GROUPD
ASSIGNMENT1
SUBMITTEDTO:
PROF.MADYADR.ZAIRANIBT.ZAINOL
PREPAREDBY:
NAME MATRIC.NO
LOWPEICHIAN 239302
CHOOYENTENG 239673
PANGCHICHING 239683
TANPEIQI 239903
TABLEOFCONTENTS
1. TABLEOF i.
CONTENTS
2. 1.0INTRODUCTION 14
3. 2.0ISLAMICDEPOSITSANDINVESTMENTPRODUCTS 515
4. 3.0ISLAMICFINANCINGPRODUCTS. 1625
5. 4.0ISLAMICTRADEFINANCING. 2635
6. 5.0CONCLUSION. 36
7. 6.0 ii.iii.
REFERENCE
i.
1.0INTRODUCTION
1.1HISTORYOFISLAMICBANKING
The origin ofIslamic banking dates back to the verybeginning ofIslam in the seventh
century.TheprophetMuhammad'sfirstwife,Khadija,wasamerchant,andheactedasan
agentforherbusiness.Hewasusingmanyofthesameprinciplesusedincontemporary
Islamicbanking.IntheMiddleAges,tradeandbusinessactivityintheMuslimworldrelied
onIslamicbankingprinciples,andtheseideasspreadthroughoutSpain,theMediterranean
andtheBalticStates,arguablyprovidingsomeofthebasisforwesternbankingprinciples.In
the 1960s to the 1970s, Islamic banking resurfaced in the modern world.
IslamicbankingreferstoasystemofbankingthatcomplieswithIslamiclawalsoknownas
Shariahlaw.TheunderlyingprinciplesthatgovernIslamicbankingaremutualriskandprofit
sharingbetweenparties,theassuranceoffairnessforallandthattransactionsarebasedonan
underlyingbusinessactivityorasset.AccordingInvestopedia,Islamicbankingisabanking
systemthatisbasedontheprinciplesofIslamiclaw,alsoreferredtoasShariahlaw,and
guidedbyIslamiceconomics.TwobasicprinciplesbehindIslamicbankingarethesharingof
profitandloss.
ThroughtheuseofvariousIslamicfinanceconceptssuchasijarah(leasing),mudharabah
(profit sharing), musharakah (partnership), financial institutions have a great deal of
flexibility,creativityandchoiceinthecreationofIslamicfinanceproducts.Furthermore,by
emphasizingtheneedfortransactionstobesupportedbygenuinetradeorbusinessrelated
activities, Islamic banking sets a higher standard for investments and promotes greater
accountabilityandriskmitigation.
1
1.2ISLAMICBANKINGINMALAYSIA
MalaysiasIslamicfinanceindustryhasbeeninexistenceforover30years.Theenactmentof
theIslamicBankingAct1983enabledthecountrysfirstIslamicBanktobeestablishedand
thereafter, with the liberalization of the Islamic financial system, more Islamic financial
institutionshavebeenestablished.
Today, Malaysias Islamic finance continues to grow rapidly, supported by a conducive
environment that is renowned forcontinuous product innovation, a diversity of financial
institutions from across the world, a broad range of innovative Islamic investment
instruments, a comprehensive financial infrastructure and adopting global regulatory and
legal best practices. Malaysia has also placed a strong emphasis on human capital
development alongside the development of the Islamic financial industry to ensure the
availability of Islamic finance talent. All of these value propositions have transformed
MalaysiaintooneofthemostdevelopedIslamicbankingmarketsintheworld.
AssociationofIslamicBankingInstitutionsMalaysia(AIBM)
TheAssociationofIslamicBankingInstitutionsMalaysia(AIBM)wasestablishedin1996as
theAssociationofInterestFreeBankingInstitutionsMalaysia.
WhatAIBMdo:
PromotesoundIslamicbankingsystemandpracticeinMalaysia
Representinterestofmemberslocallyandabroad
ProvideadviceandassistancetomemberspertinentinthedevelopmentonIslamic
bankingandfinanceatlocal,regionalandgloballevel
Coordinatehumancapitaldevelopmentinitiativesformembers
Promotepublicawareness
Current, AIBM has 25 members banks comprising 10 domestic banks, 4 development
financial institutions, 9 locally incorporated foreign banks operating in Malaysia and 2
InternationalFinancialInstitutions.
