Islamic Funding Structures And Financing Alternative | SHARIA

The financial jurisprudence adhered to by this site is after the manner of Mufti Taqi Usmani
Mufti Muhammad Taqi Usmani, Sheik-Ul-Islam, is one of the leading Islamic scholars living today. He graduated par excellence form Dars e Nizami at Darul Uloom, Karachi, Pakistan. He served as a judge on the Federal Shariat Court of Pakistan from 1981 to 1982 and the Shariat Appellate Bench of the Supreme Court of Pakistan between 1982 and 2002. He is an expert in the fields of Islamic Jurisprudence (fiqh), economics, and hadith. Then he specialized in Islamic Jurisprudence under the guidance of his eminent father, Mufti Muhammad Shafi, the late Grand Mufti of Pakistan. Since then, he has been teaching hadith and Fiqh at the Darul-Uloom, Karachi.

MUSLIM FINANCIAL BEST PRACTICES

Sharia Compliance - The Duty After The Duty

Islamic banks around the world have devised many creative financial products based on the risk-sharing, profit-sharing principles of Islamic banking. For day to day banking activities, a number of financial instruments have been developed that satisfy the Islamic doctrine and provide acceptable financial returns for investors. Broadly speaking, the areas in which Islamic banks are most active are in trade and commodity finance property and leasing. Some of the basic financial techniques of Islamic banking are the following

The concepts of equity and morality are at the root of Islamic banking and absence from interest. In Islam moral and equitable values form an integral part of the rules of law governing contractual and financial relations to such an extent that the relationship which exists between equity, law and religion is an organic rather than supplementary relationship. The importance of Islamic banking has increased dramatically over the past 10 years. The main difference between Western and Islamic-style banking is the concentration on people and their businesses rather than on accounts- it is a much more 'grass roots' banking according to one expert.

IJARAH

Definition

Ijara Wa Iktina: Equivalent to the leasing and installment-loan, hire-purchase, practices that put millions of drivers on the road each year. These techniques as applied by Islamic banks include the requirement that the leased items be used productively and in ways permitted by Islamic law..

MUQARADAH

Definition

Muqaradah: This technique allows a bank to float what are effectively Islamic bonds to finance a specific project. Investors

Editors Note

Please note that our representation here is neither to seen or accepted as guidance, acceptance, or recommendation. Rather it is EXISTENCE. We share this information here, with the intention that the community is informed of the existence of this product, which some muslims (and others do not) accept as compliant. For our part, we do not participate in this product.

MUDARABA

Definition

This implies a contract between two parties whereby one party, the rabb al-mal (beneficial owner or the sleeping partner), entrusts money to the other party called the mudarib (managing trustee or the labour partner). The mudarib is to utilise it in an agreed manner and then returns to the rabb al-mal the principal and the pre-agreed share of the profit. He keeps for himself what remains of such profits

MUSHARAKA

Definition

Musharaka: This is a partnership, normally of limited duration, formed to carry out a specific project. It is therefore similar to a western-style joint venture, and is also regarded by some as the purest form of Islamic financial instrument, since it conforms to the underlying partnership principles of sharing in, and benefiting from, risk. Participation in a musharaka can either be in a new project, or by providing additional funds for an existing one. Profits are divided on a pre-determined basis, and any losses shared in proportion to the capital contribution.

MURABAHA

Definition

A form of credit that enables customers to make a purchase without having to take out an interest-bearing loan. The bank buys an item and sells it to the customer on a deferred basis. The price includes a profit margin agreed by both parties. Repayment, usually in installments, is specified in the contract. The modern Murabahah has become the most popular financing technique among Islamic banks, used widely for consumer finance, real estate, the purchase of machinery and for financing short-term trade.

