Murabaha - Documentation Practical Issues by Ahmed Ali Siddi

Top 20 FREQUENT WORDS

murabaha 65 purchase 21 customer 20 goods 19 declaration 18 payment 18 agreement 15 client 13 ensure 13 agency 12 feb 12 issues 12 disbursement 9 assets 8 evidence 8 documentati 7 acceptance 6 agent 6 purchased 6 actual 5 cbd 5 date 5 executed 5 financing 5 invoices 5 profit 5 responsibility 5 signed 5

DOCUMENT KEY POINTS

• the essential of these documents are a c master murabaha financing agreement a c agency agreement a c order form draw down notice a c declaration a c purchase evidences a c demand promissory note a c payment schedule
• murabaha documentati there are a number of documents involv murabaha financing transaction

• murabaha documentati master murabaha financing agreement a c its an agreement between the client bank whereby the client agrees to p goods from the bank from time to time the terms and conditions of this agreeme a c this is an over all facility agreemen which various sub murabahas may be e from time to time
• a c hence it needs to be signed once at the t facility is sanctioned

• murabaha documentati agency agreement a c through this agreement the bank appoi customer its agent to select and procure goods for the bank
• a c the customer should define a comprehe of assets and commodities that he may during the course of business from time

• a c through this document customer reque bank to purchase the assets from the s and undertakes that it will purchase the assets from the bank once the bank acq them from the market
• murabaha documentati order form a c this document is executed at the time sub murabaha request ie each time w the customer requires murabaha for pur of assets

• a c declaration is to be signed by the custo immediately after the purchase of good bank s agent but before the actual cons a c this document establishes the actual sa transaction ie transfer of ownership o from the bank to the customer a c at this stage the specific details of the a must be known ie quantity quality co
• murabaha documentati declaration a c this is the most important part of the m process

• murabaha documentati declaration a c purchase evidences in the form of bills invoice sales tax invoice must be furnis along with the declaration specifying th details of the goods purchased
• a c proper timing of declaration is extremel important especially in cases of perisha immediately consumable commodities

• murabaha documentati payment schedule a c the payment schedule specifies the am the client will make from time to time o towards the payment of murabaha price a c this shall be executed after the executi declaration
• a c the dates mentioned in the schedule corresponds to the day when the paym becomes due on the client

• process of murabaha differ from pr products
• penalty in late payment

• timing of a offer acceptance a c a murabaha financing arrangement consists of documents to be executed at various s sequence and timing of which is extremely i a c through this client and the bank e important step of a valid murabaha sale i
• a c offer acceptance must be signed while are still in existence and have not been u production process or sold to some other en

• a new murabaha can executed for the purchase of new assets a c it is advisable that whenever practica must be a gap of days between m the previous murabaha and disburseme new one
• rollover in murabaha a c rollover in murabaha is not allowed si murabaha transaction is for the purch particular asset

• rebate on early payments a c if the customer makes early payment is no commitment from the institution i of any discount in the price of muraba the institution has the sole discretion in them the rebate
• a c it is not recommended to make it a pra must be avoided in normal course of such issue if arises should be broug knowledge of shariah advisor

• a c however it is permissible to h undertaking from the customer to amount of money or a percentage of the be donated to charitable causes in the delay in payment installments
• penalty on late payments a c as soon as the murabaha is execut murabaha price becomes a receivable d the bank

• subject matter of murabaha goods must exists at the time of exe murabaha
• murabaha cannot be done in all commod such as currencies gold silver

• purchase evidence a c in order to ensure that the customer a purchased the assets as claimed customer is required to submit asset pu evidence along with offer acceptance a c the purchase evidence must confirm t asset purchase took place after the agreement
• a c asset purchase may be in the fo invoices delivery orders truck receipts

• purchase evidencea contd a c in some cases however it may burdensome for the client to submit invoices as the number of invoices may hundreds
• a c for example cotton purchases are ge small quantities from various sour hence for each sub murabaha there ma many invoices to submit

• direct payment in murabaha a c in many cases the disbursement is m the customer as an agent of the bank
• a c in order to ensure transparency murabaha it is preferable that disburse payment be made directly to the supplie

• profit recognition in murabaha a c generally in murabaha transaction the two stages a c investment stage agency to purch a c financing stage declaration to pa a c the profit for the murabaha transactio recognized after the goods are sold by to the customer
• issues in murabaha

• training of customers bank staff a c proper training understanding of important for a c bank staff dealing with the murabah a c customers purchase officers staff
• issues in murabaha

• process of murabaha differ from pr product a c application of murabaha is not simpl products a c its application differs from products to like sugar cane shares leather cotton gas petrol therefore the rm ro dealing with the custome understand and define step wise process flow the credit approval for each new customer indu
• issues in murabaha

• however it is more prefera direct payment is made to the supplier a c actual purchase of goods and it intimation to the bank
• customers responsibil a c ensure that goods are purchased a execution of agency agreement as agent order form

• a c timely payment of the agreed muraba a c a request for disbursement of new m for payment of old debt is not allo should be strongly avoided
• customers responsibil a c purchase of goods from the bank with valid offer and acceptance via de before their consumption

• a c ensure that the credit proposal must define t flow clearly and have shariah advisor s approv a c ensure that customer is properly briefed requirement of murabaha a c ensure that mmfa agency agreement are before any disbursement to the client
• a c define a step wise process for murabaha customer in view of the specific industry re product nature involved supplier payment ter or cash etc

• in cases where funds are disbursed to under agency it must be ensured that they ar utilized for the actual purchase of the required a c once the goods have been purchased by the declaration is forwarded to the bank the ensure the presence of goods at client end
• a telephonic verification at the factory warehous a c a random physical inspection of the goods to rm to verify the same

• rm s responsibility a c the declaration must be executed immediat consumption of goods to transfer the owners client
• a c a request for disbursement of new mur payment of old debt is not allowed and to b avoided

• a c ensure that mmfa agency agreement are before any disbursement to the client and ar filled and witnessed a c description of assets in the agency agr complete a c filled order form from the customer must b before disbursement of funds and declaration a c the goods described in the order form confi agency agreement
• cad responsibility a c ensure that the credit proposal have shariah approval before disbursement

• cad responsibility a c ensure that goods are purchased after the ex agency agreement as bank s agent and order a c the declaration for murabaha is available a policy guidelines provided
• including cost profit etc a c no murabaha is disbursed just to settle old debt see rollover in murabaha section a c check invoice and purchase evidence thorough

• mode direct ent date name matter indirect i m m d d s declaration outstanding cbd a auto spare pa d feb feb feb sep cbd b sugar cane d feb feb feb aug cbd c cotton d feb feb feb jun cbd d rice d feb feb feb aug
• murabaha checking moni murabaha monitoring sheet as per the guidelines of shariah advisor murabah mechanism mmm has been implemented at mbl policy dated november to ensure tim declarations purchase evidences

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DOCUMENT WORD ANALYSIS

Main Category

AlHuda Material\islamic banking

KeyWords

islamic risk murabaha minimum iifs NA customers financing customer banking profit credit maximum shariah underlying limit service corporate required mode

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DOCUMENT REFERENCES

Number of Pages

34

Published Date

2007-05-10 15:01:41

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