Islamic modes of Business and Finance

Top 20 FREQUENT WORDS

contract 104 islamic 86 commodity 75 profit 72 debt 70 sale 68 business 61 salam 60 price 59 banks 56 finance 52 mudarabah 49 payment 47 client 45 modes 45 shariah 43 amount 39 purchase 38 seller 38 basis 36

DOCUMENT KEY POINTS

forms of of sharkat ul aqd shirkat ul amwal where all the partners invest some capital into a commercial enterprises shirkat ul a mal where partners jointly undertake to render some services to their customers and share the fee charged by them according to agreed ratio and shirkat ul wujooh partnership in goodwill where all the partners will avail credit from market using their credibility and sell the commodity to share the profit so earned at an agreed ratio

islamic modes of business and finance venture each one of them shall be treated as the agent of the other in all the matters of the business and any work done by one of them in the normal course of business shall be deemed to be authorized by all the partners

in case when the whole shirkah business comes to an end at the maturity or termination before the expiry the business shall be liquidated actually and the settlement between the partners will take place
banks can use the musharakah instrument for working capital financing project financing import and export financing and for other types of single transactions

a dm contract may consist of two or three sub contracts ie partnership by ownership shirkatul milk between two or more persons leasing by one partner its share in the asset to the other partner s and selling by one partner its share to the other partner s

according to a resolution of the oic fiqh academy and research undertaken by irti boualem the sale provision of the contract can be made binding on the financier partner and the sale will be affected at the prices prevailing in the market at the time of actual sale
islamic modes of business and finance bank building a home by funds from banks and joint ownership renovating a home or balance transfer facility btf to replace interest payable loan with financing from the islamic bank

for example a rabbul mal provides rs for mudarabah the mudarib contributes rs to the same with the permission of rabbul mal and the parties have agreed to share the profit in the ratio of
islamic modes of business and finance o zamin liable if the business suffers a loss due to his negligence or misconduct he is liable to compensate the loss o ajeer employee if the mudaraba becomes void due to any reason the mudarib is entitled to get a fee for his services

the mudarabah certificates must be negotiable at the end of the subscription period since the mudarib has authorized to do so once the certificates have been issued taking into account the following rules prescribed by shariah a if the mudarabah capital collected from subscription prior to its use in the project is still in the form of cash negotiating the mudarabah certificates is considered as an exchange of money with money governed by shariah rules on money exchange
mudarabah certificates are investment instruments which mobilize the mudarabah capital by floating certificates as an evidence of capital ownership on the basis of shares of equal value registered in the name of their owners as joint owners of shares in the venture capital or whatever shape it may take in proportion to the each one s share therein

they can also be negotiated if at a given period of time the issuing authority makes an announcement or an offer to the public by virtue of which it pledges to purchase the said certificates operation to be funded by the profits yielded by the mudarabah at fixed price set by qualified experts in the light of conditions prevailing in the stock market and the financial status of the project

islamic modes of business and finance amount without any counter benefit to meet losses in a given project provided such commitment is an independent one not related to the mudarabah contract in the sense that the enforcement of the contract is not conditional to the fulfillment of the promise or that the promise underlines the terms of the contract

the islamic fiqh academy of the oic in its sixth session march resolved in respect of forms of a possession just as the possession of commodities may be physical by taking the commodity in one s hand or measuring or weighing the eatables or by transferring or delivering the commodity to the premises of the buyer the possession may also be an implied or constructive possession which takes place by leaving the commodity at one s disposal and enabling him to deal with it as he wishes

to determine the amount of mark up the seller may take different factors into consideration including the deferred payment but as already explained once the price is fixed it will be attributable to the commodity and cannot be increased or decreased unilaterally because as soon as the sale is accomplished the price of the commodity became a debt payable by the purchaser
if the buyer debtor delays the payment of installments after the specified date it is not permissible to charge any amount in addition to his principal liability whether it is made a pre condition in the contract or it is claimed without a previous agreement because it is a riba hence prohibited in shariah