SALAM

Definition

Salam is a sale whereby the seller undertakes to supply some specific goods to the buyer at a future date in exchange for an advanced price fully paid on the spot. Here the price is paid in cash, but the supply of the purchased goods is deferred. The buyer is called "rabb-us-Salam", the seller is "Muslam ilaih", the cash price is "ra's-ul-mal", and the purchased commodity is termed as "muslam fih", but for the purpose of simplicity, I shall use the English synonyms of these terms.

ISTINSA

Definition

The majority of the jurists consider Istisna'a as one of the divisions of Salam, therefore it is subsumed under the definition of Salam. But the Hanafite school of jurisprudence makes Istisna'a an independent and distinct contract. The jurists of the Hanafite school have given various definitions to Istisna'a, some of which are: "That it is a contract with a manufacturer to make something" and "It is a contract on a commodity on liability with the proviso of work". The purchaser is called "mustasnia" contractor and the seller is called "sania" maker or manufacturer and the thing is called "masnooa" "manufactured, built, made"

MUZARAH

Definition

Muzara'ah is a cultivation (plantation) partnership between a land owner and a farmer in which the former provides a piece of land and the latter contributes efforts and expertise to grow a crop therein. The total yield (ghallah) of the land is divided between the two partners according to specific percentages.

On the other hand, mukhabarah is a type of sharecropping whereby a plot of land is rented for part of its yield (ghallah). It is a type of agreement in which the worker (farmer) supplies seeds, in addition to his labor and expertise, and the landlord provides, through lease (ijarah), the plot of land to be ploughed in preparation for sowing seed and growing crops. Mukhabarah may also involve cultivation of a sowed land in return for a specific portion of its produce. The rent is paid in kind from the land's produce.

WAKAALAH

Definition

Literally Wakalah means protection or remedying on behalf of others. Legally Wakalah refers to a contract where a person authorizes another to do a certain well-defined legal action on his behalf. It is a contract of agency which means doing any work or providing any service on behalf of any other.
The majority of the jurists consider WAKALA'a as one of the divisions of Salam, therefore it is subsumed under the definition of Salam. But the Hanafite school of jurisprudence makes WAKALA'a an independent and distinct contract. The jurists of the Hanafite school have given various definitions to WAKALA'a, some of which are: "That it is a contract with a manufacturer to make something" and "It is a contract on a commodity on liability with the proviso of work".

KAFAALAH

Definition

Kafaalah is an Arabic word from the scale of Nasara, Yansuru. It means to join. Allah Ta'ala has 99 qualities. One is al-Kafeel as he joins (assists) in the affairs of every creation.

1) Sharee Definition

'To attach a responsibility to another in a claim.' (Hidaaya). Kafaalat is permissible. This is proven from two prime sources of Shari'ah.

SUKUK

Definition

So Called Islamic Bonds

Modern "SUKUK" emerged to fill a gap in the global capital market. Islamic investors want to balance their equity portfolios with bond-like products. Because "SUKUK" are asset-based securities — not debt instruments — they fit the bill. In other words, "SUKUK" represent ownership in a tangible asset, usufruct of an asset, service, project, business, or joint venture

Each "SUKUK" has a face value (based on the value of the underlying asset), and the investor may pay that amount or (as with a conventional bond) buy it at a premium or discount.

EditorsNote

Please note that our representation here is neither to seen or accepted as guidance, acceptance, or recommendation. Rather it is EXISTENCE.

We share this information here, with the intention that the community is informed of the existence of this product, which some muslims (and others do not) accept as compliant. For our part, we do not participate in this product.

July 15, 2010 | By John Foster, former editor, Islamic Business & Finance magazine

The Islamic finance industry has often battled with the question: How Islamic is Islamic banking?

The question's pertinence was raised in March last year, when Sheikh Muhammad Taqi Usmani, of the Accounting and Auditing Organization for Islamic Finance Institutions (AAOIFI), a Bahrain-based regulatory institution that sets standards for the global industry, said that 85% of "SUKUK" , or Islamic bonds, were un-Islamic.

