- Bay': The sale or trading of a specific asset at a fixed price. Most of these are finance contracts.
- Istithmar: An equity investment in an enterprise that generates a return based on the performance of the business. These are either mutual investment contracts or accessory contracts on a fee-earning basis.
These products can be used instead of conventional financial products to finance your business and trade operations:All your corporate needs can therefore be met with Islamic financial products, for a sharia-compliant SME.
Below are definitions for the Bay' and Istithmar transactions listed in the table. The most common ones feature in bold characters.
- Ajr: Commission, fees or wages charged for services rendered or work done. - Bay' bi thaman ajil: A transaction in which goods are requested by a client, purchased by the bank and then sold to the client at an agreed upon price that includes the bank's mark-up. This is essentially identical to murabaha financing.- Bay' al 'ina: A sale in which a purchaser buys merchandise from a seller for a stipulated price on a deferred payment basis and then sells the same merchandise back to the original seller for a price lower than the original purchase price on cash basis, the net effect of which is a loan with interest.- Bay' ad Dayn: sale of debt or receivables.- Istijrar: A sale contract between a client and a supplier, whereby the supplier agrees to supply a particular product on an ongoing basis, for an agreed price and payment mode. - Murabaha: 'Cost plus' transactions. The purchaser knows the cost incurred by the vendor and agrees to a profit margin on top of this.o Tawarruq or Murabaha 'aksiya: Cash financing mechanism where one party purchases an asset from a second party on deferred payment basis to sell it consecutively for cash to a third party, thereby receiving instant cash. - Salam: This is for the sale of specified goods (generally agricultural) to be delivered at a future date. The price must be agreed and the quality and quantity of goods specified at the start of the transaction.- Istisna': A sum is paid in advance for goods that have not yet been produced. This contract can only be applied to manufactured goods.- Ijarah: One counterparty rents an asset he owns to another counterparty. o Ijara mawsoofa bi al dhimma: In contemporary Islamic finance, refers to a form of forward or future lease.o Ijarah wa iktina: Payments contain an element of capital repayment so that at the end of the agreed lease period the capital amount is fully repaid and ownership transfers to the client.
- Mudaraba: An investor provides capital to an entrepreneur to carry out a project. Any profits are shared between the two counterparties at a pre-agreed ratio. Any losses are borne by the investor alone.- Musharaka: Two or more partners make an equity investment in an enterprise, usually all sharing in profits and losses in relation to their investment.- Wakala: A common form of agency agreement in which one party carries out the business of another for a fee.- Amanah: Trust agreement whereby one party takes on a duty of care for a fee.- Kafalah: Trust agreement whereby one party provides a guarantee, a third party offering surety for the payment of debt if unpaid by the person originally liable
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