judgment says the legislature can also confer a power on the court to impose penalty on a party who makes a default in meeting out his liability or who is found guilty of putting up vexatious pleas and adopting dilatory tactics with a view to cause delay in decision of the case and in discharging liabilities and from the amount of such penalty a smaller or bigger part depending upon the circumstances can be awarded as solatium to the party who is put to loss and inconvenience by such tactics

islamic modes of business and finance ordinary sale contract in which the pre requisite is that the seller should be in full possession of the goods to be sold in order to be in conformity with the hadith of the holy prophet peace be upon him forbidding the sale of anything that is not in one s possession

against the general rule set out for salam the contemporary scholars have legalized it on the basis of istihsan as the construction of huge plants may require long gestation period and payment through installments according to the pace of implementation of such projects
it is an agreement culminating into a sale at an agreed price whereby the purchaser places an order to manufacture assemble or construct or cause so to do anything to be delivered at a future date

if the commodity conforms to the specifications agreed at the time of the istisna a contract the purchaser is bound to accept the goods and he cannot exercise the option of inspection
by analogy experts allow a penalty clause in the istisna a agreement in case of delay in delivery of the subject of istisna a

the lease period shall not commence from the date the payment is made by the lessor to supplier of the asset but from the date the asset in working condition is delivered to the lessee no matter whether the lessee has started its use or not
rental can be fixed as also floating for a floating rental it is necessary to be specified for the first period and there could be a provision in the contract to subject it to a certain benchmark for subsequent period

the cost and the return thereon can be kept in view while determining the rent but if the lease transfers the risks and rewards of ownership of the asset to the lessee it will not be a valid contract
however as suggested by oic fiqh academy there can be a unilateral promise to gift or sell the asset at end of the lease period subject to following conditions sic a firstly the agreement of ijarah itself should not be subjected to signing this promise of sale or gift but the promise should be recorded in a separate document

however if such ijarah certificates are issued that represent the holder s right to claim certain amount of the rental only without assigning to him any kind of ownership in the asset meaning that the holder of such a certificate has no relation with the leased asset at all and his only right is to share the rentals received from the lessee it will not be allowed
the loaning arrangement under this scheme is that the loan taken by the borrower multiplied by time of that loan will be arithmetically equal to the counter loan given by the borrower multiplied by time

in the case of tmcl the council of islamic ideology observed the following the concept of counter loans in essence is quite simple and can best be explained with the help of an example suppose a small trader a a wishes to borrow rs from a bank a b for three months free of interest
however just as a a would not be required to share the income earned by him by deploying the loan provided by a b the latter would also not pay any additional amount when a a s deposit counter loan matures report

in laying down the repayment schedule and the amount of the loan however the banks may keep in view the amount of the deposit of the applicant for the loan and the period over which he has maintained his deposit with the bank
according to a ruling issued by religious board of kuwait finance house it is permissible from shariah point of view to purchase a commodity on deferred payment basis and then sell it to any third party on cash payment to get cash though some scholars have disliked it particularly if someone habituates this sort of transaction question page of sheikh yusuf delorenzo s compendium of legal opinions on the operations of islamic banks first edition

the ncb s roll is to serve the customer and to sell to him the commodity that it owns and to make it easy for the customer to resell the commodity as an agent back in the international market to get the cash
legally hawalah is an agreement by which a debtor is freed from a debt by another becoming responsible for it or the transfer of a claim of a debt by shifting the responsibility from one person to another a endorsement or assignment of debt

the difference between a sale of debt that is prohibited and the a assignment of debt that is permissible is that in the latter there is recourse to the assignor or the original debtor in case the assignee does not pay the debt due to any reason what so ever
many restrictions apply to the sale of debt for debt summed up by a maxim forbidding the sale of al kali bil kali meaning literally the exchange of two things both delayed or to exchange of delayed counter value for another delayed counter value

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DOCUMENT WORD ANALYSIS

Main Category

AlHuda Material\islamic banking

KeyWords

contract price sale asset financing lease client purchase ijarah payment profit musharakah lessee amount commodity housing agreement contracts ownership project

DOCUMENT REFERENCES

Number of Pages

30

Published Date

2007-05-10 20:55:36

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Islamic modes of Business and Finance

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Top 20 FREQUENT WORDS

DOCUMENT KEY POINTS

DOCUMENT WORD ANALYSIS

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