Usmani is the granddaddy of modern-day Islamic finance, so having him make this statement is synonymous with Adam Smith saying that free-markets are inefficient. Because "SUKUK" underpin the modern-day Islamic financial system, one of its pre-eminent proponents arguing that the epicentre of the system was flawed sent shockwaves through the industry. It also gave ammunition to the many critics who see Islamic finance as an industry more driven by cultural identity than practical problem solving: as a hodgepodge of incoherent, incomplete, impractical and irrelevant ideas.

RECOGNIZABLE PRODUCTS

The products that modern-day Islamic bankers have created are very similar to conventional products. So similar, in fact, that to an outside observer they could be considered the same. Islamic banks now offer Islamic mortgages, Islamic car loans, Islamic credit cards, Islamic time deposit and guaranteed return accounts, Islamic insurance and some even offer Islamic managed and hedge funds.

This point is conceded by Samir Alamad, Sharia, or Islamic law, compliance and product development manager of the Islamic Bank of Britain. “The industry does not want to alienate its products,” he says. “They have to be recognisable, produce the same outcome as conventional products, but remain within the guidelines of Sharia.”

NO INTEREST

The core of Islamic economics is a prohibition on interest. This immediately creates a problem for Islamic banks, as conventional banks charge borrowers an interest rate through which they can reward their depositors and make some profit for being the broker. With interest ruled out it is harder to make money. The modern Islamic banker has found a way around this prohibition, however.

As in many Islamic products, the bank enters a partnership with its depositors and invests his money in a Sharia compliant business. The profit from this investment is then shared between the depositor and the bank after a set time. In many cases this “profit rate” is competitive with the conventional banking system's interest rate for savers.

The core of Islamic economics is a prohibition on interest. This immediately creates a problem for Islamic banks, as conventional banks charge borrowers an interest rate through which they can reward their depositors and make some profit for being the broker. With interest ruled out it is harder to make money. The modern Islamic banker has found a way around this prohibition, however. As in many Islamic products, the bank enters a partnership with its depositors and invests his money in a Sharia compliant business. The profit from this investment is then shared between the depositor and the bank after a set time. In many cases this “profit rate” is competitive with the conventional banking system's interest rate for savers.

LEASE AGREEMENTS

Alternatively, an Islamic banker might enter into a lease agreement for a car or a house with an individual. The bank would buy a vehicle outright and then lease it back to the person who wanted it, over a time period that would ensure that the capital was repaid and the bank made a profit. Alternatively the bank would enter into a partnership with a person wanting to buy a house. The bank would buy 70% of the house, the individual 30%. The bank then rents its share of the house back to the individual until the house is fully paid for. The bank makes a profit on the rent, which would be higher than equivalent rents in the area, but on an annualised percentage basis, would look very much like a conventional mortgage interest rate. To the casual observer, a spade is a spade. Whether the product is dressed up in Arabic terminology, such as Mudarabah, or Ijarah, if it looks and feels like a mortgage, it is a mortgage and to say anything else is semantics.

SOPHISTICATED FINANCE

The potential wealth locked up in oil-rich Gulf states encouraged the conventional banks to enter Islamic finance. HSBC established the Amanah Islamic Finance brand in 1998 and Deutsche Bank, Citi, UBS and Barclays quickly joined the fray, all offering interest-free products for wealthy Arabs. However, this new generation of Islamic bankers had cut their teeth in the City and Wall Street, and were used to creating sophisticated financial products. They often bumped heads with the Sharia scholars who authorised their products as Sharia compliant. However, these bankers had a way of dealing with this, as one investment banker based in Dubai, working for a major Western financial organisation explains:“We create the same type of products that we do for the conventional markets. We then phone up a Sharia scholar for a Fatwa [seal of approval, confirming the product is Shari'ah compliant]. “If he doesn't give it to us, we phone up another scholar, offer him a sum of money for his services and ask him for a Fatwa. We do this until we get Sharia compliance. Then we are free to distribute the product as Islamic.”

