A financial scheme from 4 – 24 months under which our SME, 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.