DomesticBanks
1. AffinIslamicBankBerhad
2. AllianceIslamicBankBerhad
3. AmBankIslamicBerhad
4. BankIslamMalaysiaBerhad
5. BankMuamalatMalaysiaBerhad
6. CIMBIslamicBankBerhad
7. HongLeongIslamicBankBerhad
8. MaybankIslamicBerhad
9. PublicIslamicBankBerhad
10. RHBIslamicBankBerhad
DevelopmentFinancialInstitutions
1. BankKerjasamaRakyatMalaysiaBerhad
2. BankSimpananNasional
3. Agrobank
4. MalaysiaBuildingSocietyBerhad(MBSB)
LocallyIncorporatedForeignBanks
1. AlRajhiBanking&InvestmentCorporation(Malaysia)Bhd
2. AsianFinanceBankBerhad
3. BNPParibasMalaysiaBerhad
4. BankofTokyoMitsubishiUFJ(M)Berhad
5. CitibankBerhad
6. HSBCAmanahMalaysiaBerhad
7. KuwaitFinanceHouse(Malaysia)Berhad
8. OCBCAlAminBankBerhad
9. StandardCharteredSaadiqBerhad
InternationalFinancialInstitutions
1. ALKHAIRInternationalIslamicBankBerhad
2. PTBankMuamalatIndonesiaTbk
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1.3WHATISTHEDIFFERENCEBETWEENISLAMICBANKINGAND
CONVENTIONALBANKING?
Islamicbankinghasthesamepurposeasconventionalbankingexceptthatitoperatesin
accordancewiththerulesofShariah,whichisknownasFiqhalMuamalat(Islamicruleson
transactions).IslamicbankingactivitiesmustbepracticedconsistentwiththeShariahandits
practicalapplicationthroughthedevelopmentofIslamiceconomics.
HeressomedifferencesbetweenIslamicbankingandconventionalbanking:
ConventionalBanking IslamicBanking
Moneyisacommoditybesidesmedium
of exchange and store of value. Moneyisnotacommoditythoughitisusedasa
Therefore,itcanbesoldatapricehigher mediumofexchangeandstoreofvalue.Therefore,
than its face value and it can also be itcannotbesoldatapricehigherthanitsfacevalue
rentedout. orrentedout.
Islamicbankingtendstocreatelinkwiththereal
sectors of the economic system by using trade
relatedactivities.Since,themoneyislinkedwith
Conventional banks use money as a therealassetsthereforeitcontributesdirectlyinthe
commoditywhichleadstoinflation. economicdevelopment.
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2.0ISLAMIC DEPOSITS AND INVESTMENT PRODUCTS
Deposits from depositors are an important source of financial strength for the Islamic banks.
This is because Islamic banks use the deposits from customers to increase their capacity for
financing operations and thereby increase profit for the shareholders of the bank. In Islamic
banking, the source of funds that it get from two main deposit that are transaction deposit and
investment deposit. Transaction deposits that are risk free and yield no return whereas
Investment deposits that carry the risks of capital loss for the promise of variable returns.
2.1 Islamic Transaction Deposit
Deposits from depositors are an important source of financial strength for the Islamic banks.
This is because Islamic banks use the deposits from customers to increase their capacity for
financing operations and thereby increase profit for the shareholders of the bank. In Islamic
banks, its consists of two main bases of mobilisation of deposits that are Savings Deposits
and Current Accounts Deposits.
I. Current Account Deposits
All Islamic banks operate current accounts for their customers as traditional banks do.
Current accounts are an interest-free loan by the account holder to the Islamic bank,
which maintains these funds and pays them to the customer on demand.
Characteristics of Current Account in Islamic Banking :
Islamic bank does not give the client anything on the current account, but it may take
a simple versus expenses to keep this money.
The customer of Islamic Bank can withdraw his current account whenever he wants,
but the additional withdrawals will not be seen as loan interest in Islamic Banking.
The current account in the Islamic bank is not only creates a client account with the
bank, but also deposit a sum of money in this account.
The Islamic bank deposits have governed by Islamic law, through the Committee of
legitimacy, so the only Halal transaction can be transacted.
