Strictly Private & Confidential
ISLAMIC BANKING OPERATION
Mohd Nazri Chik
Group Chief Shariah Officer
OUTLINE OF THE PRESENTATION
Page 2
1. Development of Islamic Finance and Banking
2. Fundamentals of Islamic Banking Operation
3. Similarities and Differences Across Jurisdiction
4. Shariah Governance
5. Moving Forward
Shariah Centre of Excellence
Shariah Centre of Excellence Page 3
Compliance to Shariah rules and principles in commercial transactions and wealth management is the reason to have Islamic financial system.
IFSA 2013 defines Shariah compliance as compliance to Shariah rules and principles as interpreted by the apex authority, Shariah Advisory Council of BNM.
SHARIAH IS THE BEDROCK OF ISLAMIC FINANCE
Islam
Aqidah Shariah
IbadahMu’amalah
Ammah
Munakahat Mu’amalat
Political activities
Economic activities
Banking activities
Social activities
Jinayat
Akhlak
Diagram: The position of banking activities within the holisticShariah framework
Shariah Centre of Excellence Page 4
ISLAMIC BANKING IS PART OF THE ECONOMIC SYSTEM
Economy System
Financial System
Banking System
A system of production and exchange
of goods and services as well as
allocation of resources in a society.A system that enables surplus units (lenders) and deficit units (borrowers) to exchange funds).A group or network of institutions that play
the role of financial intermediaries. These institutions operate a payment system, providing loans, taking deposits, and helping with investments.
Likewise conventional finance, IF deals with resource allocation, management, acquisition and investment and built upon unique characteristics which are based on rules and principles of Shariah.
Banking System & Financial Intermediaries
Capital Market
Indirect Funding
Direct Funding
REAL SECTORFINANCIAL SECTORREAL SECTOR
Surplus Units Deficit Units
Households Corporate Government Foreign Investor
Households Corporate Government Foreign Investor
Source: Adopted from Professor Dr Obiyathulla Ismath Bacha (2010)
Shariah Centre of Excellence Page 5
ISLAMIC BANKING IS PART OF THE INTEGRATED ISLAMIC FINANCIAL SYSTEM IN MALAYSIA
Islamic Banking Takaful/ Re-Takaful
Islamic Interbank Money Market
Islamic Asset/ Fund
Management
Islamic Capital Market
Islamic financing
Islamic deposit
Islamic investment account
Takaful/ Re-Takaful products
Takaful investments - linked
Islamic Profit Rate Swap
Islamic Foreign Exchange Swap
Islamic Cross Currency Swap
Shariah CompliantSecurities
Islamic Unit Trust
Islamic REITs
Islamic Stockbroking
Islamic Indexes
Sukuk
Islamic Medium Term Notes
Islamic Commercial Papers
Exchangeable Sukuk
Derivatives Equity Debt
Social net/ Financial Inclusion Zakat Waqf Islamic micro finance
Cooperative Institutions
Shariah Centre of Excellence Page 6
EVOLUTION OF ISLAMIC BANKING IN MALAYSIA
1963 1980 1983 1984 1991 1993 1997 1999 2003 2007 2010s 2016
LembagaTabung Hajiestablished (Pilgrimage Investment and Management Fund Board)
National StreeringCommittee to establish Islamic bank established
Bank Islam began its operation on 1 July 1983
Bank Islam listed on KLSE
Seminar on Ummah Economic Development (1980) proposes establishment of an Islamic bank.
Malaysia passes Islamic Banking Act 1983 to allow establishment of Bank Islam Malaysia
Interest Free Banking Scheme introduced (1993) and later replaced with Islamic Banking Scheme
Takaful Malaysia –first Takaful company established as the subsidiary of Bank Islam
BNM established National ShariahAdvisory Council
Second full fledged Islamic bank, Bank Muamalat started its operation.
