Financing schemes

A financial scheme from 4 – 24 months under which our SMS, agricultural and livestock customers can get finance from Rs 5000 with upper limit as per regulations.

Name of the product NRSP Murabaha
Underlying Islamic mode Murabaha
Type of product SME, Agriculture, Livestock and Consumer
Minimum and Maximum financing limit Minimum limit PKR 5,000 Maximum limit as per Prudential Regulations
Tenors (minimum and maximum) Minimum 4 month, Maximum 24 months
Basis of pricing / return Negotiated at the time of contract
Target Customers SME, Agriculture & Livestock
Security/collateral Required Cash Margin, Post-dated cheques, Demand Promissory Note
Other salient features/services The product can be used for agriculture, livestock, SME and consumer products.

 

Murabaha (Cost Price Plus Profit Contract)

Definition of Murabaha

Technically Murabaha has been defined as under:

Murabaha is a particular kind of sale where the seller discloses its cost and profit charged thereon. The price in this sale can be both on spot and deferred.

Legitimacy of Murabaha

The legitimacy of Murabaha is based on the legitimacy of sale (ba’i or bay’) in general. All four sources of Shariah support the legitimacy of Murabaha, namely the Quran, the Sunna of Prophet Muhammad (pbuh), the consent of the majority of Muslim jurists (ijma’a) and analogy (qiyas).

Murabaha is considered legitimate based on the general legitimacy of sale in shari’a (Islamic law) as cited in Prophetic traditions. Prophet Muhammad (pbuh) was reported to have said: “The best source of income is what man earns with his own hands and from a permissible trade” (narrated by Hakim). The Prophet (pbuh) also permitted the sale of a commodity for more than its purchase price: “if the two commodities are different, buy and sell as you wish”(narrated by Muslim in Sahih Muslim, 1587).

The Modern Application of Murabaha in NRSP

Generally Murabaha can be used for working capital financing. Whoever in NRSP we use Murabaha mostly to finance the agricultural operations as under;

The bank make purchase from the market on the demand of the client.

The bank then sale those commodities to the client on the basis of Murabaha.

The client pay the price of Murabaha to the bank as per agreed repayment schedule. The tenor/repayment of the facility is matched with harvest of the crop when sufficient cash flows are available with the customer.

A financial scheme from 4 – 24 months under which our agricultural customers can get finance from Rs 5000 with upper limit as per regulations.

Name of the product NRSP Sala’m
Underlying Islamic mode Sala’m
Type of product Agriculture
Minimum and Maximum financing limit Minimum Limit Rs. 5,000 Maximum Limit as per Prudential Regulations
Tenors (minimum and maximum) Minimum 4 month, Maximum 24 months
Basis of pricing / return Negotiated at the time of contract
Target Customers Agriculture
Security/collateral Required Cash Margin, Post-dated cheques, Demand Promissory Note
Other salient features/services The product can be used for agriculture products

 

Salam (Contract of Advance Payment Sale)

Definition of Salam 

The Muslim Jurists (faqih) (may Allah have mercy on them) define the Salam as:

A contract according to which the price of a clearly defined item is paid in advance at the price of concluding the contract, and the sold item it to be received later.

Legitimacy of Salam 

Ibn ‘Abbas (may Allah be pleased with him) says: “I testify that Allah has made lawful to us (Muslims) to pay in advance for the price of a thing to be delivered later after a specified term”. He then recited this above-mentioned verse”. (Source: Al-Hakim (3189) [2/342], Al-Bayhaqi (11081) [6/30] and ‘Abdur-Razzaq (14064) [8/5].)

When the Prophet (SAS) arrived at Medina and found its people paying in advance the price of fruits to be delivered later after a year, two or three, he said: ” Whoever pays in advance the price of a thing – (or “…of fruits…” according to another narration) – to be delivered later should pay it for a specified measure at specified weight for a specified period.” (Related by Al-Bukhari and Muslim).

The Modern Application of Salam to Islamic Banking Products

The Salam sale has the flexibility to cover the needs of various sectors of people such as farmers, industrialists, contractors, exporters or traders. It can be used to meet the capital requirements as well as to meet the cost of operations.

In NRSP we use Salam mostly to finance the agricultural operations;

  • Where the Bank transact the farmer to fulfill the promise to deliver the commodity against full payment of price in advance.
  • The bank then sale those commodity in market to create profit.

Definition of Ijarah

Ijarah (Lease) is a contract whereby the owner of an asset, other than consumables, transfers its usufruct to another person for an agreed period for an agreed consideration.

Legitimacy of Ijarah

The Sunnah of the Prophet Muhammad (SAW) refers to lease contract as follows;

The Prophet (SAW) said: “Pay the hired worker his wages before his sweat dries off”. (Sunan Ibn Majah).

The Prophet (SAW) is reported to have said: “He who hires a person should inform him of his fee.” (Al-Sunan Al-Kubra li Al-Baihaqi).

Abdullah ibn Umar narrates, “Allah’s Apostle gave the land of Khaibar to the Jews to work on and cultivate and take half of its yield.” Ibn ‘Umar added, “The land was used to be rented for a certain portion (of itsyield).” (Sahih Al-Bukhari).

The Modern Application of Ijarah in NRSP

Ordinary Ijarah can be used for lease of plant, car, vehicles and equipment, real estate, durable goods, etc. whoever in NRSP we use Ijarah mostly for leasing of agriculture equipment, motorcycles, auto rukshas and car as under;

  • The bank buy leasable assets from the market as customer demand.
  • The bank then lease those assets to clients for agreed period.
  • The user pay rentals to the bank as per agreed rental schedule.
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