Following are the different
modes of Islamic financing which have been introduced in Pakistan.
1. Musharika
Musharika is an agreement
of business between two parties on the concept of profit and loss sharing, who
contribute their funds, skills for its contribution.
In
Musharika, bank provides funds to the businessman on the agreed profit sharing
on the completion of the profit.
Features:
·
The agreement is governed by Musharika investment agreement with
in the frame work prescribed by the state bank of Pakistan.
·
The management is controlled by the partners; bank only supervises
the performance of the profit.
·
Sharing of profit or loss is calculated according to the funds
initially invested or agreed ratio of profit.
·
The funds of the bank on the basis of Musharika are secured.
·
Bank shares only with those parties having good reputation and
credit standing. The parties must have a good management and sound experience
in the required field of investment.
2. Mudariba:
Mudariba
is a form of partnership of two parties in which one participates. Its capital
and the other his knowledge or skill about business. Some persons have spare
funds but lack of required skills for its investment. On the other hand some
people may possess good skill regarding the business. In this system which
based on the ISLAMIC principles, the profit and loss is shared with the agreed
ratio at the end of the year.
The
Mudariba Company will be registered under the company ordinance. It’s paid up
capital shouldn’t less than the 7.5 million. The Mudariba Company may be of two
types that are: Multipurpose and specific purpose.
Features:
- Banks
and financial institutions are not allowed to established a Mudariba
company.
- Mudariba
Company may be in private sector or public sector.
- It
should be registered with the registrar of Joint Stock Company.
- The
promoters should be of good integrity and also possess required skill and
knowledge.
3. Participation term certificate:
Participation
term certificates are transferable instrument issued by a company for meeting
the long term requirement of capital under ISLAMIC banking. According to the
company ordinance. It can issue these certificates for raising its funds.
Feature:
·
Participation term certificate are transferable.
·
The certificates are issued by the J.S. companies.
·
These are issued for meeting medium and long term finances.
·
Profit is shared in agreed ratio.
·
The certificate holders have an option to participate in
all meeting of the company.
·
A portion of these certificates can be converted into
shares under certain conditions.
·
Losses are shared in the ratio of their investments.
4. Leasing:
“Leasing
is an agreement, in which the owner (lessor) give an asset to the borrower for
the specific period of time, for the purchase of rent”.
The
ownership of an asset will remain with the owner (lessor), only the right of
use is given to the borrower for specific period of time.
ISLAMIC
IDEOLOGY COONEL approved the method of leasing for getting the medium and long
term finance.
Features:
-
Unblocking the capital in purchase of new asset for business.
-
Ownership will remain with the owner.
-
Tax exemption to the owner.
-
Quick turn over of finance.
5. Rent sharing:
Rent
sharing system provides finance generally for the purchase and construction of
houses. The finance also becomes the partner in the house. The loan is repaid
along with the share of rent during a given period of time. In Pakistan house
building finance corporation (HBFC) is performing function of rent sharing
system.
Features:
·
The corporation or bank both contributes the funds for the
construction of houses.
·
The funds are provided according to the legal agreement.
· The funds are provided for a specific period at also for
construction of a particular house.
· The amount advance is repayable in installments along with the
share of rent according to the schedule.
·
Rent assessment is made on the quality of the construction and the
locality of house.
· The owners have an option to refund the total amount any time and
can be settle the amount before the due period.
·
The rental value is revised after three years.
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