Islamic Finance Modes

Murabaha:

The bank offers its customers finance by Murabaha which allows the customer to acquire the goods, equipment, etc. This takes place by the customer presenting a request to purchase any goods indicating the characteristics, amount and price.The bank then purchases the goods and sells it to the customer at cost plus an agreed upon profit margin.

Istisnaa

Istisnaa is a method in which the bank signs a contract with the customer (called Mustasni') to perform a certain project and bear all costs of material and wages to deliver the completed project to the customer for a specific price and on a set date.

As the bank does not own a contracting company, the bank signs a contract(s) with a contractor(s) and this is called a Parallel Istisnaa Contract.

Mudarabah

Is a partnership in a company whereby the money owner (Rab Almal) comes in with the money and the "Mudarib" with the effort. The profit is then shared between them according to an agreed percentage, whereas the loss is on the side of the money owner alone and the Mudarib bears no loss unless it is proven that it was due to negligence.

Musharakah

Musharakah investment is believed to be the main differentiator for Islamic banks in comparison with other conventional banks.

This type of investment depends on the bank participating with a share of the required capital to build a joint project or purchase goods and sell them where the bank is a part of the possible results (profit or loss) in line with pre-agreed upon shariah compliant rules.

Ijaraa (Muntahiya bil Tamaluk)

The bank purchases the property or a part thereof and leases it for a specific period after which the ownership of the property is transferred to the customer, be it real-estate, machinery or various equipment. This takes place on the basis of a feasibility study that ensures profitability and conformity with Islamic Shariah. 

Salam

The bank offers Salam investment in various types of credits . Salam is the sale of a described good , where the price of the good is paid up front (called Salam Capital) and the actual delivery of the described good is postponed (such as sugar and cement, for example). A parallel Salama is a result of the first contract where the bank enters into a contract with a third party to be able to raise funds for Salam financing and sale of expected commodities from Salam financing.