CONTRACT
•Non-restricted •Present
•Specified
•Sane •Unconditional
•Quantified
•Mature •Non-contingent
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
ISLAMIC SALE
DEFINITION OF SALE(BAI)
cash.
ISLAMIC SALE
(1)-VALID SALE ( Bai Sahih)
• Existing
• Valuable
• Usable
• Capable of ownership/title
• Capable of delivery/possession
• Specific & Quantified
• Seller must have title & risk
MURABAHA
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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 .
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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 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 .
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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 is buyer.
It cannot be used as a substitute
for running finance facility , which
provides cash for fulfilling various
needs of the client.
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SCOPE OF MURABAHA
It is a fixed price sale and normally
is done for short term.
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Step by Step Murabaha
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1- Promise stage
Stage One (a) for
Murabaha financing
1 . Client approach the bank for facility through Murabaha.
Bank Client
Facility
approved
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1- Promise stage
Stage One (b) for
Murabaha financing
1 . Client and bank sign an agreement to enter into Murabaha.
Bank Client
Murabaha
Facility
Agreement
MOU
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1- Promise stage
Stage One (c) for
Murabaha financing
. Client submit the purchase requisition to the bank.
Bank Client
purchase
requisition
/Promise to the
bank.
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2- Agency stage
Bank Client
Agreement to
Murabaha
Agency
Agreement
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2- Agency stage
Agency
Agreement
Disbursement to the
Supplier 20
3. Acquiring Possession
Stage three for Murabaha
financing
. Client purchases goods on bank’s
behalf and takes their possession.
Client purchases
goods and takes
Transfer of Risk Vendor possession
Bank Client
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4. Execution of Murabaha
Stage four (a) for Murabaha
financing
. Client makes an offer to
purchase the goods from bank.
Bank Client
Offer to
purchase
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4. Execution of Murabaha
Stage four (b) for
Murabaha financing
. Bank accepts the offer and
sale is concluded.
Murabaha
Agreement
+
Bank Client
Transfer of Title
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4. Execution of Murabaha
Payment of Price
Bank Client
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Murabaha
GENERAL MECHANICS
PRIOMISE STAGE
A- CREDIT APPROVAL
(under Shariah perspective)
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CREDIT APPROVAL
(under Shariah perspective)
Points to Be Considered
While Approving Credit
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CREDIT APPROVAL
(under Shariah perspective)
Points to Be Considered
While Approving Credit
PRIOMISE STAGE
B- Murabaha Facility Agreement
MOU
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Murabaha Facility
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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Securities Against
Murabaha Price
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STAGES OF MURABAHA
PRIOMISE STAGE
C- Purchase Requisition
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C- Purchase Requisition
The Client orders the
institution to buy certain goods
for 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- Promise to Purchase
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D- Promise to Purchase
At this stage the customer
promises the institution to buy the
goods which were acquired by the
institute on his request.
Normally Purchase requisition
contains this Promise.
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STAGES OF MURABAHA
PRIOMISE STAGE
G- PAYMENT OF MURABAHA
Goods
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G- PAYMENT OF
MURABAHA Goods
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STAGES OF MURABAHA
2-AGENCY STAGE
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AGENCY STAGE
Agency Agreement is not the
condition of the Murabaha if the
institution can make direct
purchases from the supplier.
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AGENCY STAGE
The customer, however, being in
the industry, can do this.
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AGENCY STAGE
This is done by execution of
Agency Agreement between the
institution and the customer.
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AGENCY STAGE
TYPES OF AGENCY AGREEMENT
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STAGES OF MURABAHA
3-ACQUIRING POSSESION
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Acquisition Of Title &
Possession of The Asset
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Acquisition Of Title &
Possession of The Asset
Documentary evidence required at the
time of possession before execution of
Murabaha i.e. delivery challan, gate
passes and sales tax invoices.
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Physical Inspection
Importance of Physical
Inspection.
It is advisable that bank should
appoint one person for physical
inspection .Importance of Physical
Inspection
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STAGES OF
MURABAHA
4- EXECUTION OF
MURABAHA
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Actual Murabaha Sale
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OFFER TO PURCHASE
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BANK’S ACCEPTANCE
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RELATIONSHIP
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ISSUES IN MURABAHA
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Rollover in Murabaha
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Risk Management
IN
MURABAHA
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Risk Credit
Dimension
Liquidity
s Credit
Credit
Prising risk
Banking
Risks
Market
IslamicBanks
Islamic Banksalso
alsoface
face
--Additional
Additionalasset
assetrisk
risk Foreign Exchange
--Greater
Greaterfiduciary
fiduciaryrisks
risks
--Greater
Greaterlegal
legalrisk
risk Solvency
Operational
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END OF PRESENTATION
JAZAKAMUALLAH
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