Islamic Banking Principles Applied to Microfinance

Top 20 FREQUENT WORDS

islamic 689 finance 203 client 180 banking 178 financial 169 banks 162 conventional 146 murabahah 135 sharia 129 asset 128 business 117 chapter 115 credit 112 contract 109 lease 101 microfinance 99 products 93 purchase 93 risk 88 profit 86

DOCUMENT KEY POINTS

itc wishes to acknowledge the contributions in this regard from david loundy devon bank david testa gatehouse bank nathif adam first community bank global investment house badlisyah abdul ghani cimb islamic mahmoud abushamma hsbc amanah indonesia mohamad nedal alchaar accounting and auditing organization for islamic financial institutions aaoifi and nik norishky thani and nik norzrul thani islamic finance dubai international financial centre

iv mr megelas was seconded by mauren devolder adviser trade finance for smes and assisted by uyanga dorjgotov programme assistant and sirirat kiatichaipaibul intern
natalie domeisen leni sutcliffe and michel favre prepared the book for printing

pre application finding the right financier and service provider step application step application documentation and funding step approval and post closing annex application and closing checklist for the micro enterprise and sme

ix chapter the role of a sharia adviser chapter regulations tax implications and jurisdictional guidelines regulators tax implications jurisdictional issues conclusion appendix frequently asked questions tables
malaysia women at decision making level in the corporate sector figures

a look at the islamic republic of iran
import finance musharakah

a complement to conventional banking the past few years have seen islamic banking grow to unprecedented levels with over us billion in assets and us billion invested in islamic mutual funds an annual expansion of at least in and with trends set to be the same for

part i a understanding islamic finance a covers the key principles and perspectives of islamic banking relevant to small fir miss part ii a using islamic finance a consists of a how to guide to use islamic banking instruments for specific transactions
the book also looks at the role islamic banking can play in assisting export activities of small fir miss itc hopes this book will enhance understanding of a banking system that can offer new perspectives and ways to conduct financial transactions that will lead to access to new export markets

evolution of islamic banking islamic economists and jurists initiated critique on the interest based operation of conventional banks in muslim countries in the s and a number of savings institutions were established in the s
chapter basic principles of islamic banking islamic banking can be simply defined as a banking operation that abides by sharia islamic law under which a key tenet is the prohibition of interest or riba

the first islamic finance house was established in luxembourg in the late s followed by islamic bank international of denmark islamic investment company in melbourne australia and american finance house lariba in the united states of america

a commodity murabahah the bank buys a commodity from a broker and sells it to the client who does not want to own the commodity so the client sells it to another broker to get cash

the sme thus would be paying the islamic bank the purchase price the cost to the bank to buy the ship and the profit margin it is charging
it is similar to salam because it is used to finance goods not yet in existence however it does not require full payment up front the payment is flexible

if the client wishes to own the asset at the end of the lease then the parties need to enter into an additional contract
mudarabah in a mudarabah financing only the bank rab al maal or capital provider provides capital while the client mudarib or entrepreneur manages the business

exchange contracts are the most popular form of financing as they limit the risk exposure of islamic banks while mixture contracts are provided on a selective basis as they would expose the banks to the client s business risk

the profit ratio is pre agreed in the contract and reflects the level of capital provided effort skill and expertise the partners bring to the joint venture
there are two main categories of transaction types a profitand loss sharing partnership methods which can be compared with equity investments and a transactions with a predictable or fixed return structure

profit and loss expertise expertise and loss project once the contract has been agreed between the partners the process can be broken down into the following two main components a cash and expertise all partners contribute to the capital and expertise of the business or project

chapter a islamic banking for smes the investor has no right to interfere in the day to day operations of the business although the contract between the partners can contain mutually agreed conditions the business manager has to abide by
skill and and loss and loss expertise project once the contract has been agreed between the partners the process can be broken down into the following main components a capital injection

pay for goods later as part of the contract between the buyer and the seller the price of the goods markup delivery date and payment date are agreed
having just started operating needs to generate a profit from selling the linen to clients and has requested that payment to asian exim be made in three months time