Islamic Interbank Money Market established
Liberation of Islamic banking industry –issuance of 3 licenses to foreign banks
Malaysia International Islamic Financial Centre (MIFC) initiative launched
Total assets of Takaful industry amounted to USD240.2 mil, with market penetration of 7.5%
Islamic banking assets reached USD72.5 billion with an average growth rate of 20% annually
New Islamic Financial Services Act (IFSA) passed by the Parliament (2012)
OUTLINE OF THE PRESENTATION
Page 7
1. Development of Islamic Finance and Banking
2. Fundamentals of Islamic Banking Operation
3. Similarities and Differences Across Jurisdiction
4. Shariah Governance
5. Moving Forward
Shariah Centre of Excellence
Shariah Centre of Excellence Page 8
ISLAMIC BANK CONTINUES TO BECOME AN "INTERMEDIARY"
Definition of Bank (Wikipedia) Islamic Bank (IBA 1983)
“A bank is a financial institution and a financial intermediarythat accepts deposits and channels those deposits into lending activities, either directly by loaning or indirectly through capital markets. A bank is the connection between customers that have capital deficits and customers with capital surpluses.”
“banking business whose aims and operations do not involve any element which is not approved by the religion of Islam…”
Banking business; taking deposit financing
which is: based on nominated Shariah contracts
and acceptable arrangements promotes mutual agreement (taradhi) –
disclosure & value based Halal and ethical
Shariah Centre of Excellence Page 9
RIBA IS THE MAIN ISSUE OF CONVENTIONAL BANKING
FUNDING STRUCTURE OF ISLAMIC BANK – POST IFSA 2013
Page 10
Deposits Investment Accounts Shareholders’ Funds
Current Account
Savings Account
Term Deposit
Unrestricted Investment
Account
Restricted Investment
Account
Paid Up Capital
Retained Earnings
Others
Shariah Centre of Excellence
Shariah Centre of Excellence Page 11
PRODUCTS: WHAT MAKES IB DIFFERS FROM CONVENTIONAL?
Elimination of Prohibitions – Riba,
Ghahar, Maysir
Principle/ contract (‘aqd) based –
Compliance to tenets
Ethical – Disclosure, Mutual Consent
Dealing on the “financed asset” first. Tawarruq/ Inah later.
Financing Halal Activities
Pricing is business call
Ethical ways in dealing with defaulters
Assisting in developing social welfare sector –
zakat, waqf, sadaqah
Consider other Shariah requirements – Islamic way of life,
zakat
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FUNDAMENTALS OF ISLAMIC BANKING INNOVATION
Shariah Centre of Excellence
Source: Bank Negara Malaysia
ECONOMIC BENEFIT
Product Development
HOUSE FINANCING
Murabahah for the Purchase Orderer
Ijarah or IMBT
Diminishing Musharakah
Istisna’ or Parallel Istisna’
Principle based
Various contracts can be utilized in devising products
To consider regulatory, legal, operation, tax, accounting factors in deciding the best structure.
Once used, the very rules and principles of the applied Shariahcontracts must be observed.
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PRODUCT INNOVATION IN ISLAMIC BANKING
Shariah Centre of Excellence
1970’s 1980’s 1990’s 2000’s 2005+
CommercialBanking
CommercialBanking
Retail – Deposit, House and Vehicle Finance
Project Finance and Syndication
Trade Finance
CommercialBanking
Retail – Deposit, House and Vehicle Finance
Project Finance and Syndication
Trade Finance
Equity
Leasing (Ijarah)
CommercialBanking
Retail – Deposit, House and Vehicle Finance
Project Finance and Syndication
Trade Finance
Equity
Leasing (Ijarah)
Sukuk (Bonds)
Credit Card
Structured Alternative Assets
CommercialBanking
Retail – Deposit, House and Vehicle Finance
Project Finance and Syndication
Trade Finance
Equity
Leasing (Ijarah)
Sukuk (Bonds)
Credit Card
Structured Alternative Assets
Hedging & Liquidity Mgmt
Simple structure to cater business and retail needs
Customer-driven structure/ products
Cost eaffective structure to compete in the competitive market
Page 14
EXAMPLE: VEHICLE FINANCING MURABAHAH
Shariah Centre of Excellence
Biggest portfolio
of Islamic bank
around the globe
and simplest
structure of
Islamic financing.
Cost plus.
Page 15
TAWARRUQ: ASSET FINANCING? CASH FINANCING?
Shariah Centre of Excellence
Tawarruq based
Applied widely,
despite of
difference
structure
especially on the
selling of asset
back to the
market.
Cash financing –
Like Bai’ Inah,
Tawarruq is the
basic structure for
business financing
and overdraft/
covered drawing.
1. Customer identifies asset for rental
2. Customer requests the bank to acquire
the identified asset to be leased.
3. Bank purchases the asset
and pays in cash to the
vendor.
4. Bank rents the asset to the customer
at an agreed rental rate and tenure .