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II. Savings Deposits
Many Islamic banks offer savings accounts to their customers. This account allows
the account holder to place funds in a safe environment till such time when they may
wish to withdraw them.
In Islamic banking, term deposits defined as a deposits that offers attractive fixed
profit rates which maximizes the return on customers investment.
When banks want to utilize the funds, it will ask permission from
customers. However, the customers may withdraw their saving in the
current account anytime they desire.
Islamic banks will provides cheque books and others services provided by
conventional bank to the current account.
This savings account defined as a facility that give customers to save their money.
Under the Wadiah contract, this facility provides services free safekeeping of
customers money and allow customers easy to access for withdrawals whenever they
needed.
There are few requirements that must concern by customers when they need to apply
this savings account :
This account is open to all people but it must 13 years old and above.
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Based on Wadiah Savings Account-i , customers will get the benefits from this
account that are :
Banks will give some hibah to their savings accounts customers on a monthly
basis based on its discretion.
Banks also provide free savings passbook to their customers upon request.
This G.A.N.G account is derived from Great Activities N Games. It is a account that
help kids to discover the joy of savings. The shariah concept apply in this account is
Wadiah Yad Dhamanah.
Wadiah Yad Dhamanah is the combination of safekeeping and guarantee. This type
deposit facilities wider application in the Islamic banks system, particularly where the
deposits are the sources of funds for banks. The features of this, the custodian is
entitled to use the deposit property for trading or any other purposes. So, has right to
gain some profit derived from the utilization of the property and the sometime he is
fully responsible for the damage.
There are some features that need concern by those are interested in the G.A.N.G
account :
The initial amount when customers want to open this account is RM 50.
Depositors for this account should be minor that aged below 12 years old and
he/she must open this account on trust basis.
This account adopts the Shariah principle of Tawarruq. Under this principle of
Tawarruq, it refers to an arrangement which consists of multiple sale and purchase
transactions. Based on this product, customer will purchase the commodity at the
purchase price (an amount equivalent to the customers Net Deposit) from a supplier.
After that, customer will sell the commodity to the bank at the selling price (which
comprises of the purchase price and the some profit) on the basis of Murabahah. This
means bank shall be paid to the customer at the end of tenure. Then, bank can sell the
commodity to a third party on cash basis.
In this trust account, it must have minimum 2 account holders, whereby one of
the account holders must be "Beneficiary" status and aged below 18 years.
As a legal guardian, he/she should be the person who has been assigned to take
care of the junior in the court of law and they must have the legal paper to
prove that they are legal guardian.
The parents or legal guardian will remain as primary account holder and will
transact all the transaction on behalf of the beneficiary (junior).
Minimum initial deposit to open this current account are RM 500.00 for
individual account whereas RM 1000.00 for non-individual account.
For the age requirement, this current account is open to all individuals who are
18 years old and above.
There are many types of current account are provided such as individual
account, joint account, partnership account, government account, and
association account.
Banks will give some hibah to their current accounts customers on a monthly
basis based on its discretion.
Customers can get their bank statement at Statement Printing Machine without
any payment to banks.
E. BARAKAHPLUS-i
BARAKAHPLUS-i is an account that is a manifestation of our Banking Without
Barriers philosophy. From this account, customers can gain the flexibility of cheque
writing convenience with the ease of a savings account. Based on BARAKAHPLUS-
i , it is under the shariah concept of Wadiah.
Wadiah can define as a safekeeping, custody, deposit and trust account. In this
arrangement, bank will charges some fees on customers for the safe custody of the
depositors funds when depositors deposit their funds or assets with the bank for
safekeeping.
Banks will provide monthly statement to customers for easy tracking their
transactions.
Term Deposit-i Special is a deposit with a fixed profit rate. The profit that customer
receive is derived from the commodity purchase and sale transactions based on the
profit rate determined upfront.
This account is under the Shariah concept of Tawarruq. Tawaruq is apply in this
account when the commodity is used as an underlying asset for the purchase ans sale
transactions between commodity traders, which are customers and the banks.
The initial deposit of this account is minimum RM 1000 for 1 month whereas
RM 500 for 2 months and above. There is no maximum deposit amount for
depositors.
