The activity of Islamic banking system
Курсовой проект - Банковское дело
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aken and repayment is for the same amount as the amount lent. Goods of the same kind will be paid back on demand or at the settled time. Qard should not bring any return or addition to the lender because that would be equivalent to taking Riba. However, a borrower can pay more than the amount borrowed, but it must not be stipulated in the contract. Further, the date of payment of the loan may or may not be included in the Qard contract as the lender can demand repayment at any time. And the loan should not be conditional upon any other contract, such as Bai and vice-versa. is another structure of borrowing goods in a virtuous act. However, in the case of Ariyya, the exact borrowed commodity has to be returned to its owner, not any replacement. While in Qard, the same kind of the loaned commodity with essentially the same nature or character could be paid back. the other hand, a Dayn is the result of any contract or credit transaction. The created debts ought to be returned without any profit over their principal amounts. Salaf is a form of Dayn that is words to Salam. It is used for a loan of fixed tenure and in that sense it is closer to Dayn; Salaf includes loans for short, intermediate and long term loans and the price of the commodity is paid in advance, while it is delivered at a future date. The amount given as Salaf cannot be called back before its due date. Therefore, this creates a liability for the seller to supply the commodity in the future.addition, in all credit transactions, Islam recommends witnesses and documentation. This provides safeguards against disputes and allows credit transactions for a fixed or known time period. And since Islamic banks can neither pay interest nor charge any return on loans, they have the right to ask for collateral to ensure recovery of the loan amount. In fact, the client cannot refuse to repay the loan or debt in case he has incurred loss in the business conducted with the banks loan. Also, The Shariah puts a great deal of emphasis on repayment of loans/debts and the borrower also has a moral obligation to repay a loan. For that reason, banks can include, with mutual consent of the clients, a penalty clause in the credit contract to mitigate the risk of default, but the penalty charged on any default has to go to charity. With regard to a possible rebate that could be given to the debtor for repaying the loan earlier than the due date, the Shariah considers that as a reduction of interest in the financing costs arising from prepayment of the amount that would be stipulated in a contract. And, there is unanimity about the illegality of remitting a part of the debt payable by anyone and getting the remaining part. However, Muslim jurists have differentiated between loans or debts that have become due or can be called back at any time (Duyoon Haalah), and loans where time of payment settled between the creditor and the debtor and the debt is not yet due (Duyun Muajjalah). Duyoon Haalah are allowed by almost all Muslim jurists on the rationale that in such loans, delay is not the right of the debtor. In fact, rebate should neither be provided in the agreement nor be made a condition in the loan contract. In opposition, remission of a part of a debt not yet due involves Riba. [8]
Modes of financing
In recent times, Islamic financing services have increased phenomenally around the world. Islamic banks offer now, to their clients, different modes to investment their money and finance their projects. These modes include solutions for short, medium, and long-term project-financing and investments.and-loss-sharing is the most common mode proposed by Islamic banks for import financing, pre-shipment export financing, working capital financing and financing of all single transactions. This mode could also be used in the case of socio-economic projects such as infrastructure projects. PLS instruments include Mudaraba, an equity participation contract under which one of the parties participates with capital and the other with know-how. If the project ends in profit they share the profit in a pre-arranged proportion and if it results in loss the entire loss is borne by the financier, and the entrepreneur gains no benefit out of his effort, which was his part of the investment. PLS instruments also include Musharaka, an equity participation contract under which a bank and its client contribute jointly to finance a project. Ownership is distributed according to each partys share in the financing. Besides, Islamic banks propose non-PLS modes of investment that include Shariah acceptable forms of trade and leasing. Murabaha, salam and Istinasa are the most known Trade-based techniques. Murabaha is a purchase and resale contract in which an asset is purchased by the bank for its customer, with the resale price determined based on cost plus profit mark-up. As opposite to Murabaha, Salam is a purchase contract with deferred delivery of goods. While, Istisna is a medium-term contract, whereby the manufacturer, or the seller, agrees to provide the buyer with described goods after they have been manufactured within a certain time and for an agreed price. , leasing-related financing, Islamic banks agree to purchase and maintain the assets and afterwards dispose of them according to Shariah rules. Ijara, for example, is a leasing contract whereby a party leases an asset for a specified rent and term. The bank bears all risks associated with ownership., Islamic banks could use other schemes of financing such as the investment deposit scheme that provides investors with an Islamic alternative to making short-term investments by participating in the financing activities of the Bank. Under this scheme, the Bank accepts deposits from both individual and institutional investors for use in its Import Trade Financing Operations.
Banks adopt several modes of acquiring assets or financing projects. But they can be broadly categorized into three areas: investment, trade and lending. [9]
Investment financing
In the modern economic system, Islamic banks are mostly using the debt-creating modes of trade and leasing for their financing activities, while the main basis for mobilizing deposits from the public are the partnership modes of Musharakah and Mudarabah. Both modes belong to profit-and-loss sharing or the risk-sharing techniques involved in partnerships. If the financier wants to finance the whole project, the form of Mudarabah can come into operation. If investment comes from both sides, the form of Musharakah can be adopted.Islamic bank arranges Musharakah on the basis of a written agreement with the client for a specific transaction or project for a fixed period of time that can be renewed. It could be used to finance industry, trade, real estate, contracting and almost all legal enterprises through partnership. A Musharakah business or its assets can also be securitised by selling Musharakah Certificates in the market. The Musharakah Certificate represents the ownership of the holder in a proportion of the assets of the project. It could be sold in the marker only if it represents non-liquid assets. If the certificate only represents a proportion of liquid assets of the project; it could not be sold in the market except, as it could be assimilated to a trade of money and thus would be words to Riba.addition, the returns of the Islamic bank in Musharakah have been tied up with the actual profits accrued through the enterprise. Thus the client is required to provide the bank periodically with the results of operations of the business. The bank should also share the losses of the business. And if the enterprise earns enormous profits, all of it cannot be secured by the industrialist exclusively, but they will be shared by the common people as depositors in the bank. And since financial institutions do not normally want to remain partner of a specific project for good, they can sell their share to other partners of the project as aforesaid. is another agreement between the Islamic bank and an entrepreneur, whereby the entrepreneur can mobilize the funds of the bank for its business activity. It is considered as the basis of Islamic banking in the sense that funds are mobilized by banking and non-banking financial institutions mainly under this kind of partnership. The bank acts as a mudarib for the savers and investors and as financier for the entrepreneurs. If the bank employs the clients deposits without committing any of its own, it acts as mudarib for the client until the conclusion of the business transaction for which the funds were invested; whereas the entrepreneur provides his expertise, labor and management of the project. Profits made are shared between the bank and the entrepreneur according to predetermined ratio. In case of loss, the bank loses the capital, while the entrepreneur loses his provision of labor. It is this financial risk, according to the Shariah, that justifies the banks claim to part of the profit. The profit-sharing continues until the loan is repaid. The bank is compensated for the time value of its money in the form of a floating rate that is pegged to the debtors profits. Its liability mudarabah is limited to the amount of capital provided and the creditors of a mudarabah have no recourse to other assets of the Islamic bank. Financial institutions can also mobilize funds for investment by issuing negotiable investment instruments called Mudarabah Certificates; they represent ownership in the funds collected. It would distribute a percentage of the profit earned from the investment of those funds on Mudarabah principles. Mudarabah Certificates are registered in the name of their owners in proportion to the each ones share therein. A Mudarabah Sukuk can also be issued on the Mudarabah principle.addition, Islamic banks can use Mudarabah to finance import trade