Bright Group

8/12/2019 Bright Group

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BRIGHT GROUP

M.Zubair Zia [Group Leader]

M.BilalSyed Sajjad Hussain

M.Sajid

M.NaeemM. Hafiz Sharif


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PRESENTATION TOPIC:

ISLAMIC MODES OFFINANCING


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ISLAMIC FINANCIAL SYSTEM- AN

INTRODUCTION Based on QURAN and SUNNAH

Demands socio economic justice

Prohibits all kinds of RIBA

Prohibits all forms of exploitation

Provides equal opportunities to all Condemns accumulation of wealth in few

hands


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ISLAMIC MODES OF FINANCE

Modaraba

Musharaka

Bai Salam

Bai Murabaha

Bai Muajjal Ijarah


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1. MUDARBAH

One partner (Rab al Mal) contributes

capital and the other (Mudarib) contributes

his skills or services to the ventureVenture may for a fixed period or purpose

Both share profit in pre-agreed ratio

Loss is borne by Rab al Mal only, Mudaribloses his services


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FEATURES OF MUDARBAH

Religiously LawfulBusiness

Registeration Form of Capital

Division of Profit andloss

Duties of Parties Nature of Business


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MERITS OF MUDARBAH:

Development of Islamic Economic System

Development of Islamic Principles

End of Interest

Deliverance from Capitalism

End of Unemployment


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2. Musharaka

A joint enterprise or partnership structurewith profit/loss sharing implications that is

used in Islamic finance instead of interest-bearing loans. Musharakah allows eachparty involved in a business to share in

the profits and risks.


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Characteristics:

All parties share in the capital

All parties share profits as well as losses

Profits are distributed as per agreed ratio

Loss is borne by the parties as per capital

ratio Every partner is agent of other


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MERITS OF MUSHARAKAH:

The merits of Musharakah are the same asdescribed in Mudarabah:


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3.BAI SALAM:

IntroductionThe basic conditions for a validity of a sale in

Shriah are three:(1)The purchased commodity must be

existing,

(2)The seller should have acquired the

ownership of that commodity,(3)The commodity must be in the physical or

constructive possession of the seller,


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Definition &Concept

Seller agrees to supply specific goodsto the buyer at a future date inexchange of an advanced price fullypaid at spot.

Price is in cash but the supply ofgoods is deferred.


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Purpose of Salam

To meet the needs of small farmers whoneed money to grow their crops and to

feed their family up to the time of harvest. To meet the need of working capital

To meet the needs of liquidity problem.

To meet the need of traders for importand export business.


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Salam is beneficial to theseller,because he receives theprice

in advance,and it is beneficialto the buyer also,because

normally,the price in salamused to be lower then the pricein spot sales.


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Conditions of Salam

(1) It is necessary for the validity of Salam that the buyer pays theprice in full to the seller at the time of effecting the sale, becausethe basic wisdom for allowing Salam is to fulfill the instant needof the seller. If its not paid in full, the basic purpose will not be

achieved.

(2) Only those goods can be sold through a Salam contract in whichthe quantity and quality can be exactly specified e.g.preciousstones cannot be sold on the basis of Salam because each stonediffer in quality, size, weight and their exact specification is notpossible.

(3) All details in respect to quality of goods sold must be expresslyspecified leaving no ambiguity which may lead to a dispute.


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4)It is necessary that the quantity of thecommodity is agreed upon in absolute terms. It

should be measured or weighed in its usual

measure.

(5) Salam cannot be effected on a particularcommodity or on a product of a particular field or

farm e.g.. supply of wheat of a particular field orthe fruit of a particular tree since there is apossibility that the crop is destroyed before

delivery and given such possibility, the deliveryremains uncertain.

(6)The exact date and place of delivery must be

specified in the contract.


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4. BAI MARABAHA:

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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BANKING MURABAHA

It is a contract wherein the institution, upon

request by the customer, purchases a asset

from the third party usually asupplier/vendor and resells the same to the

customer either against immediate payment

or on a deferred payment basis.


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SCOPE OF MURABAHA

As it is a kind of sale, there must be a seller and

buyer and some thing that is bought and sold .

The institution is the seller and the client isbuyer.


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It is a fixed price sale and normally

is done for short term.

The transaction can be used in orderto meet the working capital

requirements however it cannot be

used to meet liquidity requirements.


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5.Bai Muajjal:

A sale in which the parties

agree that the payment ofprice shall be deferred.


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Shariah orders for Bai Muajjal

1 Item on sale must be owned in physical byseller.

2

Seller has right to ask for mortgage3 Seller has right to take profit of that sold item

if he bears the risk.

4 Possession of sold item must be transferred to

purchaser at once.5 The deferred price may be more than cash but

it will be fixed at the time of sale.


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6. AJARAH

It is a contract on using the benefitsor services in return for

compensation.


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The term Ijarah is used for twodifferent situations:

1. It means to employ the servicesof a person on wages given to him

as a consideration for his hiredservices.

The employer is called Mustajir, theemployee is called Ajir


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2. Relates to the usufructs (right to

use of a property) of assets andproperties

Ijarah in this sense means totransfer the usufruct of a particular

property to another person inexchange for a rent claimed fromhim.


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Conditions of Ijarah (Islamic

Leasing) The commencement of lease

Rent should be charged after the delivery of the

leased asset to the lessee Expenses consequent to ownership to the lessor

Penalty for late payment of Rent

Termination of Lease


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CONDITIONS OF AJARAH

Usufruct of an asset is passed to other

party against a periodic rent payment

The asset must have corpus (body) and

be in existence

The asset must not be consumable in

nature (should not vanish if used)

Ownership will remain with the lessor and

he will bear all the risks related to

ownership


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END OF PRESENTATION


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THANK YOU

Bright Group

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