Interest Free Banking

Interest Free Banking (5)

Monday, 18 September 2017 11:34

Customers' Account

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  • Wadiah Saving Account: - It is an agreement between the Customer and CBO to keep their deposit in the Bank’s custody. It allows easy access for withdrawals whenever needed.
  • Labbaik Saving Account: - is a safe keeping account to be deposited regularly for Hajj and Umrah. The purpose of traveling to Meca Medina, the deposited amount to be available on demand.
  • Wadiah Demand Deposit/Current Account: - is an account which is regarded as trusts or safe keeping and offers the depositors’ safety of their money against the bank’s guarantee to return their funds on demand and is a non-interest bearing account.
  • Mudharabah Unrestricted Investment Account: - is a fund that will be placed in the Bank general pool of Shariah compliant banking activities. In return, the account holder will be entitled to an agreed percentage share of investment income or proportionally bears the loss of capital.
  • Mudharabah Restricted Investment Account: - is a fund that will be specifically utilized to a particular project of the account holder choice. In return, the account holder will be entitled to an agreed percentage share of the investments income or proportionally bears the loss of capital.
  • Wadiah special Accounts: - is a safekeeping account operated by cheque.

Monday, 18 September 2017 11:33

Financing

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  • Murabaha Financing: - A contract of promise to sell and to buy commodity, machinery, vehicle etc on agreed profit added to the cost (mark-up).
  • Ijaraha Financing: - is a form of financing applicable to financing and operating leases of properties.
  • Salam: - is a sale whereby the seller undertakes to supply some specific goods to the buyer at a future date in exchange of an advanced price fully paid at spot. Salam is used to finance agricultural like goods.
  • Istisna: - Sales transaction concluded before the commodity came into existence. CBO shall act as a manufacturer or constructor to undertake house construction, plant, power station, roads projects etc as per specification.

 

 

 

 

Monday, 18 September 2017 11:33

Investment

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  • Mudharaba Investment: - A partnership between CBO and eligible customer (entrepreneur), profit and loss shared as per the agreed profit sharing ratio.
  • Musharaka Investment: - It is a joint ownership of property or equipment or commercial enterprise. Partner shall share profit as per the agreed ratio while losses are shared in proportion to capital contribution of partner.
  • Diminishing Musharakah: - is a form of co-ownership in which two or more persons (i.e., the bank and the client) share the ownership of a tangible asset in an agreed proportion and one of the co-owners/client undertakes to buy in periodic installments the proportionate share of the other co-owner/bank until the title to such tangible asset is completely transferred to the purchasing co-owner/client.

 

 

 

Monday, 18 September 2017 11:32

Kafala

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KAFALA (LETTER OF GUARANTEE FACILITY)

Kafala is a written promise by the bank to compensate (pay sum of money) to the beneficiary (local or foreign) in the event that the obligor fails to honour his/her/its obligations in accordance with the terms and conditions of the guarantee/agreement/contract. Types of Kafala/Letters of Guarantee offered by CBO:

  • Bid Bond
  • Performance Bond
  • Advance Payment Guarantee
  • Retention Payment Guarantee
  • Letters of Indemnity for Missing Documents
  • Customs Duty Guarantee

Monday, 18 September 2017 11:32

Trade Service

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  • Wakalah Letter of Credit : - written undertaking by a bank given to the seller at a request and/ or the instructions of the buyer under wakala contract, to make payment or to accept and pay bills of exchange (Draft) drawn by the seller up to a stated sum of money within a prescribed time limit and against stipulated documents provided that the terms and conditions of the credit are complied with.
  • Murabaha Import Letter of Credit : - is a contract whereby CBO buys goods for the customer (applicant) and the customer agrees to later buy the goods from the CBO through a resale at a mark-up price.
  • Musharaka Letter of Credit: - is a contract whereby the value of the letter of credit issued by CBO and the profits of the partnership transaction are shared between CBO and the customer based on an agreed ratio.
  • Wakala Export Letter of Credit: - is a condition where the exporter appoints CBO as his/her agent to collect receivables on his/her behalf.
  • Wakala Documentary Collection (Wakala Cash Against Document - CAD): - It is type of transaction by which importer and exporter conclude a contract, accordingly the exporter deliver documents to the importer through his/her bank to buyer bank through which, the title for purchased goods is released to the buyer after the total sale price is collected in full.
  • Wakala Advance Payment : - a transaction in which an importer makes payment for items to be imported prior to the shipment of goods. The importer must trust that the supplier will ship the product on time and that the goods will be as their agreement because it creates a lot of risk factors for the importers.
  • Wakala Consignment Basis Payment (for Export) : - It is a transaction method in which the local exporter (a consignor) exports the goods to the foreign importer (a trustee) who pays (remit) the exporter only as and when the goods are sold.

 

 

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