The bank purchases commodities, equipment, or appliances upon the client's request and as per his required specifications along with his promise to buy the commodity in question by the cost plus an agreed upon profit. The amount may be settled in one payment or in installments.
This type of financing may be used for the following commodities:
Lease Ending in Ownership Financing(Ijara):
Upon customer request,the bank purchases tangible assets such as real estates, lands,house,Equipments,machines…etc. The bank promises to Lease the asset to the client for use in exchange for periodic rent. The ownership of the leased asset will be transferred to the client after completion of the renting period as a gift from the bank with no compensation.
Clients may also use Ijara financing to purchase homes and apartments subject to the following privileges:
Competitive and Shar’iah-compliant rental return
long term payment period up to 25 years
Easy monthly installments
Free subscription in the Mutual Insurance Program
Free real estate insurance
Opportunity to obtain financing to purchase a kitchen equipment or furniture
The bank commits to transfer the ownership of the apartment, real estate, or rented asset to the customer at the end of the agreed period.
The possibility of total or partial payment at the renewal of the contract.
Mudarabah Financing is a profit-sharing contract consisting of a capital investment from the Bank (as a Principal) and a labor investment from the client (as Mudarib). In accordance with its terms, the Bank puts forward the necessary funds to finance a specific project, whether partially or in full.
The client undertakes the necessary labor so the profits are devided through agreed upon percentages. The client can only face a loss if any negligence or infractions are revealed; in the case of unsuccessful project, the client loses the labor invested, while the Bank loses its funds invested wholly or partially, as applicable.
The client approaches the bank with a request for financing a specific technical/industrial project, presenting all technical designs and plans, as well as all general and specific conditions related to the project after consulting a specialized engineering consultancy firm.
After the Bank approves the request, a contract is prepared detailing the project specifications, as well as the cost of the project and the payment schedule to which the client commits, whether monthly installments or full payment. A separate contract is prepared between the bank and a “contractor”, by which the contractor commits to carry out the project in accordance with the design and specifications previously outlined by the client.
Musharakah is defined as a contractual agreement between the partners with regard to both capital and profit.
Musharakah is one of the most important models of Islamic investment practiced by Islamic International Arab Bank. The Bank plays an effective role with its partner in conducting studies and deliberating over the intended project from technical, Shari'ah, and social aspects. The Bank also allows the client the chance to take full ownership of the project, by purchasing shares in installments when possible.
It is one of the types of sales in which the seller agrees with the buyer on the price of the goods without disclosing the profit
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