Al huda islamic modesagricultural financing_20-10-2008-lahore
Islamic working capital finance presentation-mywork
1. Risk, Ownership and Accounting of Islamic Working Capital Products by
Arsalan Aqeeq
2013
Product/Contract Phase I Phase II Phase III
Murabaha [Deferred
Payment Sale]
Request to Purchase/ Agency
agreement/ Payment to
supplier
Delivery of
Goods/Declaration of
Murabaha
Offer Acceptance and Deferred
Payment Sale.
Purpose To finance the buy side/ payables primarily for raw material procurement of a business by Selling on
deferred payment basis.
Asset Ownership Bank Bank Borrower
Risk Exposures Ownership Risk,Market Risk,
Price Risk, Supplier Risk
Shariah Compliance Risk,
Quality/Quanity Risk
Counterparty Risk
Non Payment/Delayed Payment is
a LOSS to bank. Compensation
Based Credit Restructuring is not
allowed
Accounting
Treatment
Advance Against Murabaha Murabaha Finance Murabaha Finance
Product/Contract Phase I Phase II Phase III
Salam
[Spot Payment –
Deferred Delivery
Sale]
Contract to manufacture and
Sale.
Payment to Borrower
Delivery of Goods/Agency
Agreement to Sell the
goods.
Salam agreement settled through
proceeds of Sale of goods.
Purpose To finance the sell side/receivables/overheads of a company by buying on spot payment and
deferred delivery.
Asset Ownership Borrower Bank Bank
Risk Exposures Catastrophy/ Calamities,
Non-performance Risk.
Counterparty Risk
Ownership and Inventory
Holding Risks.
Shariah Compliance Risk
Quality/Quanity Risk.
Market Risk.
Buyer Risk
Non Payment/Delayed Payment.
Accounting
Treatment
Advance Against Salam Goods Salam Finance Salam Finance
Product/Contract Phase I Phase II Phase III
Istisna
[Purchase Order
Performance]
Payment to Borrower Delivery of Goods/Agency
Agreement to Sell the
goods.
Istisna agreement settled through
proceeds of Sale of goods.
Purpose To finance contract/order performance of a business buy making spot/bullet/tranches payment for
deferred delivery .
Asset Ownership Borrower Bank Bank
Risk Exposures Non-performance Risk.
Counterparty Risk
Ownership and Inventory
Holding Risks.
Shariah Compliance Risk
Quality/Quanity Risk.
Market Risk.
Buyer Risk/Contract Performance
Risk
Non Payment/Delayed Payment.
Accounting Treatment Advance Against Istisna Goods Istisna Finance Istisna Finance
Receivables
Payables
Overheads
Raw Material Finished Good
Murabaha [Days
Inventory/Days Payables]
Istisna, Salam [Days Manufacturing
Overheads/Days Receivables]
![Risk, Ownership and Accounting of Islamic Working Capital Products by
Arsalan Aqeeq
2013
Product/Contract Phase I Phase II Phase III
Murabaha [Deferred
Payment Sale]
Request to Purchase/ Agency
agreement/ Payment to
supplier
Delivery of
Goods/Declaration of
Murabaha
Offer Acceptance and Deferred
Payment Sale.
Purpose To finance the buy side/ payables primarily for raw material procurement of a business by Selling on
deferred payment basis.
Asset Ownership Bank Bank Borrower
Risk Exposures Ownership Risk,Market Risk,
Price Risk, Supplier Risk
Shariah Compliance Risk,
Quality/Quanity Risk
Counterparty Risk
Non Payment/Delayed Payment is
a LOSS to bank. Compensation
Based Credit Restructuring is not
allowed
Accounting
Treatment
Advance Against Murabaha Murabaha Finance Murabaha Finance
Product/Contract Phase I Phase II Phase III
Salam
[Spot Payment –
Deferred Delivery
Sale]
Contract to manufacture and
Sale.
Payment to Borrower
Delivery of Goods/Agency
Agreement to Sell the
goods.
Salam agreement settled through
proceeds of Sale of goods.
Purpose To finance the sell side/receivables/overheads of a company by buying on spot payment and
deferred delivery.
Asset Ownership Borrower Bank Bank
Risk Exposures Catastrophy/ Calamities,
Non-performance Risk.
Counterparty Risk
Ownership and Inventory
Holding Risks.
Shariah Compliance Risk
Quality/Quanity Risk.
Market Risk.
Buyer Risk
Non Payment/Delayed Payment.
Accounting
Treatment
Advance Against Salam Goods Salam Finance Salam Finance
Product/Contract Phase I Phase II Phase III
Istisna
[Purchase Order
Performance]
Payment to Borrower Delivery of Goods/Agency
Agreement to Sell the
goods.
Istisna agreement settled through
proceeds of Sale of goods.
Purpose To finance contract/order performance of a business buy making spot/bullet/tranches payment for
deferred delivery .
Asset Ownership Borrower Bank Bank
Risk Exposures Non-performance Risk.
Counterparty Risk
Ownership and Inventory
Holding Risks.
Shariah Compliance Risk
Quality/Quanity Risk.
Market Risk.
Buyer Risk/Contract Performance
Risk
Non Payment/Delayed Payment.
Accounting Treatment Advance Against Istisna Goods Istisna Finance Istisna Finance
Receivables
Payables
Overheads
Raw Material Finished Good
Murabaha [Days
Inventory/Days Payables]
Istisna, Salam [Days Manufacturing
Overheads/Days Receivables]](https://image.slidesharecdn.com/islamicworkingcapitalfinance-presentation-mywork-130504153808-phpapp02/85/Islamic-working-capital-finance-presentation-mywork-1-320.jpg)