as part of the lease agreement the lessee provides the lessor with a unilateral purchase undertaking which specifies the amount at which the lessee will purchase the asset upon expiry of the lease
chapter a islamic banking for smes leasing an ijarah transaction is a lease in which one party lessor allows another party lessee to use an asset against the payment of a rental fee

at the end of the lease period early bird has one of the following choices a extend the lease for a further period a purchase the trucks at current market value from lease a truck or a hand the trucks back to lease a truck
because the lessee is using the asset on a daily basis he or she is often better positioned to determine maintenance requirements and is generally appointed by the lessor as an agent to ensure all maintenance is carried out

the seller receives the funds to enable production of the underlying asset while the buyer obtains an asset in the future with the expectation that the eventual price will be higher than the original payment
malik comes to an agreement with super duper supermarkets which wants to buy kg of quality a pumpkin seeds packaged in g bags for us for delivery in november

depending on which party requests them the letters of credit provide certainty that the goods will be delivered prior to payment being made or transfer the risk of non payment to the financial institution issuing or confirming the letters
chapter a islamic banking for smes letters of credit islamic letters of credit are similar to conventional letters of credit and are an undertaking by a bank to make a payment to a named party against the presentation of the stipulated documents

the asset is specified and the delivery date is agreed a on the agreed delivery date the seller delivers the asset to the buyer or the buyer collects it from the seller a on the agreed delivery date after inspecting the asset the buyer pays the balance of the purchase price e
although the deal is done the seller would like some sort of guarantee and does not want to be in a position where he has done all the work only to find the buyer has changed his mind

in the interest of the sukuk holders it needs to be ensured that the spv is bankruptcya remote which means that insolvency of the original seller of the asset will not affect the spv
in addition the spv should not be subject to any negative tax implications and will need to be established in what is known as a tax friendly jurisdiction

typically the bank instructs the seller to deliver the asset direct to the buyer although ownership is transferred to the bank before the asset is passed on to the buyer
leasing transactions are suitable when there is a need for a particular asset such as vehicles or equipment but the company prefers to rent or lease the equipment rather than owning it outright with all the associated ownership risk

the last three of the above can also be classified as predictable return structures and are preferred by banks and regulators because they do not require significant monitoring to ensure they receive the correct profit share
however the principles regarding the strength of the business plan and the value of the underlying assets do apply

although it is the bank s responsibility to ensure that the client is provided with all the required information to enable him to make the right decision regarding the transaction type the level of funding cost and other elements the sme has also to take its own responsibility for ensuring the recommended financial solution is the right one
the types of islamic financial transactions that would be most suitable for an sme are detailed above in the section which transaction type an sme would benefit most from a standard financial solution occasionally coupled with minor amendments to cater for specific company requirements

chapter a islamic banking for smes however if the sme feels that the product offering does not meet its purpose it has the responsibility for questioning the financial institution and ensuring that it becomes comfortable that its purpose will be met
just as the bank requires the client to provide information about its business so should the bank provide clear and sufficient information on charges structures and the most appropriate transaction type

it has the potential to not only respond to unmet demand but also to combine the islamic social principle of caring for the less fortunate with microfinance s power to provide access to finance to the poor

among the primary conditions for a murabahah sale to remain sharia compliant are i the financier must own the commodity before selling it ii the commodity must be tangible and iii the client must agree to the purchase and resale prices
consequently though promoted strongly by sharia they result in substantial operating costs particularly for micro and small enterprises that are not accustomed to formal accounting

development of the islamic finance industry global expansion despite its origins in the gulf sharia compliant banking has proved popular with muslims in other countries as well leading to the development of new islamic banks across north africa and asia
billion global islamic finance market is located in gulf cooperation council gcc countries bahrain kuwait oman qatar saudi arabia and the united arab emirates in non gcc southwest asia and north africa and in asia primarily malaysia brunei darussalam and pakistan

international organizations in parallel with increased attention by regulatory authorities international organizations have been set up to create islamic finance accounting and other standards a islamic financial services board ifsb based in malaysia it issues prudential standards and guiding principles for islamic finance
for example several countries such as kuwait jordan lebanon and thailand have regulated the competence and composition of ssbs as well as related rules governing the appointment dismissal and qualifications of ssb members