5. On maturity:
(i)Ijarah – Bank may extend the lease period or asset can be returned to the Bank or purchased by
customer.
(ii)IMBT – the ownership of the asset should be transfered to the customer either by sale or gift.
IJARAH (LEASE)
• Servicing Agreement to manage major maintenance inclusive takaful . Amount will be
set off during final installment.
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CUSTOMER
SUPPLIER
Shariah Centre of Excellence
FACILITATING TRADE REQUIREMENTS
17
WHAT IS TRADE?
Involves two parties; the buyer and the seller. The buyer agrees to pay in return for a specific
asset. The seller agrees to provide the asset in
consideration of money that he will receive.
ROLE OF ISLAMIC BANKS IN TRADE
Effect payment Custodian of payment Intermediary for buyer and seller Implement exchange control regulation Finance importers Finance exporters
Shariah Centre of Excellence
TRADE FINANCE – TRADE SETTLEMENT AND LEVEL OF RISK
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Cash in Advance/ Cash
Before Shipment
Letter of Credit
(Confirmed/ Advised)
On CollectionBasis
Open Account Consignment
Exporter’s Level of Risk
Importer’s Level of Risk
Cash in Advance: Payment is effected before shipment.
Letter of Credit: Undertaking by a bank to effect payment on behalf of the buyer if terms of the LC is complied with
On Collection Basis: Exporter/ Seller uses a bank to collect payment.
Open Account: Both parties are involved in buying and selling of each other’s products. Each sale will be recorded in a ledger and the amount will be contra off at the end of the month.
Consignment Basis: Buyer to receive goods before payment and remit proceeds upon sale.
Shariah Centre of Excellence
TRADE FINANCE – PRODUCT OFFERINGS
19Shariah Division
IMPORT/PURCHASE FINANCING EXPORT/ SALE FINANCING
Documentary Credit
Letter of Credit (Wakalah)
Letter of Credit (Murabahah)
Letter of Credit (Musharakah)
Shipping Guarantee
Murabahah Working Capital
Islamic Bankers Acceptance
Foreign Inwards Bills for Collection (FIBC-
i)
Domestic Inwards Bills for Collection
(DIBC-i)
Inward Letter of Credit
Islamic Factoring (Bay’ al-Dayn)
Accepted Bills-i (Bay’ al-Dayn)
Islamic Bankers Acceptance
Islamic Credit Export Financing
Islamic Export Credit Re-financing (Pre-
Shipment)
Islamic Export Credit Re-financing (Post-
Shipment)
Accepted Bills-i
Foreign Outward Bills for Collection-I
Domestic Outward Bills for Collection-i
Debt Trading Working Capital Financing
Istisna’ Sale Financing
Islamic Factoring (Bay’ al-Dayn Bil-
Sila’)
MURABAHAH: TWCF PURCHASE
1. Customer purchases the goods
from the supplier as bank’s
purchasing agent (pursuant to
appointment of agent in the
Trade Financing Agreement).
2. Supplier then supply the goods
the customer.
3. Bank settles the purchases price
to the supplier on cash basis.
4. Bank sells the goods to the
customer on deferred payment
basis (murabahah).
5. Customer pays the bank’s
selling price on maturity.
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5
SCR Masterclass for Board of Directors 20
CUSTOMER (BUYER)
SUPPLIERIssue: Financing of perishable goods and services –
SSC has approved application of Tawarruq.
BAY’ AL-DAYN (SALE OF DEBT)
SCR Masterclass for Board of Directors 21
1 April 2012 (Wa’ad -
Promise)1 Jun 2012
(Sarf)
Customer exports goods to USA
worth USD1,000,000
Exchange rate USD1 = RM3
Trade term – payment in 60 days
Bank promises that should the
customer bring USD1,000,000 on 1
Jun 2012, Bank will purchase at
RM3,000,000
If USD1 > RM3 (e.g. RM3.50),
Customer sells USD1,000,000 into
the market and receives
RM3,500,000.
If USD1 < RM3 (e.g. RM2.50),
Customer will ask the Bank to
honour its promise and purchase at
RM3,000,000
BAY’ AL-SARF: FX FORWARD (PURSUANT TO WA’AD)
22Shariah Centre of Excellence
BENEFITS OF RELATIONSHIP: BANK ISLAM
23
NO BENEFIT
1 Package financing – Discounted financing rate for employees of selected
companies.
