Master Islamic Finance

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1 Master Islamic Finance Subject: Islamic capital market Presentation under the theme: "Evolution of Islamic products: Mosharaka - Moudaraba - Murabaha " Supervised by: Mr. Akhrif Amin Presented by: BEN SAID AMRANI Jawad BENYAACOUB Abdelkrim BENJELLOUNE Yassine BENZAKOUR Mohamed LAHNOUNI Youssef 1

2 Outline Introduction Mourabaha Mousharaka Moudaraba Conclusion 2

3 Introduction This is the era of Islamic finance, all the economies of the world are interested in this new born, more powerful and less risky after the financial crisis Morocco has also taken its first step in this finance after several years of hesitation, the law of Law has given the green light to the participating banks, so what are the executives who will govern that sector? And what will be the modes of financing adopted? 3

4 Most Common mode A sale where the seller discloses the cost of the commodity and amount of profit charged Debt given on interest Sale of a commodity at profit Purchases the commodity as per requisition of the client Islamic Bank Sells the client on cost-plus-profit basis 4

Client is named as agent to buy goods on bank s behalf 3.

5 Step by Step Murabaha financing 4. Vendor is transferring the risk of those goods to the bank Vendor 4. Client is purchasing goods on bank s behalf & taking their possession Bank 1. Signature of an agreement to enter into Murabaha 2. Client is named as agent to buy goods on bank s behalf 3. On this agreement, bank gives money to client for purchase of goods 4. Offer to purchase made by the client 5. Murabaha agreement, transfer of title & conclusion of the sale 6. Payment of price Client 5

Musharaka Is a contract of partnership between two or more parties in which all the partners contribute capital, participate in the management, share the profit in proportion to their capital or as

6 Musharaka Is a contract of partnership between two or more parties in which all the partners contribute capital, participate in the management, share the profit in proportion to their capital or as per pre-agreed ratio and bear the loss. The initial contribution or the capital must be quantified and specified in terms of currency, value, etc. and the capital invested by various partners need not be mixed and need not be in liquid form. 6

7 Musharaka Stands terminated in case of violation of the conditions of the contract. It can also be terminated when the purpose of forming the partnership has been achieved. In modern banking, Musharaka can provide a viable alternative to interest-based transactions. 7

8 Musharaka The partnership may be agreed for a set period of time or be indefinite, such divestment terms are agreed at the outset. It can be established as permanent Musharaka in which invested funds are not subject to repayment in the short term, or as diminishing Musharaka where invested funds are repaid over time as profitability allows, but also provides a method through which the equity of the bank keeps on reducing and ultimately transfers the ownership of the asset to the participants. 8

9 Mudarabah Is an equity-based contract offered by Islamic banks, which is based on the Islamic Shariah. It is a special kind of partnership, where one partner provides money to another and the latter manages the money by investing it in commercial projects in order to earn profit which is shared among the two in a predetermined ratio. The first partner who provides the money to the second is called rabb al maal (capital provider) while the second partner is known as mudarib (manager) Losses suffered shall be borne by the capital provider, provided such loss is not due to the manager s negligence or violation of specified conditions, can be terminated any time by either of the two parties by giving notice. 9

10 Mudarabah Types of the contract Contract which the capital provider specifies which projects to invest his/her money in, and the manager is supposed to restrict the investment to the specified businesses; this type of contract is known as Restricted Mudarabah (Mudarabah mokayadah). Contract where the capital provider does not specify any project for investment and the manager has choice; this type of contract is known as a permanent Mudarabah (Mudarabah al Mutlaqah). 10

11 Mudarabah 11

12 Conclusion The rapid pace of growth of Muslim population worldwide presents a lucrative window of opportunity for Islamic Banking. However, banks need to examine the key location-specific factors while offering Islamic Banking products and develop targeted offerings based on the unique needs of a region. 12

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Introduction to Islamic Banking. Salman Ahmed Shaikh

Introduction to Islamic Banking Salman Ahmed Shaikh islamiceconomicsproject@gmail.com www.islamiceconomicsproject.wordpress.com HISTORY OF ISLAMIC BANKING Islamic banking and the field of Islamic finance