yumyme chocolates names: hussain ali mustafa hassan abdulla alturabi financed by
DESCRIPTION
Definition Murabaha Steps: 1.Discuss establishing chocolate factory 2.Buy back + profit margin ◦Ordinary murabaha ◦Murabaha sales connected with a promise 3.First sale contract takes place ◦Customer is agent 4.Contractor begins construction 5.Client will buy backTRANSCRIPT
Yumyme ChocolatesNAMES: HUSSAIN ALIMUSTAFA HASSANABDULLA ALTURABI
Financed by
Table of content: Definitions and legal/Shari’a basis of Murabaha
Advantages and disadvantages of the Murabaha compared to other modes of finance
The required forms and documents used in Al-Baraka
The procedures for providing the money in Al-Baraka
The risks involved in Murabaha contract and how can they be mitigated
Definition Murabaha
Steps:1. Discuss establishing chocolate factory2. Buy back + profit margin
◦ Ordinary murabaha ◦ Murabaha sales connected with a promise
3. First sale contract takes place◦ Customer is agent
4. Contractor begins construction5. Client will buy back
Legal/Sharia Basis Contracts based on Quran and Sunna
Examples of fatwas:1. Meaning and purpose (i.e. simply replace “interset” with “profit”)2. Promise (Malki vs others)3. Insurance 4. Commission via administrative costs5. Property as guarantee 6. Bank can use a mode of finance with other banks7. Customer bears costs if purchase promise not executed
Advantages of MurabahaMudaraba Murabaha
• High level of risk• Responsible for losses if no negligence
• There is guarantor
Ijara Murabaha
• Major maintenance for bank • Ownership will transfer to client• So client is responsible for defects
Istisna Murabaha
• Bound to one contractor • Multiple contractors
Other modes of finance Murabaha
• Doesn’t include it • Revovling Murabaha
Other modes of finance Murabaha
• Doesn’t include it • Retain 50% of costs in case of default
Musharaka Murabaha
• Provide working capital • Only down payment
Disadvantages of MurabahaIstisna Murabaha
• No need to reveal costs and profit • Have to quote all costs
Ijara Murabaha
• No upfront rentals • There’s down payment
Ijara Murabaha
• Flexible repayment terms • No flexibility • Legal consequences + overdue repayments
Musharaka and other modes Murabaha
• Less costly for bank • Costlier since bank is payment full amount at first
The procedures for providing the moneyStep 1: filling the application form and attaching the required documents
Step 2: analyzing the client application
Step 3: signing the facilities agreement and the offer letter
Step 4: sign an Agency contract (Wakala) – client trustworthy
The procedures for providing the moneyStep 5: Murabaha financing process:
•A- One off
•B- Revolving
Step 6: local purchase order
Step 7: payment request letter with an invoice
The procedures for providing the money
The required forms and documents used in Bank AL-Baraka:Application form
Required documents from the client
Credit Approval Routing Slip
Facilities agreement
Offer letter
Agency contract (Wakala)
Local purchase order
Invoice
Payment against invoice letter
RisksCredit Risk
Market Risk
Operational Risk
Credit RiskDefaults in payment
1% Late Payment
Postponed Cheques
Market Risk
Operational Risk
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