Real-time Murabaha Financing in Stock Market

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Solution presented by me and my boss Syed Qutub Ahmed.

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  • Real-time Murabaha Financing in Stock Market

    1. 1. Islamic Shares Financing [Murabaha] Asif Hussain BE Computers, MBA Project Manager / Senior Business Analyst
    2. 2. Financing MechanismThe customer approaches the Bank with the request for financing Transfer of Title Transfer of TitleVendor Bank Customer Payment of Purchase Price Payment of Marked-up Price The Bank purchases and receives title of ownership from the vendor. The Bank makes payment to the vendor The Bank transfers the title over to the customer upon payment The customer makes payment up-front or on a deferred basis
    3. 3. Murabaha Financing • Contract between Bank and Customer to decide profit rateBuys Shares, for Customer on resale and payback period • Customer purchases shares as bank’s agent, bank pays for them • Bank sales the shares to the Purchases Shares on new rate customer on settlement at profit 1-Jun Bank Buy 100 OGDC 135.13 3-Jun 3-Jun Bank Sell 100 OGDC 136.21 3-Jun 3-Jun Customer Buy 100 OGDC 136.21 3-Jun
    4. 4. Murabaha Financing Qty Rate Settlement 1-Jun Bank Buy 100 OGDC 135.13 3-Jun 3-Jun Bank Sell 100 OGDC 136.21 3-Jun 3-Jun Customer Buy 100 OGDC 136.21 3-Jun• The 2nd transactions is done on a rate slightly higher than the actual buying rate from the market.• This new rate is determined by an already existing contract between the bank and the customer.• This Murabaha Contract has a fixed percentage of profit for the bank and the customer has to pay the amount within a fixed period.• Customer can sell shares with profit/loss, and payback the bank.• The profit is not dependent over the time for which the shares are financed.
    5. 5. Collateral Valuation and Hair Cuts Rate Hair Cut Value OGDC 136.13 0.8 108.904 NML 49.91 0.7 34.937 AHSL 39 0.65 25.35 HUBC 33.74 0.75 25.305 PTCL 21.55 0.8 17.24 PSO 299.54 0.7 209.678• Bank determines financing limit on the basis of collateral value of the customer• Bank generates margin calls if the collateral value gets below alert threshold and can sell collaterals to cover loss
    6. 6. The Financing Model
    7. 7. Infrastructure
    8. 8. Technology Architecture
    9. 9. Q&A

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