Islamic Finance 6

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Islamic Finance 6

  1. 1. ISLAMIC BANKING PRODUCTS BASED ON FEE (Ujra)
  2. 2. TOP 15 INSTITUTIONS BY SHARIA COMPLIANT ASSETS
  3. 3. TOP 25 ISLAMIC INVESTMENT BANKS – NOV 2007
  4. 4. TOP 25 ISLAMIC INSURANCE COMPANIES – NOV 2007
  5. 5. LATEST ENTRANTS – ISLAMIC FINANCIAL SINCE 2006
  6. 6. TOP 25 ISLAMIC INSTITUTIONS BY ROA – NOV 2007
  7. 7. TOP 25 ISLAMIC INSTITUTIONS BY PROFITS – NOV 2007
  8. 8. MAP ISLAMIC ASSETS
  9. 9. MAP: MUSLIM POPULATION
  10. 10. Types of Ujra <ul><li>Administration Fee </li></ul><ul><li>Kafalah </li></ul><ul><li>Wakalah </li></ul><ul><li>Ar-Rahnu </li></ul><ul><li>Others </li></ul>
  11. 11. Adminstration Charges <ul><li>It is not permissible to charge a fee for granting a loan </li></ul><ul><li>It is not permissible to charge a fee for deferring an instalment </li></ul><ul><li>Therefore to charge a lump sum of monies for processing a loan is not permissible, but the actual administration costs incurred in processing a loan is justified in terms of Shariah. </li></ul>
  12. 12. Adminstration Charges <ul><li>The bank is allowed to collect an administration fee for the execution, accounting and recording of a transaction on condition that the administration fee does not exceed the actual cost incurred to the bank. </li></ul>
  13. 13. Adminstration Charges <ul><li>The most appropriate method of calculating the service charges is to calculate the actual administrative expense incurred for processing every separate transaction and to levy the actual administrative expense on every individual client accordingly. </li></ul><ul><li>But if the actual expense cannot be identified separately for every client then it is permissible to levy an admin fee for the administration expenses incurred for processing and recouping the debt. The condition applicable to this form of service fee is based on the market related fee charged for providing this form of service. </li></ul><ul><li>A bank can also charge a percentage of the amount as a service fee. The percentage amount must be very minimal to prevent the bank from obtaining undue benefit from the client. The condition to this form of service fee is that that the fee must be market related, and the fee must not be disguised as a premium on the transaction. </li></ul>
  14. 14. KAFAALAH (SURETYSHIP)
  15. 15. <ul><li>  Literal Definition </li></ul><ul><li>It means to join. Allah Ta'ala has 99 qualities. One is al-Kafeel as he joins (assists) in the affairs of every creation. Shar'ee Definition 'To attach a responsibility to another in a claim.' (Hidaaya) </li></ul>DEFINITION
  16. 16. <ul><li>Qur'aan &quot;They said, 'We have lost the (golden) bowl of the king and for him who produces it is (the reward of) a camel load; and I will be responsible to it.' (Yusuf 72) The officers have taken the responsibility (Kafeel) of the lost item. </li></ul><ul><li>b) Hadith Hadhrat Abi Umamah (Radhiallaahu Anhu) narrates that Rasulullah (Sallallaahu Alayhi Wasallam) said, 'Aariya (loaned item) should be fulfilled; Debt should be fulfilled; Minha (loaned goat or sheep) be returned and the Za'eem (Kafeel) is responsible.' (Nasbur Raaya) Rasulullah (Sallallaahu Alayhi Wasallam,) said, 'The one who looks after the Yateem (orphans), I and him will be (close) like this in Jannah. Rasulullah (Sallallaahu Alayhi Wasallam,) indicated with his two fingers (forefinger and middle finger).' (Tirmidhi) </li></ul>SOURCES OF SHARIAH
  17. 17. <ul><li>Makfool Anhu (the person who owes the debt - Debtor). Makfool Lahu (the person claimihg the debt - Creditor) Kafeel (the person who undertook the responsibility to discharge the debt - Guarantor) Makfool Bihi (the undertaken responsibility, e.g. debt, etc.) For example, Zayd requires a loan of R10,000 from Umar and Bakr stands guarantee for Zayd to Umar. Zayd is the Makfool Anhu umar is the Makfool Lahu. Bakr is the Kafeel and the amount of R10,000 is the Makfool Bihi. </li></ul>ROLE PLAYERS
  18. 18. <ul><li>  </li></ul><ul><li>'Proposal from the Kafeel (gurantor) and acceptance from the Taalib (creditor).' (Badaai'e) The proposal must be in clear words, for example, one states, 1 assume the responsibility of a Kafeel' or It is upon me, etc. </li></ul>PROCEDURE