Customers will get Term Deposit-i certificate when they make deposit
placement in bank.
Customers will get attractive returns and capital guaranteed in this account.
Banks allowed customers make renewal of the deposit like they may perform
renewal of deposit amount or deposit amount with profit amount.
I. Investment Account
Under the Islamic Financial Services Act 2013 (IFSA), investment accounts as a
distinct Shariah compliant asset class and source of funding for Islamic banks.
Customers with higher risk appetites will have the option of placing their surplus
funds in investment account. Clients of investment accounts are able to retain funds
for a longer period of time and enjoy the opportunity to earn more returns but with
more restrictive withdrawal conditions.
Two main types of investment accounts are offered by Islamic banks in Malaysia:
restricted and unrestricted investment accounts. Restricted investment accounts (RIA)
refers to a type of investment account where the investment account holder (IAH)
provides a specific investment mandate to the Islamic Financial Institutions (IFI) such
as purpose, asset class, economic sector and period for investment. Furthermore,
Unrestricted investment account (URIA) refers to a type of account where the IAH
provides the IFI with the mandate to make the ultimate investment without specifying
any particular restriction or condition.
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A. MUDHARABAH
DEFINITION OF MUDHARABAH
The word Mudharabah derived from the phrase dharaba fi al-ard which means to
make a journey. This is because the agents or entrepreneur gets profits by virtue of his
hard work and efforts in performing long journeys. Generally, Mudharabah can
defined as a kind of partnership that involved two parties whereby one party provides
capital and other party the entrepreneurship with the profit being shared among them
with a predetermined ratio. The person that provides fund is called Rabb-al-Mal
whereas the person who utilizes those funds is called Mudharib.
The fund provider or called as Rabb-al-Mal does not have any right to interfere in
business affairs but Mudharib is exclusively responsible for the management of the
business. In addition, as a depositors Rabb-al-Mal deposits their money to bank
which called as Mudharib, both parties are on the basis of profit sharing on pre
agreed specific ratio. Moreover, the losses will be borne by the capital provider alone
who is the fund provider whereas the entrepreneur only suffers the frustration of a
fruitless effort.
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B. MURABAHAH
DEFINITION OF MURABAHAH
Murabahah refers to a sale and purchase contract which is binding in nature. Thus, the
contract shall not be terminated unilaterally by any of the contracting parties. The specific
inherent nature of the contract of Murabahah is the sale contract which is based on the
element of trust in disclosing the cost and mark-up. The common inherent nature of a sale
contract is the transfer of ownership of the asset from the seller to the purchaser.
i. InvestSmarti
Thisaccountcombinesthesecurityofinvestmentaccountandthepowerofunittrust
toboosttheoverallinvestmentpotentialreturns.
Features:
Investment account placement and Islamic unit trusts purchased can be
pledgedforcreditfacilities.
Theminimumofinvestmentaccountvariesaccordingtoselectedinvestment
packageattherationof60:40,whichis 40%ofinvestmentininvestment
accountand60%ofinvestmentinselectedequityfunds.
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Benefits:
Giveshigherreturnontheinvestmentaccountandtheopportunitytodiversify
theinvestmentthroughunittrust.
Earnupto48.85%profitperannum.
Flexibleinvestmenttenuretosuittherequirements.
ii. SpecialMudharabahInvestmentAccounti
TheproductisonlyapplicableforIslamicFlexiHomeFinancingiandIslamicFlexi
BusinessPremisesFinancingifacilities.ItslinkedtotheFlexiHomeFinancingi
andFlexiBusinessPremisesFinancingithatallowscustomerstoenjoysavingson
profitchargedandatthesametimeenjoyreturnsontheinvestmentaccount.
Features:
ProfitSharingRatio(PSR)is5:95%(5%fortheCustomerand95%tothe
Bank).
Profitwillbedistributedinmonthlybasis.
Profitissubjecttotheperformanceoftheassetswherethefundsisinvested.
NoteligibleforPerbadananInsuransDepositMalaysia(PIDM)protection.
Benefits:
CustomerscanenjoymonthlyreturnswhilegetsavingsontheFlexiHome
FinancingiandFlexiBusinessPremisesFinancingiaccountprofitcharged.
