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Unformatted text preview: Musharaka Investment Agreement Istisna Agreement Agreement for Interest free Loan Mudaraba Financing Agreement Syndication Mudaraba Agreement Essentials and Model Agreements for Islamic Modes of Financing Introduction The Commission for Transformation of Financial System set up in the State Bank of Pakistan in pursuant to the Supreme Court Judgment on Riba dated December 23, 1999 approved essentials of Islamic modes of financing including Musharaka, Mudaraba, Murabaha, Musawama, Leasing, Salam and Istisna. The recently established State Bank of Pakistan ’ s Shariah Board has reviewed and approved these essentials of Islamic modes of financing and recommended that the same may be circulated to the banks conducting Islamic banking business in Pakistan as guidelines that would form the basis for Prudential Regulations on Islamic banking in due course. It does not preclude the possibility of developing new modes or instruments of financing, modifications or variants of the modes provided they are Shariah compliant. The Essentials are given below: 1. Murabaha (Agreed profit margin sale with cash or deferred payment of price) i) i) Murabaha means a sale of goods by a person to another under an arrangement whereby the seller is obliged to disclose to the buyer the cost of goods sold either on cash basis or deferred payment basis and a margin of profit included in the sale price of goods agreed to be sold. ii) Goods to be traded should be real, but not necessarily tangible goods. Credit documents cannot be the subject of Murabaha. iii) Being a sale transaction, it is essential that the commodities which are the subject of sale in a Murabaha transaction, must be existing, owned by the seller and in his physical or constructive possession. Therefore, it is necessary that the seller must have assumed the risks of ownership before selling the commodities to the buyer/customer. iv) Murabaha, like any other sale, requires an offer and acceptance which will include certainty of price, place of delivery, and date on which the price, if deferred, will be paid. v) In a Murabaha transaction, the appointment of an agent, if any, the purchase of goods by or for and on behalf of the bank and the ultimate sale of such goods to the customer shall all be transactions independent of each other and shall be so separately documented. An agreement to sell, however, may embody all the aforesaid events and transactions and can be entered into at the time of inception of relationship. The agent file:///C|/Documents and Settings/Administrator/Des...s by SBP/Essentials of Islamic modes of finance.htm (1 of 6) [2/23/2008 11:33:38 PM] State Bank of Pakistan - The Central Bank would first purchase the commodity on behalf of his principal i.e....
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- Fall '11
- Finance, Institution, state bank, Islamic modes