financing

Payment of PriceBank Client

M b h


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Murabaha

GENERAL MECHANICS

CUSTOMERISLAMIC BANK AgreementVENDOR

The customer approaches the Bank withthe request for financing

The Bank purchases and receives title ofownership from the vendor

The Bank makes payment to the vendor

The Bank transfers the title over to thecustomer upon payment

The customer makes payment up-front or

on a deferred basis


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STAGES OF MURABAHA

1. Promise Stage

2. Agency Stage

3. Acquiring Possession


5. After Execution of Murabaha


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STAGES OF MURABAHA

PRIOMISE STAGE

A- CREDIT APPROVAL(under Shariah perspective)


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CREDIT APPROVAL

(under Shariah perspective)

Poin ts to Be Cons ideredWhi le App rov ing Credi t

It is essential that the transactionbetween two parties must be genuine ,not fictitious.

CREDIT APPROVAL


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CREDIT APPROVAL

(under Shariah perspective)

Poin ts to Be Cons idered

Wh i le App rov ing Credi t

The Institution must insure that theparty from whom the item is bought is a

third party and not the customer or hisagent. In this manner the transactioncan be saved from Bai Inah (Buy Back)which is not allowed in sharia.


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STAGES OF MURABAHA

PRIOMISE STAGE

B- Murabaha Facility Agreement

MOU

Murabaha Facility


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y

Agreement

MOU Mentioning Limits of each facility

Security to be submitted by the

Customer

Other terms and conditions

covering all the facilities

approved for the Customer.

The Agreement to be signed by

both the parties.


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Secur ities Against

Murabaha Price


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STAGES OF MURABAHA

PRIOMISE STAGE

C- Purchase Requ isi t ion

C P h R i iti


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C- Purchase Requisition

The Client orders theinstitution to buy certain goodsfor him and sell him the same

after acquiring.

Containing the details of the

goods required to purchase

from the Supplier, Cost Price

and expected date of delivery The prerequisite is that the

goods are not already owned by

the client.


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STAGES OF MURABAHA

PRIOMISE STAGE

D- Prom ise to Purchase

D P i t P h


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D- Promise to Purchase

At this stage the customerpromises the institution to buy thegoods which were acquired by the

institute on his request.

Normally Purchase requisitioncontains this Promise.


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STAGES OF MURABAHA

PRIOMISE STAGE

G- PAYMENT OF MURABAHAGoods


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STAGES OF MURABAHA


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STAGES OF MURABAHA

2-AGENCY STAGE

AGENCY STAGE


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AGENCY STAGE

Agency Agreement is not thecondition of the Murabaha if theinstitution can make directpurchases from the supplier.

The financial institution, doesnot have the expertise to identify

the goods and negotiate anefficient price.

AGENCY STAGE


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AGENCY STAGE

The customer, however, beingin the industry, can do this.

The institution thereforeappoints him as its Agent (whichis also permissible), in the firststep of the transaction, to identify

and procure the goods oninstitution behalf.

AGENCY STAGE


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AGENCY STAGE

This is done by execution ofAgency Agreement between theinstitution and the customer.

However according to Sharia

Perspective it is preferable toappoint the Agent other thencustomer.

AGENCY STAGE


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AGENCY STAGE

If goods are acquired from thirdparty the execution of agencyagreement will be between theinstitution & the third party..

AGENCY STAGE


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AGENCY STAGE

TYPES OF AGENCY AGREEMENT

1. SPECIFIC AGENCY AGREEMENT

When the purchase of commodity is not ofconsistent nature.

2. GLOBAL AGENCY AGREEMENT

When the purchase of commodity is ofconsistent nature.


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STAGES OF MURABAHA

3-ACQUIRING POSSESION

Acquisition Of Title &


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Possession of The Asset

1-Institution must take actual orconstructive possession of theitem .

The forms of taking delivery orpossession of items differ according totheir nature and customs.

The item must move from the

responsibility of the supplier to theresponsibility of the institution .

It is obligatory that the point when therisk of the item is passed on by theinstitution to the customer, be clearlyidentified.



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2.Goods must exists at the timeof execution of Murabaha.

If the above two are not fulfilled than theinstitution cannot execute Murabaha.



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Documentary evidence required at thetime of possession before execution of

Murabaha i.e. delivery challan, gatepasses and sales tax invoices.

Physical Inspection


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Importance of Physical

Inspection.

It is advisable that bank shouldappoint one person for physical

inspection .Importance of Physical

Inspection

STAGES OF


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MURABAHA

4- EXECUTION OFMURABAHA


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Actual Murabaha Sale

OFFER & ACCEPTANCE

OFFER TO PURCHASE


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OFFER TO PURCHASE

The Customer will make an offer topurchase the goods acquired by him

for Banks behalf mentioning theOffer Price .(Comprising Cost plusBanks Profit )

BANKS ACCEPTANCE


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BANK S ACCEPTANCE

The Bank will accept the offer made by theCustomer. All the terms of the MurabahaTransaction such as Sale Price ( Cost plusProfit ) Due Date or Schedule of Paymentsetc. must be mentioned in the Banks Letter

of Acceptance..

RELATIONSHIP


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RELATIONSHIP

At this stage relation of a Buyer & Sellercomes into operation between theinstitution & the client.

Since the sale is effected on deferredpayment basis, the relation of Debtorand Creditoralso emerges between them

simultaneously.


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I SSUES IN MURABAHA

Rollover in Murabaha


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Rollover in Murabaha

Rescheduling is allowed but

repricing is not allowed.

Rollover is also notallowed.


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Risk ManagementIN

MURABAHA


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Risk

DimensionsCredit

Banking

Risks

Credit

CreditLiquidity

Prising risk

Market

Foreign Exchange

Solvency

Operational

Islamic Banks also face

-Additional asset risk

-Greater fiduciary risks

-Greater legal risk

END OF PRESENTATION


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END OF PRESENTATION

JAZAKAMUALLAH

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