in bank indonesia prepared a blueprint of islamic banking development in indonesia in which it outlined a nine year plan for the development of the islamic finance sector including support for the sharia rural banks
bank indonesia is also spearheading efforts in capacity building by establishing a centre in medan to offer training in and certification on islamic financial operations to sharia rural bank staff managers and directors

chapter a islamic microfinance an emerging market niche banks downscaling and expanding product line an encouraging development in the growth of islamic microfinance is that islamic commercial banks have started to offer islamic microfinance services

chapter a islamic microfinance an emerging market niche focus on indonesia indonesia gives an insight into the development of islamic microfinance because of its dual conventional islamic microbanking system which includes both conventional rural banks bank perkreditan rakyat or bprs and shariacompliant rural banks bank perkreditan rakyat syariah or bprss

greater efforts should be explored to i increase collaboration between financial experts and sharia experts on product authenticity ii encourage exchange of experiences among religious leaders particularly those serving poor populations at the local level relating to sharia compliance of microfinance products and iii educate low income populations in collaboration with local religious leaders on how financial products comply with islamic law

in addition more efforts should be made to train islamic mfi managers and staff through for example the development of operational tools and manuals such as those developed by deutsche gesellschaft fuer technische zusammenarbeit or the german agency for technical cooperation for use in indonesia

investment habits of women research by the ministry of women family and community development in on female investment habits showed that about
it has also been demonstrated that women s top priority in savings and insurance or takaful are their children s health and education a less priority is given to themselves

financial planning although there is confusion surrounding the concept of financial planning essentially it is about the management of one s finances and planning of investments with the goal of sustaining and growing long term wealth

its findings on the presence of women banking in the emirates are shown below islamic banks presence of women s branches dubai islamic bank yes abu dhabi islamic bank yes emirates islamic bank no conventional banks presence of women s branches abu dhabi commercial bank no first gulf bank no emirates bank no for women only banks it found that a the branches are not just open only to customers with a high net worth
chapter a islamic banking for women a case study the malaysian government has taken measures to facilitate the involvement of women in business through the provision of access to capital

while catering exclusively for women the bank intended to start with selected women clients with high net worth with a view to future expansion into a fullscale women s branch open to all women
among the new privilege financing services are a az zahra equity home financing i a az zahra mudarabah current account i a az zahra mudarabah general investment account i a az zahra hire purchase i

banking for women in other countries masrafy bank bahrain in june the bahrain monetary agency granted abu dhabi investment house adih a licence to open the world s first islamic investment bank for women with an authorized capital of us billion and a paid up capital of us million
the profit earned will be shared as dividends between the customer and the bank according to a predetermined p senior az zahra hire purchase i based on the ijarah thumma bai hire purchase concept this allows customers to hire and subsequently purchase a car

further opportunities with the growing demand for islamic finance and increasing numbers of women who work and are of high net worth islamic banking for women offers considerable future opportunities
al reem offers staff consisting only of women exclusive lounges and service areas a discount on bank products discounts at retail outlets a chip based debit card customized chequebook a road side assistance programme and invitations to attend women only social events

in the last decade there has been a persistent increase in activity in the islamic finance sector in gcc countries and in southeast asia notably the countries of the association of southeast asian nations or asean

idb has three important subsidiaries serving the sector the international islamic trade finance corporation itfc islamic corporation for the development of the private sector icd and the islamic corporation for insurance of investments and export credit iciec
chapter islamic finance what it is and where it is available to smes policymakers and bankers worldwide are increasingly focussing on micro small and medium sized enterprises

this successful infusion of islamic values into other established legal systems is important as it means that there is strong evidence of the applicability of the methods described in this book under any legal regime not just in islamic countries

chapter a islamic finance what it is and where it is available to smes why should managers of micro enterprises and smes consider islamic banking many believe that financing for micro enterprises and smes is a natural niche for islamic banking as it deals directly with the real economy creates employment involves the productive use of resources especially capital and finance and contributes to the alleviation of poverty
in the profit sharing concept of a financed project the financier and the beneficiary share the actual or net profit loss rather than leaving the risk burden to the entrepreneur

