Application of Islamic Financial Products

Support to Socio Economic Encouraging Documented Economy

Maximizing the Financial Risk Developing International Trade Relations

All Characters are for Example due to Commercial Reasons

Islamic Finance International Conference IFC 2012 Organized by iCompetences 27TH & 28TH DECEMBER 2012

Marrakech- Morocco

Yousuf I Hasan IQRA University- Pakistan

Input & Output method of funds under Equity Participation

Sukuk For

Transaction under

Trade Financing For

Pakistan Origin Rice Procurement, Processing

& Export

 

Financing By using four methods

Sukuk into Modaraba Modaraba into Musharka

Musharka into

Morabaha & Ijarah In Single Transaction

Sukuk Issued By Muslim Bank Ltd Under Modaraba Base

Purchased by Four Banks FIRST STAGE CAPITAL BANK 1 BANK 2 BANK 3 BANK 4

AMOUNT US $ US$..........

280,000,000 45,000,000

65,000,000

70,000,000

100,000,000

Sukuk Price $

10,000.00 4500 6500 7000 10000

No of Sukuk &

28,000

Equity Ratio 16.07 23.21 25.00 35.71

SECOND STAGE

MODARABA

Modarib Muslim Bank Ltd &

Rab-al-Maal 4 Islamic Banks Sukuk Holders

Modaraba Terms

Capital 280,000,000

Profit Sharing Ratio on NP 20 - 80 Net Proft

Management Fee 2% On Gross Profit

THIRD STAGE

Muslim Bank Ltd Musharka with

Central Bank Profit Ratio 5: 95

MUSHARKA Central Bank Participated with US $ 5 mil

Muslim Bank Ltd

280,000,000 Central Bank Equity 5,000,000

Musharka Capital 285,000,000

IJARAH Warehousing & Processing Facility obtain by Central

Bank under Ijarah from Private Sector

Monthly Rent

125,000.0 Per Year 1,500,000.00

Space in Square Meters

15,000.00 Including

FACILITIES & SERVICES 1..Stock Room, 2..Rice Processing Unit,

Rates in US $ Per Square Meter 8.33

3..Packing Facility, 4..Office Area, 5..Rest House

Yearly Contract 12 Month

1,500,000

6..All RCC Construction 7..Secured from all Risk

Per Metric Tons **** $ 1.500

8..Power generation unit 1200 KVA, 9..Water Tank 100,000 gallons 10.Storage Capacity 1.7 Mil Tons

FORTH STAGE

Central Bank >>>>>>Rab-al-Maal Ratio 90% Rice Mill Corp >>>>>Morahib Ratio 10% Morahib Selling Expense 6% as Cost of Product

% MORABAHA Ratio 10 : 90 Morabaha

Central Bank Rab-al-Maal

Rice Mill Corp Morahib Capital

Capital Participation Financing 285,000,000

Arboon 10% 28,500,000 313,500,000

Fifth Stage Central Bank appointed 4 Local Bank to act as MUCCUDUM

These Commercial Banks authorize to pay on behalf of Rice Mill Corporation against Procurement of Rice for the local growers.

Direct payment to disregarding old and orthodox method that p0roved exploitation to poor growers since last 100 years by Land Lords, Middlemen and |Grain Market Players

Growers were given choice to take cash against delivery of stock or open bank account to avail the security of their funds Payment was made at the bank counter of the any four banks

Morahib Equity 10% added with Rab-al-Maal for Procurement of Stock under spot buying

Morabaha Capital

313,500,000 Local Banks Appointed as Muccudum for

Pledge, Payments & Proceeds Total Quantity of Rice

Procured in 1,000,000 Metric Tons

Local Bank 1 $

Local Bank 2 $

Local Bank 3 $

Local Bank 4 $

Amount Disburse to each Agent Bank to pay the

purchase price 78,375,000

78,375,000

78,375,000

78,375,000

Purchase price PMT Rates PMT

242.00

Rental Storage US $ 1.5 Million

1.50 Rice Procurement & Bank Handling Fee

Value added

23.00 Metric Tons

250,000 Metric Tons 250,000

Metric Tons 250,000

Metric Tons 250,000

Transportation

18.00 Bank Fee

5% Bank Fee

5% Bank Fee

5% Bank Fee

5%

Insurance

2.00 US $

1,000,000. US $

1,000,000 US $

1,000,000 US $

1,000,000 Port Charge 3.00

Brokerage

3.50

Bank Commission

4.00 Operational Expenses

8.00

Selling Expenses

6.00

Cost Price PMT

311.00

Total Purchase Price

311,000,00

0

Stock Exported by Rice Mill Corporation Bank Muslim approach to Sukuk Partner who were assigned to market the orders in their respect area of operation.

Sukuk Partner mobilize the import of Rice and place the order to Rice Milling Corp. under Letter of Credit and earn Commission and Handling Fee on Import.

Export Proceeds arrive in Central Bank and all documentation handle by Commercial Bank the Agents

Total Purchase price 311,000,000

Export Expenses in total Stock purchase and Export

2,500,000

Shipping Expenses for 1 Million tons and Warehouse Rent

Export Value 313,500,000

PMT Stock Value 313.50

Sales Price PMT US $ 390.00

Total Sale Report 390,000,000

Gross Profit 76,500,000 Net Profit Less Arboon 28,500,000 48,000,000

Profit Share Central Bank >>>>>>Rab-al-Maal Ratio 90% Rice Mill Corp >>>>>Morahib Ratio 10%

MORABAHA Ratio 10 : 90 Morabaha Central Bank Rice Mill Corp Capital

Capital Participation 285,000,000 28,500,000 313,500,000

Profit Earned 43,200,000 4,800,000 48,000,000

Profit on Capital %

13.7799 1.5311 15.3110

Morahib Sales Fee 6% 6,000,000 Morahib Profit Income 4,800,000 Morahib Total Income 10,800,002

Return on Investment 37.895

Profit Muslim Bank Ltd Musharka with Central Bank Profit Ratio 5: 95

MUSHARKA

Capital in US

$ Net Central Bank Muslim Bank

Muslim Bank Ltd

280,000,000 Profit Profit Profit

Central Bank

5,000,000 43,200,000 10.00 90.00

Profit on Capital

285,000,000

4,320,000

38,880,000

Profit Sukuk in Modaraba Financing with

Muslim Bank Ltd MODARABA Modarib Muslim Bank Ltd & Modaraba Terms

Capital 280,000,000

Profit Sharing Ratio on NP 20 - 80 Management Fee 2%

On Gross Profit

Muslim Bank Ltd GROSS MANAGEMENT NET MODARIB Rab-al-Maal

PROFIT FEE PROFIT Profit Profit

Profitability

38,880,000 777,600

38,102,400

7,620,480

30,481,920

Sukuk Issuance by 4 Banks FIRST STAGE CAPITAL BANK 1 BANK 2 BANK 3 BANK 4 AMOUNT US $

US$.......... 280,000,000 45,000,000

65,000,000

70,000,000

100,000,000

Sukuk Price

10,000.00 4500 6500 7000 10000

No of Sukuk &

28,000

Equity Ratio 16.07 23.21 25.00 35.71 1st Year Sukuk Profit

US $.......... 30,481,920

4,898,880

7,076,160

7,620,480

10,886,400

Return % Capital

10.886%

Return on investment 10.8864% 1.7496 2.5272 2.7216 3.8880

Per Sukuk

Profit Profit in % Profit

Amount

1088.640 10.88640 30,481,920