WADI’AH DEPOSIT TAKING INSTRUMENT

The term wadi’ah is derived from the verb “Wada’a”. It means to keep, lodge, store, entrust, leave, or deposit. It means to leave something in someone’s custody. In technical terms, it refers to the act of keeping or the property that is being kept. It has also been used to refer to assets given to… Continue reading WADI’AH DEPOSIT TAKING INSTRUMENT

WAKALAH AGREEMENT

Wakalah means; to look after, to delegate, to authorize, doing a task on behalf of another party. it is a contract of agency where a person (the principal – Muwakkil) appoints another person (the agent – Wakil) to do a certain well-defined tasks on behalf of him or her for a specified time for an… Continue reading WAKALAH AGREEMENT

QARDH-HASAN (BENEVOLENT LOAN)

Qardh-Hasan is a form of interest-free loan that is extended by a lender to a borrower on the basis of benevolence. It means the lender does not expect any form of return from the borrower. It is a gratuitous loan extended to those in need, for a specified period of time. At the end of… Continue reading QARDH-HASAN (BENEVOLENT LOAN)

TAWARRUQ

As discussed in our previous articles, Islamic banks solve customer needs through number of ways. All Islamic banking contracts entail buying or selling of goods or services. But what if the customer needs liquid cash for his miscellaneous personal use? Remember that money is not a commodity which can be bought or sold. And what… Continue reading TAWARRUQ

WHAT IS MUSHARAKA?

The term Musharaka is derived from the Arabic word Sharikah which mean partnership. It refers to all form of sharing and partnership. Musharaka was practiced by many civilizations long before the advent of Islam. When Islamic principles were introduced during the time of the Prophet ﷺ, Musharaka was approved as a valid means of financing.… Continue reading WHAT IS MUSHARAKA?

WHAT IS MUSHARAKA?

The term Musharaka is derived from the Arabic word Sharikah which mean partnership. It refers to all form of sharing and partnership. Musharaka was practiced by many civilizations long before the advent of Islam. When Islamic principles were introduced during the time of the Prophet ﷺ, Musharaka was approved as a valid means of financing.… Continue reading WHAT IS MUSHARAKA?

Operationalization of Mudharaba Contract in Present Day Islamic Banking

To make Mudharaba contract valid and in line with Shariah, the following guidelines between Rabb ul Maal (capital owner) and Mudarib (fund manager) have been laid down by scholars: The amount of capital must be specified from the inception, uncertain amount of capital leads to uncertainty when it comes to profit sharing. The currency of… Continue reading Operationalization of Mudharaba Contract in Present Day Islamic Banking

MUDHARABA AS A MODE OF DEPOSIT TAKING

In our previous articles we looked at deposit taking instruments and classified them into two categories; Profit and Loss Sharing (PLS) such as Mudaraba and Musharaka and Debt based modes of deposit taking. We will today commence with Mudaraba, the first instrument under the Profit and Loss Sharing (PLS) category. Mudharaba is a profit-and-loss sharing… Continue reading MUDHARABA AS A MODE OF DEPOSIT TAKING

ISLAMIC BANKING AND FINANCE INSTRUMENTS

Deposit Taking Instruments In previous articles, we defined Islamic finance and its principles. We also gave a brief history of Islamic banking and mentioned different models of Islamic banking being practiced globally. In the next few articles, we shall look at the deposit taking instruments of Islamic banking and how they are applied in modern… Continue reading ISLAMIC BANKING AND FINANCE INSTRUMENTS