Abstract: Twenty two African entrepreneurs with Small and
Medium Enterprises (SMEs) in a single social network centered
around a non-Muslim population in a smaller African country,
selected an Islamic financing structure, a form of Murabaha,
based solely on market rationale. These entrepreneurs had all won
procurement contracts from major purchasers of goods within their
country and faced difficulty arranging traditional bank financing
to support their supply-chain needs. The Murabaha-based structure
satisfied their market-driven demand and provided an attractive
alternative to the traditional bank-offered lending products. The
Murabaha-styled trade-financing structure was not promoted with any
religious implications, but solely as a market solution to the existing
problems associated with bank-related financing. This indicates the
strong market forces that draw SMEs to financing structures that are
traditionally considered within the framework of Islamic finance.
Abstract: Though quite fast on growth, Islamic financing at large, and its diverse instruments, is a controversial matter among scholars. This is evident from the ongoing debates on its Shariah compliance. Arguments, however, are inciting doubts and concerns among clients about its credibility, which is harming this lucrative sector. The work here investigates, particularly, some issues related to the Tawarruq instrument. The work examines the issues of linking Murabaha and Wakala contracts, the reselling of commodities to same traders, and the transfer of ownerships. The work affirms that a multi-agent smart electronic market design would facilitate Shariah compliance. The smart market exploits the rational decision-making capabilities of autonomous proxy agents that enable the clients, traders, brokers, and the bank buy and sell commodities, and manage transactions and cash flow. The smart electronic market design delivers desirable qualities that terminate the need for Wakala contracts and the reselling of commodities to the same traders. It also resolves the ownership transfer issues by allowing stakeholders to trade independently. The bank administers the smart electronic market and assures reliability of trades, transactions and cash flow. A multi-agent simulation is presented to validate the concept and processes. We anticipate that the multi-agent smart electronic market design would deliver Shariah compliance of personal financing to the aspiration of scholars, banks, traders and potential clients.
Abstract: One of prevailing modes of finance in emerging
Islamic banking system is Murabah’a. It means a financial dealing or
transaction in which seller tells cost of the goods to be sold to buyer.
Otherwise, the transaction would become invalid. In this mainstream,
import Murabah’a transaction is divergent in such a way that the cost
is not recognized and identified due to execution of import
transaction in foreign currency i.e. US Dollar and the next transaction
of Murabaha’a with the client is executed in local currency. Since this
transaction is executed in dual currency i.e. bank pays supplier in
foreign currency and executes Murabah’a with its client in local
currency and it is not allowed in according to Islamic Injunctions as
mentioned in hadith narrated by Hazrat Ibn-e-Umar (May Allah be
pleased with them) used to sell his camels with Dirhams and take
dinars instead and vice versa. Upon revealing before the Prophet
(Peace be upon him), he was advised that it must not be contingent in
the agreement and the ready rate would be applied and possession of
one of the consideration is compulsory. The solution in this regard is
that the import Murabah’a transaction should be in single currency
However, other currency can be paid in payment at the time of
payment in a very indispensable situation provided that ready rate
would be applied. Moreover, some of other solutions have also been
given in this regard.
Abstract: Al-Murabahah is an Islamic financing facility used in
asset financing, the profit rate of the contract is determined by
components which are also being used in the conventional banking.
Such are cost of fund, overhead cost, risk premium cost and bank-s
profit margin. At the same time, the profit rate determined by Islamic
banking system also refers to Inter-Bank Offered Rate (LIBOR) in
London as a benchmark. This practice has risen arguments among
Muslim scholars in term of its validity of the contract; whether the
contract maintains the Shariah compliance or not. This paper aims to
explore the view of Shariah towards the above components practiced
by Islamic Banking in determining the profit rate of al-murabahah
asset financing in Malaysia. This is a comparative research which
applied the views of Muslim scholars from all major mazahibs in
Islamic jurisprudence and examined the practices by Islamic banks in
Malaysia for the above components. The study found that the shariah
accepts all the components with conditions. The cost of fund is
accepted as a portion of al-mudarabah-s profit, the overhead cost is
accepted as a cost of product, risk premium cost consist of business
risk and mitigation risk are accepted through the concept of alta-awun
and bank-s profit margin is accepted as a right of bank after
venturing in risky investment.