  19. 19. <ul><li>In Kafaalat, the common conditions for the Makfool Anhu, Makfool Lahu and Kafeel are to be free, sane and adult. That implies that the Makfool Anhu and / or Kafeel cannot be a slave. Either one of the two cannot be insane or immature (under age in Shari'ah). Besides the common condition, the Makfool Anhu, Makfool lahu have an additional condition of being known. </li></ul>CONDITIONS
  20. 20. <ul><li>There is flexibility in Kafaalat (and ambiguity in it will be tolerated). (Hidaaya) Based on that principle, the Fuqahaa have ruled, '(Kafaalat) in Kafaalat bil Maal is permissible whether the Makfool Bihi is known to him or unknown.' (Hidaaya) 1) The Makfool Lahu has the right to claim the debt from both parties Aseel and Kafeel, or any one he choose to. 2) The Kafeel may place a condition in assuming the responsibility, for example, he says, 'Whatever you purchase from a particular person, it is upon me. 3) The Kafeel says that if the Asil does not pay, then he will pay. In this case, the Makful lahu or creditor must first claim from the Asil. If he does not pay, then he can ask the Kafeel. </li></ul>GENERAL PRINCIPLES
  21. 21. <ul><li>If the Makfool Lahu relieves the Makfool Anhu, the Kafeel will be relieved, not vice versa. If the Kafeel or the Asil dies, then the responsibility of Kafaalat terminates </li></ul>TERMINATION
  22. 22. WAKAALA CONTRACT OF AGENCY
  23. 23. <ul><li>Literal Definition It means to take care of, to look after. Allah Ta'ala has 99 qualities. One is al-Wakeel as He takes care of every affair of every creature till death. </li></ul><ul><li>Shar'ee Definition 'To appoint another person in one's position in a permissible and known transaction.' (Raddul Mukhtar vol.5 pg.510; HM Sa 'eed) The two key points in the definition are: 1) 'To appoint somebody (to take charge of) in one's place 2) In a permissible and known transaction </li></ul>DEFINITION
  24. 24. <ul><li>a) QUR'AAN &quot;So send one of you with this silver coin of yours to the town, and let him find out which is the good lawful food, and bring some of that to you.' (Kahf 19) The appointment to purchase food was Wakaalah. b) HADITH Hadhrat Urwah ibn Abil Ja'd narrates that Rasulullah (Sallallaahu Alayhi Wasallam} gave him one Dinaar to purchase a sheep. He purchased two sheep. He retained one sheep and sold the other for one Dinaar. He, in turn, gave Rasulullah (Sallallaahu Alayhi Wasallam} one sheep (as required) as well as the one Dinaar. Rasulullah (Sallallaahu Alayhi Wasallam} made Du'aa of Barakaat for him. Urwah was very skilful in buying and selling. If he would purchase sand (insignificant), he would make profit from that as well. (Mishkaat pg.254; Qadeemi, with reference of Bukhari) </li></ul>SOURCES OF SHARIAH
  25. 25. <ul><li>Muwakkal (Appointer) - original person who delegates the responsibility. Wakeel (Agent) - person upon whom the responsibility has been delegated and accepts it. Muwakkal bihi - delegated responsibility. For example, Zayd wants to purchase a watch but he does not know how to recognise a good watch. He requests Umar, who has experience in watches, to purchase a good watch on his behalf for R250. Umar agrees to purchase the watch for Zayd. So, Zayd is the Muwakkil and Umar is the Wakeel and the responsibility to buy the watch is Muwakkil bihi. </li></ul>ROLE PLAYERS
  26. 26. <ul><li>Procedure of Contract Proposal and acceptance - verbal acceptance is not necessary but the Wakaalat will be rejected if rejected. (Shaami) </li></ul>PROCEDURE
  27. 27. <ul><li>In Wakaalat, the only condition of qualification is to be sane. That means an insane person cannot be a Muakkil or Wakeel. </li></ul><ul><li>The secondary condition is that the Wakeel must do the work according to the instructions of the Muwakkil. If he does anything against the instructions of the Muwakkil, then he will be responsible for it himself. </li></ul>CONDITIONS
  28. 28. <ul><li>Whosoever appoints any person to purchase anything, it is necessary to specify the item, its quality and price. But if the appointment is general (then it is not necessary), for example, a person says, 'Buy for me whatever you think.' (Qudoori) </li></ul>RULES OF AGENCY
  29. 29. <ul><li>THE PRINCIPAL RELIEVES THE AGENT FROM THE DUTY </li></ul><ul><li>DEATH </li></ul><ul><li>CONCLUSION OF DUTIES </li></ul>TERMINATION

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