Thereisnospecifictenurefortheinvestment.
ThisaccountperformwithdrawalviaATMoroverthecounteratbranches
whenthecustomersneedcash.
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iii. HibahHartaTrust
ThekeypointofthisserviceisthefactthattheDonorcandistributehisassetsinany
proportionandtoanybeneficiaryaccordingtothedesireofhisheart.Thedistribution
ofassetsunderHibahHartaTrustavoidsextensiveestateadministrationprocedures
anddistributionofassetswithminimumhassle.
Features&Benefits:
The ability to determine the proportion of assets to be given to ones
beneficiaries.
Avoidanceofassetfreezingandprobatedelays.
Toprovideliquidityforfamilymembersintheeventofsuddendeath.
Theabilitytohavestaggereddistributiontobeneficiaries.
Privacyofownershipanddistributionplan.
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3.0 ISLAMIC FINANCING PRODUCTS
Islamic Banking involves the provision of financial products and services for Shariah
approval underlying transactions and economic activities, based on contracts that comply
with Shariah laws. Islamic financial products has progressed and grown in complexity, as we
can seen from the offering of wider range of innovative products and services with different
mix of customer composition. Islamic banking products include from retail products into a
full range of products offering, such as corporate and long-term bond instruments under
Islamic contracts.
3.1 House Financing
i. MaxiHome-i
A 3-in-1 account, the MaxiHome Flexi loan integrates your home loan and
deposits account. Any savings placed in your Flexi loan account will reduce the
outstanding principal amount of your home loan automatically to save more on
profit.
Eligibility:
individuals, joint applicants, residents and non-residents
Minimum property value of RM80,000 and minimum financing amount of
RM15,000
Features :
Higher financing eligibility up to 70% of gross income.
Long financing tenure up to 30 years or age 60, whichever is earlier, or up
to 40 years or age 70 for professionals and graduates.
For Principal Document based on Shariah principles, there is a reduction of
20% on stamp duty for conversion from Conventional financing.
Make extra deposits to reduce interest payments and shorten loan tenure.
Collateral or guarantor is required to apply for a loan.
No compounding of profit and other charges.
Earn interest up to 1.85% pa for credit balances above RM5,000.
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Features & Benefits:
- Lower monthly installment with the longer payment period up to 35 years or
until age 70, whichever come first.
- Convenient payment options of the installment via online Barakah, ATMs and
Kawanku Phone Banking.
- Higher financing eligibility up to 70% gross income based on salary earns or
certified self employed.
- Reduction of 20% on stamp duty for new financing and wavier of conversion
from Conventional facility.
- No compounding of profit and other charges (Non-Zero Entry Cost)
- No early settlement charge
Financing facilities is complying with the principles of Shariah and its practical
application. It is also a concept of where the financial institution buying commodity on
the borrowers behalf and selling back to the borrower at profit. The most easily
accessible loan available compared against other types of loans. There are 3 types of
personal financing which are Murabahah, BBA and Bai Inah.
A. Murabahah cost plus
Murabahah is a special sale of cost of commodity plus the profit to the cost and
declared the profit that earned on the commodity to the buyer. It is sale of
commodity for cash or deferred price. Therefore, Islamic bank have to make the
cost outlay (historical cost acquisition) to the customer. The asset should disclose
fully from any fault, related impact that occurs after the purchase. If any of the
conditions are not fully met, the customer (purchaser) must given option to
proceed with sale as it is, have recourse to seller for such discrepancy and cancel
the contract.
i. Commodity Murabahah Term Financing-i (CMTF-i) and Murabahah Term
Financing-i (MTF-i)
CMTF-i Tradable Shariah-compliant commodities such as zinc, tin, lead, palm
oil and wheat
MTF-i The required assets by customer.
Need some cash for personal use, business use or education purpose? Bank
Barakah Berhad CTMF-i and MTF-i will help you cover your immediate need for
cash.
Pricing:
1. Variable Rate Financing
- Selling Price Rate : BFR + 4% or 10%, whichever is higher
- Effective Date : BFR + margin (at conventional rate)
2. Fixed Rate
- As per conventional rate. The rate will remain fixed throughout the financing
tenor.