in contrast should the bank lose money in its operations the wadiah contract is essentially a contract of safekeeping and the bank must return to the customer the same amount deposited
savings accounts and time deposits fixed deposits and certificates of deposit bear an interest rate yield that is based on the duration of the deposit

these are similar to deposits in that the customer will not invest in the bank but will appoint the bank as agent to apply the customer s money to profitable transactions
chapter a islamic finance what it is and where it is available to smes wakalah or agency accounts are a new trend among islamic banks

chapter a islamic finance what it is and where it is available to smes as a result of the significant structural difference between the accounts that fund an islamic bank and the deposits at a conventional bank an islamic bank s risk and liquidity profile differs from that of a conventional bank

for example if the financing is sought for goods to be exported then the structure of the financing may be based on an instrument called istisna manufacturing or construction financing

the islamic bank purchases goods needed by the customer who is aware of the cost to the bank and agrees on a purchase price from the bank in which the bank s profit is disclosed to the consumer
chapter key products and how they compare to conventional counterparts the common methods used in islamic financing include sales contracts such as murabahah cost plus sale leasing ijarah salam forward sale and istisna construction or manufacturing sale

this is the basic rule of riba which forbids the creditor to offer a further deferral in payment for more money a if the payment is late no form of penalty may be charged for the profit of the creditor there is some debate over this as in certain markets regulators require that a buyer paying off a credit murabahah ahead of schedule should be able to know what his or her reduced price will be

simple murabahah step entrepreneur seeks funding from islamic bank entrepreneur islamic bank kes million step islamic bank sells the step islamic harvester to the entrepreneur at bank buys the cost plus profit with deferred payments harvester and a lien cost plus kes million negotiates and plus bank s profit purchases cost disclosed to client strengths and weaknesses for micro enterprises and smes strengths the simple murabahah is an attractive business tool that has the same credit dynamics as a conventional loan for the entrepreneur
the means of credit is an unconditional sales contract which means that the bank cannot change the price if it grants the client more time to pay and the bank cannot charge penalty interest

it is easier for the bank to provide a credit service to the client than to be a principal buyer as the bank may not achieve terms and conditions which are as attractive as those secured by the client
agency murabahah �� i�� wakeel entrepreneur islamic bank entrepreneur purchases negotiates and establishing purchases the the cost inventories entrepreneur islamic bank bank sells goods to client and client pays instalments

in this alternative the client will sell his or her product to the bank spot and then be appointed as agent of the bank to sell the goods to the end buyer
strengths and weaknesses for micro enterprises and smes strengths like simple murabahah agency murabahah is a useful credit tool with characteristics similar to those of a conventional loan for the entrepreneur

murabahah to purchase order bank client orders purchases from the bank establishing the cost entrepreneur islamic bank supplier client sells bank receives goods to client the goods and client pays instalments strengths and weaknesses for micro enterprises and smes strengths like other forms of murabahah murabahah to purchase order is an instalment credit with the economic characteristics of a loan

musawamah step entrepreneur seeks funding from islamic bank entrepreneur islamic bank step islamic bank makes the purchase on a promissory step islamic bank sells to the note from the entrepreneur entrepreneur at cost plus profit with deferred payments cost plus negotiates and purchases the bank s cost and profit are not disclosed to client foreign exchange dealings whenever the murabahah and other islamic transactions are import export transactions the questions of hedging and currency transacting arise

a the bank sells the commodity on behalf of the client to a third party and deposits the proceeds in the client s account
these two forms of credit are more clearly parallel to conventional loans and may be structured to have rate resets rollovers and to accommodate late payment recoveries

tawarruq step step client client promises to purchase a bank buys the commodity commodity step step as agent bank sells as promised the commodity and client makes deposits money in payment to the the client s account bank client s account strengths and weaknesses for micro enterprises and smes strengths although tawarruq has the same credit characteristics as a loan it also allows the generation of cash for the exporter thereby resulting in discounting
nonetheless the concept has a few challenges a the term of the debt created by a murabahah instalment sale may be extended but without a change in price a no penalty is permitted on late payments and a the debt created is akin to money and may not be discounted