NO CONCENSUS

This “Fatwa shopping”, which was carried out by some institutions, brings us back to the Sharia scholars. Even these scholars do not agree all the time, which means that in some cases a product is deemed Sharia compliant in one market and not in another. This is especially the case with Malaysian products, which are often deemed not Sharia complaint in the more austere Gulf. “Often no rulings exist for modern day problems, such as use of narcotics,” Alamad explains. “In Islam intoxication by wine is forbidden, but at the time of the Prophet Muhammad there was no crack cocaine.” Modern scholars had to interpret the rules on intoxication, and the consensus was that crack should also be forbidden to Muslims, as it is a dangerous intoxicant. “This is how we make rulings, whether in finance or societal,” Alamad says. “The consensus rules, which usually will become mandatory for all Muslims to follow, but there are some opinions and sometimes scholars are not in the consensus.”

Are Islamic Bonds Different?

By Dr. Faleel Jamaldeen

Modern "SUKUK" emerged to fill a gap in the global capital market. Islamic investors want to balance their equity portfolios with bond-like products. Because "SUKUK" are asset-based securities — not debt instruments — they fit the bill. In other words, "SUKUK" represent ownership in a tangible asset, usufruct of an asset, service, project, business, or joint venture

Each "SUKUK" has a face value (based on the value of the underlying asset), and the investor may pay that amount or (as with a conventional bond) buy it at a premium or discount.

Rewarding investors for "SUKUK"

With "SUKUK" , the future cash flow from the underlying asset is transferred into present cash flow. "SUKUK" may be issued for existing assets or for assets that will exist in the future. Investors who purchase "SUKUK" are rewarded with a share of the profits derived from the asset. They don’t earn interest payments because doing so would violate sharia

Repurchasing "SUKUK" at maturity

As with conventional bonds, "SUKUK" are issued with specific maturity dates. When the maturity date arrives, the "SUKUK" issuer buys them back (through a middleman called a Special Purpose Vehicle).

However, with "SUKUK" , the initial investment isn’t guaranteed; the "SUKUK" holder may or may not get back the entire principal (face value) amount. That’s because, unlike conventional bond holders, "SUKUK" holders share the risk of the underlying asset. If the project or business on which "SUKUK" are issued doesn’t perform as well as expected, the "SUKUK" investor must bear a share of the loss.

Most sharia scholars believe that having "SUKUK" managers, partners, or agents promise to repurchase "SUKUK" for the face value is unlawful. Instead, "SUKUK" are generally repurchased based on the net value of the underlying assets (each share receiving its portion of that value) or at a price agreed upon at the time of the "SUKUK" purchase.

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We provide products through our custom programmes and arrangement with specific benefits and specific performance requirements in a roll-out.

Products are aesthetic, cost effective, energy lean, environmental sustainable and satisfies a specific trigger and user service proposition for the target demographic, be it individuals, companies, city chambers of commerce, industry sector interests, standing governments of countries or party interests of the same country

Getting off on the right foot requires a proven game plan. We do stagings that provide the raised the bar on performance for your company that allows you to achieve faster concept to target implementation, so that you don’t have to. We may be your best option in finding the best-fitting solution just-in-time.

Private

At the personal level the obligation is to (a) engage in halal professions and business activities. (b) Facilitate seamless transitions from conventional business practices to a Islam Compliant Practices; (c) Be a catalyst in the enhancement of permissible lifestyle businesses from concept to product delivery, and customer satisfaction.

Corporate

At the corporate level the obligation is to seek to (a) establish a system that facilitates such individual efforts and discourage their opposites in our community; (b) research, establish, and support, promote compliant Businesses activities; (c) increase the successful small to medium owner managers pool of entrepreneurs (d) transition and convert conventional business to compliance; (e) be an intermediary between diverse cultures; (f) be a bridge-builder facilitator in trade, commerce and business relations, on a best practices of Islam

Governorate

At the greater collective level we intend to be in the vanguard of establishing, maintaining and propagating Businesses Best Practice, based on Islam

THE FINE PRINT.