3. Combination of both Fixed and Variable Rate
Payment:
1. Lump-sum payment
2. Periodically, i.e. monthly, quarterly and yearly.
Eligibility:
- Malaysian citizen aged 20 years and not exceeding 58years
- Permanent staff at least 1 year in service at any approved agencies
- Earning minimum gross salary RM1,500 per month
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Eligibility:
- Minimum age 21 years and maximum age 60 years
- Minimum income of RM30,000 per annum
- No applicable to Barakah Group Staff
- Subject to clean bankruptcy search, OCISS and CCRIS (payment historical
record and credit)
- Minimum financing amount RM3,000 and maximum to RM50,000 in tenure
1year to 5 years.
Payment method:
- Biro Perkhidmatan Angkasa (BPA): Salary deduction via BPA payroll unit
with profit rate 4.3% per annum.
- Private sector: Auto debit via Barakah Bank Current/ Savings account with
profit rate 6.90% per annum.
The bank will appoints a car dealer as its panel dealer and agent subsequently appoint the
prospective buyer as banks agent to purchase the car based on terms and conditions
(T&C) under the contract of Wakalah (agency). When the customer decides to buy a car,
the car dealer will appoint him as purchasing agent of the bank but subject to T&C and he
subsequently place order to purchase the car. Before that, customer has to execute an
undertaking to purchase the car from bank. If the application submitted by customer
through dealer approved, the bank will notify customer. Bank sells the vehicle to
customer under the contract of BBA (at cost plus profit) and the customer pays
installment the indebtedness created from the sale. The customer pledged the vehicle as
security under the contract of Rahn (collateral).
Eligibility:
Driving license
NRIC / certificate of incorporation
Letter of employment
Eligiblity:
- Minimum basic salary of RM1,500 per month
- Minimum age 20 years and maximum age 30 during application
- Application made within 3 years from the date of graduation
- Confirmed staff
e. Murabahah
Refers to a special sale of cost of commodity plus the profit to the cost and
declared the profit that earned on the commodity to the buyer.
i. Vehicle Financing-i
By offering a highly competitive rates, Barakah vehicle financing-i
also gives a flexible and affordable installment scheme when
purchasing a national or imported car available in the market.
Eligibility:
- Minimum age 18 years and not more than 60 years old on the end of financing
tenure
- Open to all public and private sectors employees with fixed income (at least 6
months)
- Minimum monthly income of RM1,500
Most Islamic bank provides interest-free loans to customers who are in need. The Islamic
view of loans (qard) is a moral duty to give borrowers free of charge, as a person seeks a
loan only if needed. Some Islamic banks give interest-free loans only to holder of
investment accounts with them; some extend them to all bank clients; some restricts them
to needy students and other economically weaker in society; and some provide to interest-
free loans to small entrepreneurs, farmers and producer who cannot get finance from
other sources. One of the Islamic staff financing is Qard Hassan.
i. Al Qard Al Hassan
In accordance with Islamic jurisprudence to assist customers in
overcoming their financial problem, Barakah Bank creates with Al
Qard Al Hassan to save them from undesirable circumstances and
exploitation.
Eligibility:
- Salary of both applicant and guarantor must be transferred to Barakah Bank
Berhad (in case of expatriates)
- The applicant must submit required document such as salary transfer, passport
copy, cheques, guarantees and others.
- Only available for local residents.
- Maximum of RM20,000 granted for marriages and RM10,000 for other cases
such as medical treatment, emergency needs
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III. Other Islamic Trade Finance Products
Besides the import and export trade finance instruments, there are also other Islamic
trade finance products namely Al-Kafalah Bank Guarantee (KBG-i), Al-Kafalah
Shipping Guarantee-i (KSG-i) and Cash Line-i.
LC-i Wakalah(agency)
Through Wakalah contract, Islamic Bank act as an agent of the customer where the
customer will required bank to issue LC-i by providing written instruction to the
seller. Then, the bank will ask customer to place a deposit for the full value of the
goods as security. After that, bank will creates LC-i in favour of the exporter and
collects commission and other charges. Next, the issuing bank will pay the negotiation
bank by using customers deposit. At the end, bank charges commission under al-
Ujrah (fee). Al-Ujrah must be mentioned and the amount must be stated earlier.