at the conclusion of an ijarah agreement there are four possible choices for the bank and client a renew the lease with a new contract a conclude the ijarah agreement and return the asset to the lessor a the lessor may sell the asset to the former lessee or a the lessor may give the asset to the lessee after completion of the lease term
strengths and weaknesses for micro enterprises and smes strengths the client is able to improve operations and access credit but not make a capital expenditure thereby conserving cash

step the client promises or undertakes to purchase the forklifts when the st transaction purchases lease ends the promise is signed ijarah forklifts simultaneously with the lease
this concept relies on the sharia principle that a contract is a two party relationship binding on both parties whereas a promise is solely binding on the person or party who gives it the promisor

step client sells bank has title and owns asset to the bank asset lease payments client client strengths and weaknesses for micro enterprises and smes strengths in this case the client has a choice of how to improve operations

forward ijarah forward lease payments future asset lessor lessee lessee step lessee makes advance rental step if an asset is not delivered then payments prior to receiving the the lessor must refund the lessee all the equipment advance rental paid alternative application of forward ijarah although forward leases have been used mostly in large scale project financings and real estate projects the concept works well with any form of capital equipment

bai al salam a forward sale although the general rule of sales in islamic banking is that the seller must possess the item to be sold bai al salam is an exemption granted by the prophet to ease farmers access to credit

therefore banks have two common structures for the provision of salam financing to clients a enter into a parallel salam a the bank purchases commodities on a salam basis from the client and secures an undertaking from a third party to purchase the commodities at a pre arranged price on delivery to the bank
simple salam step co op s t e p step islamic bank wholesaler step step co op approaches the islamic bank and gets cash for harvesting groundnut bank pays for five metric tons of groundnut to be delivered later

parallel salam in the case of parallel salam the process is exactly the same except that the bank will find a user of the groundnuts willing to purchase them under a parallel salam contract
chapter a key products and how they compare to conventional counterparts strengths and weaknesses for micro enterprises and smes strengths this method provides advance finance to the co op assuring it the financial means to finance pre planting and production activities

weaknesses salam against undertaking requires the bank to take on delivery and the commodity risk from the co op as well as the purchaser s credit and performance risk
chapter a key products and how they compare to conventional counterparts salam against undertaking parallel salam is often difficult to organize as most wholesalers of commodities either seek credit themselves or they are not willing to pay of the commodity price in advance

periodically it may suit the bank to appoint the client to act as the bank s agent to deal with the contractor or vice versa
in salam the price must be paid in advance but in istisna it may be paid partially in advance according to progress reports or inspections

the bank will pay the instalments and appoint the exporter as the bank s agent to sell the goods to the company making the order
parallel istisna step step istisna contract islamic bank islamic bank step step islamic istisna bank importer contract

weaknesses the bank is exposed to both the importer s and the exporter s risk and needs to be able to evaluate the capacity of the exporter to manufacture the goods properly
classically multiple partnerships were crafted with variable terms and conditions as a means of venture management that had more in common with merchant banking and synthesized lending but with greater risk and reward factors for the bank

although profit cannot be structured to give a guaranteed rate or yield to one party the investor and investee may agree to set the psr on the basis of gross sales as opposed to net income
indeed if the psr generated a certain return to investors they are permitted to give a bonus to the client if the client is the manager

musharakah agreement joao islamic bank both parties contribute capital in cash or kind which must be valued in cash terms percentage share based on capital contribution or business skills joint venture profit shared according profits and losses to the agreed profits and losses if any profit sharing if any ratio psr based on capital contributed in the example the bank will make joao manager of the enterprise

declining balance musharakah joao islamic bank export activity is co owned by joao and the bank share of profit applied purchase of units in to buying the export activity by joao partnership units from applying his share of the bank the profits profit sharing and capital purchase agreements between partners and joao strengths and weaknesses for micro enterprises and smes strengths this method allows joao to access the needed capital for preexport manufacture and secure his order

