EIF project - E.I.F Project Report BY: Muhammad Abdullah...

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E.I.F Project Report BY: Muhammad Abdullah 13425 Muhammad Rehan 16734 Faizan Usmani 13706 Faizan shakil puri Submitted to: Nawaz Ahmed Course: MBA morning Days: Tuesday (12 to 03) Friday (11 to 01:30)
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E.I.F Project Report Date of submission: 26/07/2011 Acknowledgements We all the group members thank Allah and then Mr. Nawaz Ahmed for providing us Knowledge and chance to work on this project. We would also like to give our best regards and many thanks to all those who participated very patiently in making project, all of your input was very valuable to us in recognizing and realizing what essentials do we need for this project.
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E.I.F Project Report Introduction to Murabaha Murabaha is a particular kind of sale and not a financing in its origin. Where the transaction is done on a Cost plus profit ” basis Murabaha can be used by Islamic banks as a mode of interest-free financing .The Islamic financier buys the asset in its name from the supplier and sells it to the customer with a mark-up on a deferred payment basis. Shari’ah requires that title and possession of the asset passes from the supplier to the Islamic financier before its onward sale to the customer. Possession of the asset can be actual or constructive. The customer pays the deferred purchase price in one amount or by installments. Title and possession pass to the customer when the murabaha is entered into. The purchase price is calculated by reference to the price the Islamic financier paid to the supplier, any costs associated with the purchase and a mark-up. In practice, the customer has the relationship with the supplier. It is in a better position to negotiate the specifications, the price, etc. Therefore, the customer often acts as the Islamic financier’s agent in dealing with the supplier. Shari’ah boards of Islamic financiers allow the customer to act as an undisclosed agent of the Islamic financier and take the title in its name for the Islamic financier. If a customer wants to pay the deferred payment price early, the murabaha contract itself cannot include a provision obliging the Islamic financier to give a discount. However, it is possible that the Islamic financier can, in its discretion, give a rebate. In practice, most Islamic financiers provide a rebate. Tawaruq Unlike a ‘trade’ murabaha, tawaruq (which is a form of murabaha) is used to provide a cash or ‘working capital’ facility. Historically, tawaruq used commodities such as metals (other than gold or silver) that are bought and sold on an exchange like the London Metal Exchange. Within the Islamic finance industry one interesting development has been that, when using tawaruq, some Islamic financial institutions are no longer using commodities such as metals, but shares. It seems that one reason for this is to avoid paying brokers’ fees. However, the use of shares as the basis of tawaruq
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EIF project - E.I.F Project Report BY: Muhammad Abdullah...

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