LC-i Musharakah(partnership)
Through Musharakah contract, Islamic bank will issues the LC-i which involves both
of the lender and customer to the purchase price. The customer will places a certain
amounts of deposit into the bank account to share the cost of good to be purchased or
imported. After that, Islamic bank will creates LC-i and pays the proceeds to the
negotiating bank by using customers deposit and bank own shares of financing.
Lastly, the above two parties will share the profit based on pre-agreed profit sharing
ratio.
Features of LC-i Musharakah are as below:
Contract is required.
Customer deposits into bank to share the cost of goods to be purchased with
the bank.
Bank will receives the deposit from customer under the principle of Al-Wadiah
Yad Dhamanah.
Payment made by using the customers deposit and banks own share of
financing.
The parties will share the profit/loss upon completion of the project.
The benefits of LC-i Musharakah are:
Customer can shares the profit from the venture.
The return on the investment will be depended on the ventures profitability.
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In short, the features of TRI-i are as below:
Based on the Shariah principle of Murabahah.
Customer appointed as the banks agent to purchase the goods from seller on
behalf of bank.
Then, bank will sells the goods to the customer at selling price which include
cost and profit margin agreed by both parties and pays on maturity date.
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31
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Several types of guarantees issued by bank are:
Tender Guarantee
Performance Guarantee
Guarantee for advance payment
Guarantee for exemption of Custom Duties
Guarantee for Honouring of Cheques
Custom Bond
I. Cash Line-i
According to Naim and Zainol (2015), Cash Line-i is designed as a short-term
financing, to finance working capital requirement, thus easing the customers cash
flow. This type of instrument is issued based on the principle of bai al-innah or
bithamanajil and then based on tawarruq concept where commodity murabahah is
enable for the concept.In Cash Line-i facility, customer just need to pays for the
utilized amount and no fee will be charged on the unutilized amount.
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5.0CONCLUSION
Asaconclusion,theprimaryobjectiveofestablishingIslamicbankallovertheworldisto
promote,fosteranddeveloptheapplicationofIslamicprinciples,lawandtraditiontothe
transactionoffinancial,bankingandrelatedbusinessaffairsandtopromoteinvestment
companies,enterprisesandconcernswhichshallthemselvesbeengagedinbusinessasare
acceptableandconsistentwithIslamicprinciples,lawandtraditions.Buttheobjectiveof
Islamicbankwhenviewedfromthecontextofitsroleinaneconomy,itsspecificobjectives
maybeenlistedasfollowing:
TooffercontemporaryfinancialservicesinconformitywithIslamicShariah;
Tocontributetowardseconomicdevelopmentandprosperitywithintheprinciples
ofIslamicjustice;
Tofacilitateefficientallocationofresources;
Tohelpachievingstabilityintheeconomy
Whileeliminationof"Riba"orinterestinallitsformsisanimportantfeatureoftheIslamic
financial system, Islamic banking is much more. At the heart of Islam is a sense of
cooperation,tohelponeanotheraccordingtoprinciplesofgoodnessandpiety(butnotto
cooperateinevilormalice).Inessence,itaimstoeliminateexploitationandtoestablisha
justsocietybytheapplicationoftheShariahorIslamicrulingstotheoperationsofbanksand
other financial institutions. To ensure compliance to the Shariah, Islamic banks use the
servicesofreligiousboardscomprisedofShariahscholars.
Islamicfinancemaybeviewedasaformofethicalinvesting,orethicallending,exceptthat
no loans are possible unless they are interestfree. Among the ethical restrictions is the
prohibitiononalcoholandgamblingandtheconsumptionofpork.Islamicfundswouldnever
knowinglyinvestincompaniesinvolvedingambling,alcoholicbeverages,orporcinefood
products.
ItspractitionersandclientsneednotbeMuslim,buttheymustaccepttheethicalrestrictions
underscoredbyIslamicvalues.
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6.0REFERENCES
2. Mansour,I.Q.(2014).TheconceptofwadiahanditsIslamicbanking. Journalof
ResearchinHumanitiesandSocialScience,2(11),7074.
4. Waseem,M.(2014).Islamicbankingproducts.RetrievedSeptember30,2016,from
http://islamicbanking.info/category/islamicbankingproducts/
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