The activity of Islamic banking system
Курсовой проект - Банковское дело
Другие курсовые по предмету Банковское дело
on a single transaction or a consignment basis where the whole investment has to be made by the bank. Mudarabah can also be used for the purpose of securitization. wordsly, Mudarabah can be for the whole business of a company or for any specific project whose expenses and revenues can be set aside from the main business.in order to insure a mutual trust in this relationship, the accounts of Mudarabah projects are periodically audited in order to determine the distributable profit, after taking into account all expenses. Furthermore, in cross-border financings, exchange and political risks have to be taken into consideration before contracting any transaction of Mudarabah. The bank may also closely monitor the performance of the mudarib during implementation of the project in order to ensure that the project or the business is managed in accordance with custom and the original agreement. The bank may even appoint its representative to the boards of the financed institution. [10]
Scope of Musharakah and Mudarabah certificates
Musharakah is a mode of financing which can be securitized easily, especially, in the case of large projects that requires huge amounts which a limited number of individuals cannot afford to collect. A Musharakah certificate represents the proportionate ownership of the client in the assets of the Musharakah project. If all the assets of the joint project are in liquid form, the certificate will represent a certain proportion of money owned by the project.in Musharakah certificates is not allowed when all the assets are still in liquid form, as an increase would fall under the prohibition of riba. Therefore, after the project is started by acquiring substantial non-liquid assets representing tangible assets, Musharakah certificates can be treated as negotiable instruments and can be bought and sold in the secondary market. In fact, the subject matter of the sale, under the Shariah, is a share in the tangible assets and not in money alone; therefore the certificate may be taken as any other commodity which can be sold at a profit or at a loss. when the money subscribed in Musharakah is employed in purchasing non-liquid assets like land, building, machinery, raw material etc. the Musharakah certificates will represent the holders proportionate ownership in these assets. However, in most cases, the assets of the project are a mixture of liquid and non-liquid assets. In such cases, most of Muslim jurists find it acceptable to trade in Musharakah Certificates, when the Musharakah portfolio comprises more than 50% in the form of non liquid assets., Mudarabah Certificates are investment instruments, which mobilize the Mudarabah capital by floating certificates, registered in the name of their owners; they represent shares of equal value. Joint owners of shares in the venture capital or whatever shapes it may take, in proportion to the each ones share therein. Mudarabah is considered as the basis of Islamic banking in the sense that funds are mobilised by financial institutions mainly under this arrangement by issuing negotiable Mudarabah certificates, representing ownership in the funds collected and providing for the profit earned from the investment of those funds to be distributed on Mudarabah principles. And as it is the case in Musharakah certificates; Mudarabah certificates will not be negotiable in the eye of Shariah, if all the assets are in nature of liquid. In addition, Islamic banks could act 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. Finally, the liability of the Islamic bank under Mudarabah is limited to the amount of capital provided by the bank and the creditors of a Mudarabah have no recourse to other assets of the bank. [11]
Trade financing
Trade financing is also done in several ways. The main ones are: a) Mark-up where the bank buys an item for a client and the client agrees to repay the bank the price and an agreed profit later on. b) Leasing where the bank buys an item for a client and leases it to him for an agreed period and at the end of that period the lessee pays the balance on the price agreed at the beginning an becomes the owner of the item. c) Hire-purchase where the bank buys an item for the client and hires it to him for an agreed rent and period, and at the end of that period the client automatically becomes the owner of the item. d) Sell-and-buy-back where a client sells one of his properties to the bank for an agreed price payable now on condition that he will buy the property back after certain time for an agreed price. e) Letters of credit where the bank guarantees the import of an item using its own funds for a client, on the basis of sharing the profit from the sale of this item or on a mark-up basis.
Lending
Main forms of Lending are: a) Loans with a service charge where the bank lends money without interest but they cover their expenses by levying a service charge. This charge may be subject to a maximum set by the authorities. b) No-cost loans where each bank is expected to set aside a part of their funds to grant no-cost loans to needy persons such as small farmers, entrepreneurs, producers, etc. and to needy consumers. c) Overdrafts also are to be provided, subject to a certain maximum, free of charge. [12]
Chapter III. Perspectives and future development of Islamic banking in the world
banks, while functioning within the framework of Shariah, can perform a crucial task of resource mobilization, their efficient allocation on the basis of both PLS (Musharaka and Mudaraba) and non-PLS (trading & leasing) based categories of modes and strengthening the payments systems to contribute significantly to economic growth and development. Sharing modes can be used for short, medium and long-term project financing, import financing, pre-shipment export financing, working capital financing and financing of all single transactions. In order to ensure maximum role of Islamic finance in development of the economy it would be necessary to create an environment that could induce financiers to earmark more funds for Musharakah/Mudarabah based financing of productive units, particularly of small enterprises.non-PLS techniques, as acceptable in the Islamic Shariah, not only complement the PLS modes, but also provide flexibility of choice to meet the needs of different sectors and economic agents in the society.
Trade-based techniques like Murabaha with lesser risk and better liquidity options have several advantages vis--vis other techniques but may not be as fruitful in reducing income inequalities and generation of capital goods as participatory techniques. Ijarah related financing that would require Islamic banks to purchase and maintain the assets and afterwards dispose of them according to Shariah rules, require the banks to engage in activities beyond financial intermediation and can be very much conducive to the formation of fixed assets and medium and long-term investments.the basis of the above it can be said that supply and demand of capital would continue in an interest free scenario with additional benefit of greater supply of risk-based capital along with more efficient allocation of resources and active role of banks and financial institutions as required in asset based Islamic theory of finance. Islamic banks can not only survive without interest but also could be helpful in achieving the objective of development with distributive justice by increasing the supply of risk capital in the economy, facilitating capital formation, and growth of fixed assets and real sector business activities. [13]has a vast potential in financing the productive activities in crucial sectors, particularly agriculture, agro-based industries and the rural economy as a whole. It also provides incentive to enhance production as the seller would spare no effort in producing, at least the quantity needed for settlement of the loan taken by him as advance price of the goods. Salam can also lead to creating a stable commodities market especially the seasonal commodities and therefore to stability of their prices. It would enable savers to direct their savings to investment outlets without waiting, for instance, until the harvesting time of agricultural products or the time when they actually need industrial goods and without being forced to spend their savings on consumption.might engage in fund and portfolio management through a number of asset management and leasing & trading companies. Such companies/entities can exist in the economy on their own or can be an integral part of some big companies or subsidiaries, as in the case of Universal Banking in Europe. They would manage Investors Schemes to mobilize resources on Mudarabah basis and to some extent on agency basis, and use the funds so collected on Murabaha, leasing or equity participation basis. Subsidiaries can be created for specific sectors/operations, which would enter into genuine trade and leasing transactions. Lowrisk Funds based on short-term Murabaha and leasing operations of the banks in both local as well as foreign currencies would be best suited for risk-averse savers who cannot afford possible losses, in PLS based investments. Under equity based Funds, banks can offer a type of equity exposure through specified investment accounts where they may identify possible investment opportunities from existing or new business clients and invite account-holder