Business and it’s environment is risky beyond control, companies of all sizes are facing critical issues of resources and seek agile multi-skilled individuals and locations for economies of scale and everywhere life's dynamism creates new challenges.

HOW YOU ENGAGE US.

Recommendation or Expression of Interest Communication Product/Service Introduction.

Where We Are Intro To Company, We Conduct A Customer/Entity Readiness Evaluation to determine if we are a good fix

COMPETENCIES

These are issues which arise from the things clients are not so good at or, the things they are not sure how to do or they are not sure if they're dong it right or just the things they don't like doing or even some of the things they are good at - but it's no longer profitable to do it., or even some of the things that you are good at, but just cannot do now.

DELIVERABLES

Fixed Cost, Fixed Time, On Terms, On Time, First Time

SHARED RISKS/BENEFITS

Shared vision from risks framed in common terms, through shared costs and collaborative action that fosters the catalyses Shared opportunities for Shared benefits Custom Methods & Processes allows us to provide the deliverables exactly on requirements above 90% of the Time. 5% to 10% of the time, deliver according to adjusted deliverables..

COMMON TERMS

We work on common terms which ensures that if we do well, you do well and if you do not, we do not either.

If you do an early termination, you forfeit 50% of your fees. If We terminate Early, we return 100% of your fees.

THREE (3) DAYS

If perchance, you are not provided with your complete deliverable we will return 50% of We provide you with a respite of three (3) business days to sign off on our project after we have been paid – and if you are not satisfied with our solution, we will return 50% of your total fees

BILLNG TERMS

Billed fees are 100% earned and due.

GOLD STANDARD

Our standard fees rate is 4.5Grams of 99.999 purity gold per hour or the equivalent in your currency.(if we need a custom fee for your delivery it may be multiples of 4.5Grams or percentages of 4.5Grams

LIABILITY

Our declared liability is 50% the fees collected for our agreed solution.

WE DONT DO DISCLAIMERS

As Muslims involved in business and technology consulting, we rely completely on the tenets of Islam to determine our praxis and counsel, our business relationships, our products and our associates. Islam is its own culture, a way of life, a form of government, a social structure, as well as a regulatory norm for the full range of human and human/other relationships.

The conduct of business is no exemption.

Our socio-politico-economic-ethico*-moral theories should be consistent with guidance and instruction and the basis of all of them must be one. and when the Creator and His Messenger has made a decision, it is not for Mankind and ins to have an opinion on it

Islamic society preserves the notions of free enterprise and social solidarity, social responsibility and an alternative form of humanity for all.

This precedes and supersedes self-interest, and that also is the object of many specific guarantees in Islam

WEBSITE

On this site our descriptions are longer than many others, primarily because we know what we can do and it the declaration provides a clear indication of our capabilities, the value we exchange and what the standards and delivery options we should be held observed.

PRINCIPLES

We provide our solutions against the background of the Islamic Aadaabs Of Khidmat (Service To Others) of which there are three conditions of Kidmaat, viz.

Sincerity: The motive of rendering the service must be nothing other than Muhabbat (affection).

Congeniality:  The hearts of the Khaadim (the one who renders the service) and the Makhdoom (the one who is being served) should be at one. There should be congeniality (Munaasabat) between them. They should not be strangers.

Ability: The Khaadim should know how to render the service he is to undertake. | CEO.IKRIMAH - In Other Words We Will Not Take The Project Unless We Can Deliver. {iA}

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IKRIMAHPLC controls these sites from its offices in Singapore. You agree that any action proceeding, or other matters relating to your access to, or use of, the information on these sites shall be governed by Islamic Laws and permissible Singapore law. Here you choose (a) compliance and confidence with