import finance musharakah purchases the parts umm abdul from the partnership islamic bank rahman or acts as agent for the partnership to sell to customers partnership by contract contributes services sources goods profits and losses profits and losses if any if any imported auto parts although umm will be the managing partner and order the parts the bank will contribute the services needed to facilitate the goods purchase including japanese yen and any required letter of credit
the psr also allows the bank to compensate itself for the cost of the services that are part of a traditional import deal within the realm of sharia namely the costs of the letter of credit and foreign exchange

mudarabah managed partnership mudarabah is a concept similar to musharakah except in the case of the former one partner the rab al maal or investor contributes capital and agrees to compensate an entrepreneur or investment manager the mudarib through profit sharing
this last point should not obscure the fact that the musharakah structures are financial arrangements that are closer to equity than they are to debt

mudarabah financing � project evaluation � psr agreed joao islamic bank time and effort generator manufacturing joao uses the money for working capital loss profit mudarib loses time and effort mudarib and rab al maal share profit according to their agreed rab al maal loses profit sharing ratio psr strengths and weaknesses for micro enterprises and smes strengths this method allows joao to access the needed capital for preexport manufacture and secure his order
just as with musharakah the parties entering into a mudarabah contract have a number of contractual freedo miss the mudarib may elect to set a limit to the profits that he or she will realize or the rab al maal may grant the mudarib a bonus for achieving a target

mudarabah deposit � psr agreed � indicative return posted client and bank client islamic bank time and bank s general effort business and financing operations loss profit mudarib loses time and effort mudarib and rab al maal share profit according to their agreed rab al maal loses psr wakalah a recent trend among islamic banks is to apply the concept of wakalah or agency to both financing and deposit taking

comparing equity and agency structures musharakah declining mudarabah wakalah musharakah equity or debt equity equity with strong equity debt with equity debt features features proi t sharing according to psr according to psr according to psr not required unless one partner rents the asset then proi t sharing is deferred to the termination of the partnership or lease loss sharing according to the according to the according to the the agent is not capital invested capital invested capital invested exposed to loss manager loses time of capital and effort fees not allowed not allowed minimal allowed
as a result the risks in the event of transaction failure are not at all the same as in a conventional loan and the bank or depositor may lose money

each model has enjoyed success depending on the market in which it operates the degree to which regulators are prepared to allow full fledged islamic banking and the shareholders are prepared to take up the islamic banking business proposition
there are now three distinct approaches to providing customers with islamic financial services fully fledged islamic financial institutions islamic windows at conventional banks and limited islamic service offers by conventional banks

the latest addition to the idb family itfc offers financing for specific trade transactions and expands on many of idb s existing programmes to make more trade funding available to a larger pool of exporters operating in areas under the idb mandate

the rapid evolution of the islamic banking market has led to a growing number of resources that can help locate the best or nearest provider of islamic financial services
as a result more oau banks are offering islamic finance or are willing to begin doing so and more regulators are welcoming this trend

chapter accessing islamic finance on the one hand the method of accessing islamic finance is similar to that of conventional finance given that an islamic bank will require the same types of basic credit and collateral evaluation procedures as a conventional bank
role of sharia compliance it is important to underline that it is not necessary to be muslim or have a business that is sharia compliant to deal with an islamic bank or enter into an islamic financial relationship

these fundamental differences in style and substance mean that islamic banks need special accounting and risk management approaches which have led to the formation of specialized bodies such as the accounting and auditing organization for islamic financial institutions aaoifi and the islamic financial services board ifsb

the financing process has four clear steps step pre application understanding a company s financial needs determining the right financial instrument pre application finding the right financier and service provider step application documentation and funding step approval and post closing the websites of islamic trade finance institutions may carry a checklist of project information requirements at various steps of the financing process

pre application determining the right financial instrument for instance is capital expenditure better funded by a lease releasing operating cash flow for pre export activities or should the exporter work with the financier to lease the yet to be produced goods to the end user via a forward lease if the exports are commodities for example should and could salam be the best tool for this undertaking would istisna be suitable for processed commodities like groundnut oil each of these questions may result in an answer that changes the exporter s choice of institution

