Post on 03-Apr-2018
7/28/2019 Islamic Business Mode
1/4
ISLAMIC BANKING MODE
1 | P a g e
ASSIGNMENT OF ISLAMIC BANKING
SUBMITTED TO:
MR.MEHMOOD SHAH
SUBMITTED BY:
HARIS ZAFAR (12051032020)
JUMAIRA TAHIR (12051032059)
AIMEN KHAN (12051032027)
LUBNA RASHID (094632110)
DATE:
23rdmay
2013
7/28/2019 Islamic Business Mode
2/4
ISLAMIC BANKING MODE
2 | P a g e
ISLAMIC BUSINESS MODE
AGENCY/FEE BASED MODE:
There are three types of agency/fee based mode in the following:
Wakalah Kafalah Ijarah (ashkhas)
WAKALAH:
In Islamic financing, a contract in which one person appoints another person to act as an agent on
their behalf in a transaction. An agent is someone who establishes contractual and commercial
relations between a principal and a third party, usually against a fixed fee. An action performed
by an agent on behalf of the principal will be deemed as action by the principal. Agency is
necessitated by the fact that an agent has to perform certain tasks which the principal has neither
the time, knowledge nor the expertise to perform himself. The need for agency arises where a
person has no ability or expertise to perform a certain action due, for example, to distance or
size. The main features of agency are service, representation and the authority to act for the
principal. An agent may obtain a certain wage for services rendered within the incentive
structure of the principal.
CASH INVESTMENT
Manages as agent for investor
SHARE OF PROFIT SHARE OF PROFIT
INVESTOR BANK
(Wakil)
COMMERICAL
VENTURE
7/28/2019 Islamic Business Mode
3/4
ISLAMIC BANKING MODE
3 | P a g e
For example, a letter of credit can be based on wakalah contract whereby an importer authorizes
the bank to issue it on his behalf to the bank of an exporter. In this context, the issuing bank will
act as an agent, facilitating the issuance of the letter of credit. In return, the bank receives a fee
(ujrah) from the importer (the principal) for this service.
KAFALAH:
A contract of guarantee which is used to provide assurance as to performance or liabilities.
In other words, kafalah is instrumental to terminate any adverse change that may lead to
uncertain or unpredictable outcomes with respect to the object or underlying of a transaction.
Guarantees are typically used to secure the import of goods, in which case a bank issues a
guarantee when the exporter discharges the liability for the goods on behalf of a third party. Each
party, whether an exporter or importer, can be assured that the transaction will end up in
receiving his dues (the price, for an exporter, and the goods for an importer) as agreed upon. The
importer may be asked by his banker to post some form of collateral as surety, and typically pay
a fee (ujrah) for this service. Kafalah, per se, is not an actual transaction, but is rather used to
facilitate transactions such as international trade.
Creditor can
Guarantor agrees to be retrieve his
Responsible debt in case
Principle debtors of default by
Liability principle
Debtor
KAFIL
(GURANTOR)
MAKFUL BIH (DEBTOR/THINGS)
PRINCIPAL
DEBTOR
CREDITOR
7/28/2019 Islamic Business Mode
4/4
ISLAMIC BANKING MODE
4 | P a g e
IJARAH-TUL-ASHKHAS:
It is kind of Ijarah in which the personal services of a person are hired. For example if any
organization hires a person on contractual basis or if the professor is hired in university for a
specific period of time and he is paid salary etc.
Ijarah al-Ashkhas literally means employing somebody, or hiring the services of another person.
In simple cases the one that hires is called a mustajir while the person being hired is called an
ajir. The money involved or the payment for the services is called ujrah. This type of ijarah
is basically applied to different forms of employment. A basic example is when a particular
person hires a messenger to deliver documents or goods to another person. In this example, the
messenger or ajir is expecting to be paid for his delivery services rendered to the one who
hired him or the mustajir.