borne by those who pay their obligation with delay. Such people will refuse to pay thehigher cost, which means that the Islamic bank will end up with the “bad risks” clients.Islamic banks differ in handling delinquency cases. The most common form is changingpenalties on those who fail to pay on time. Rather than taking this as an income to thebank, it is donated to charity. This way the effect and pressure of late charges inorientated what falling into a luscious transactions. This is because such penalty will beconsidered “riba” if it has become an income to the creditor, which not so here. The basisof such penalty is the consent of the debtor in the contract that originates the cost.16.Explain how Ijara can be used for home finance.The process of Ijara can be used for equipment as well as property. This Islamic financeprocess is very simple. A single asset Trust is created whereby the Trust purchases theproperty, and then leases the property to the customer. A portion of each monthlypayment goes towards ownership, until the customer owns 100%.The basic difference between a Sharia Ijarah-wal-iqtinah Islamic loan process and aconventional lease is the Ijarah process obligates the Trust (seller) to sell the property toyou under a Promise to Purchase. While the same contract entitles the customer topurchase the property, the customer is not obligated to do so.17.Define LIBOR and explain its application with an Ijarah contract.The London Interbank Offered Rate (LIBOR) is abenchmarkinterestrate at which majorglobal banks lend to one another in the international interbank market for short-termloans.LIBOR, which stands for London Interbank Offered Rate, serves as a globally acceptedkey benchmark interest rate that indicates borrowing costs between banks. The rate iscalculated and published each day by theIntercontinental Exchange (ICE).The London Inter-bank Offered Rate is an interest-rate average calculated from estimatessubmitted by the leading banks in London, Each bank estimates what it would becharged were it to borrow from other banks.The rental amount under Ijarah transaction is normally linked to interest basedbenchmark like KIBOR or LIBOR.If majority of the assets of the pool is in tangible form, like leased property or equipment,shares in business concerns etc. its units can be sold and purchased on the basis of theirnet asset value determined on periodical basis.