murabahah to purchase order preparing for islamic finance and the application of the micro enterprise or sme to the bank for credit the entrepreneur has to be directly focused on the asset and prepare a clear description of how the business process will lead to a successful outcome for both the company as a buyer a in the case of murabahah to purchase order a and the bank as a seller
the micro enterprise or sme should anticipate the conventional credit process in which the bank will seek to understand the company s credit risk the need for the money the risk of loss to the bank and the proper risk reward characteristics for the bank and the micro enterprise or sme

at this stage of the credit relationship there are truly different outcomes which may affect the company s and the transaction s risks a the client performs and maintains the payment schedule as agreed
chapter a accessing islamic finance step approval and post closing once the bank in a murabahah to purchase order transaction has completed its sale to the client the client will have acquired goods but not yet paid for them

annex application and closing checklist for the micro enterprise and sme the islamic trade finance company may provide the following useful checklist of required project information on its website
the company a brief company history a products or services a technology used a labour force a production and sales pattern five years a sales distribution local foreign market segments etc

financial projections a five year pro forma financial statements for the project and consolidated statements for the company cash flow balance sheet and income statement a assumptions used for financial projections a cost of goods sold and unit cost analysis
investment costs a costs of the project and its breakdown a basis for estimating costs a potential sources of local and imported equipment machinery

proposed security arrangements a mortgage liens on project assets a insurance a sponsor guarantees a project completion guarantees a offshore escrow account a security sharing with other financiers
chapter a accessing islamic finance

if not the process may prove more complicated as the sharia adviser needs to understand the points of difference from the agreed standards of his peers
modern scholars may undergo specialized training at a number of institutions participate in a variety of scholarly and regulatory colloquia and pursue specialized designations in sharia audit such as that offered by aaoifi

chapter a the role of a sharia adviser in conclusion sharia scholars and panels perform research to enhance existing sharia compliant operations and to discover new ones
when it comes to a micro enterprise or sme sharia advisers are a valuable resource in understanding how sharia rules affect the business and what the preferred means of transacting are

chapter regulations tax implications and jurisdictional guidelines the merchant character and profit sharing activities of islamic banks mean that regulation and governance of these institutions and their deal structures differ from those of conventional banks
in addition the manager may not be able to access as many services from the islamic bank as from a conventional bank

in some cases such as in the united states certain islamic structures including murabahah and ijarah muntahiyah bi tamleek lease ending in ownership are exempted from certain taxes through regulatory rulings treating them as loan structures

in the meantime as regulatory tax and legal issues for islamic finance are not widely addressed there may be fewer products and higher costs for managers of micro enterprises and smes seeking to apply islamic finance in their businesses

q are conventional banks able to provide me with islamic financial services and products a since the inception of modern islamic banking major international banks including citibank hsbc deutsche bank and development bank of singapore have provided islamic financial products to the global market
q are international islamic banks able to work in countries in which they do not have branches or subsidiaries a over the years islamic banks have operated in different capacities as offshore financiers fund investors and asset managers in countries where they are not physically established

ch for orders from africa europe and the middle east and united nations sales marketing section room dc united nations plaza new york n
org orders can be placed with your bookseller or sent directly to one of the above addresses

Please note, This is an auto generated summary based on sentances position in the document and other factors

DOCUMENT WORD ANALYSIS

Main Category

AlHuda Material\islamic micro

KeyWords

loan microfin islam borrow programmatic repay busi financial incom officeas finance activa insurable applic service relief policies local amount econometric

DOCUMENT REFERENCES

Number of Pages

116

Published Date

2010-02-05 12:16:18

Full Document

Read the Full Document

Islamic Banking Principles Applied to Microfinance

Contents

Top 20 FREQUENT WORDS

DOCUMENT KEY POINTS

DOCUMENT WORD ANALYSIS

Main Category

KeyWords

RELATED DOCUMENTS

DOCUMENT REFERENCES

Number of Pages

Published Date

Full Document

Navigation menu

Personal tools

Namespaces

Variants

Views

More

Search

Navigation

Tools

Categories