Islamic Business Mode

7/28/2019 Islamic Business Mode

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ISLAMIC BANKING MODE

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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


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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


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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


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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.

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