2 Investment Account – Return based on the performance of the tagged assets.
3 Financing – No element of compounding finance charges
4 Financing – Available in both floating and fixed rate. For floating, the rates
fluctuations is capped at a ceiling rate via selling price and profit margin.
5 Financing – No commitment fee over unutilized amount (RC-i and Cash Line-i).
6 Financing – Stamp duty exempted (refinancing/ conversion of conventional loan)
7 Financing – 20% discount on stamp duty for perfecting the bank’s security
documents.
8 Financing (house) – Payment holiday program for house financing
9 Social welfare – Supporting payment of zakat business and its asnaf
development program (AMAL Bank Islam) as well as Waqf development projects.
10 Conversion to Shariah compliant – Bank Islam can assist conversion of
financial institutions to become Shariah compliant.
Shariah Centre of Excellence
Page 24
SHARIAH PARAMETER ON PRICE AND PROFIT
Shariah Centre of Excellence
A sale must be of mutual consent ( إن البيع This includes .(عن تراضthe price (principal +
profit).
The price (principal + profit) must be agreed at
the inception of the contract.
Price can be paid during the contract and on
deferred basis.
No additional amount to be imposed due to
extension of payment period. Otherwise, it is a
practice riba al-jahiliyyah.
There is no Shariahrequirement that the profit should not be
more than 100% of the principal.
It is not compulsory to disclose the profit
computation method to the buyer (murabahah
vs musawamah)
It is recommended for the seller be eased in
selling things ( ًرحم هللا عبداسمحاً إذا باع، سمحاً إذا اشترى،
(سمحاً إذا اقتضى
Page 25
EXAMPLE: "VARIABLE RATE" – ISLAMIC BANKING IS EXPENSIVE?
Shariah Centre of Excellence
Application of wa’ad (unilateral promise) to give ibra’ (rebate) in structuring variable rate
financing.
Page 26Shariah Centre of Excellence
Selling Price:
RM365,136
ContractedProfit Rate (CPR):
9.0%
EffectiveProfit Rate (EPR):
3.5% (prevailingrate at point of contract).
Financing Period:
180 months (15 years)
Cost of Purchase (Principal):
RM200,000
InstalmentMode:
Monthly –Instalment amount according to EPR.
EXAMPLE: "VARIABLE RATE" – ISLAMIC BANKING IS EXPENSIVE?
Page 27
HOW ISLAMIC BANKS MANAGE DEFAULTERS – TA'WIDH
Shariah Centre of Excellence
“Compounding interest” in conventional
banking is “riba Jahiliyyah” ( أتقضي أم تربي)
Computation of ta’widh is not severe as
the prohibited compounding interest.
SAC of BNM has allowed the bank to impose ta’widh
on a defaulting customer subject to the following
conditions:
1.The amount cannot exceed the actual loss suffered
by the bank.
2.The determination of compensation is made by a
third party, which is BNM.
3.The default of payment is due to negligence on the
part of the customer.
Page 28
FACT FROM BANK ISLAM'S INCOME STATEMENT (SEPT15)
Shariah Centre of Excellence
As at 31st December 2016, 92% of Bank Islam’s business fund comes from “depositors”
Profit attributed to
depositors (PATD)
Page 29
CHALLENGING ENVIRONMENT IN MALAYSIA
Shariah Centre of Excellence
Margin is depressing (cost of fund is getting higher YOY).
Average assets and liabilities rates are “much” LOWER than Pakistan, Sri Lanka,
Bangladesh, Indonesia; but HIGHER than Singapore (0.5% liabilities and 3.5% assets)
OUTLINE OF THE PRESENTATION
Page 30
1. Development of Islamic Finance and Banking
2. Fundamentals of Islamic Banking Operation
3. Similarities and Differences Across Jurisdiction
4. Shariah Governance
5. Moving Forward
Shariah Centre of Excellence
Page 31
SIMILARITIES ACROSS JURISDICTIONS
Shariah Centre of Excellence
Deposit taking activities, more or less, are similar
e.g. Mudharabah, Wadi’ah/ Qard, Wakalah and Reverse
Tawarruq
Shariah scholars influence the framework and set-up (banking concept) applied
by Islamic banks
Structures adopted by all jurisdictions – Murabahah, Musawamah, Musharakah, Mudarabah, Wakalah and
Ijarah
Despite issues in Tawarruq, all jurisdictions accept the
structure as a liquidity management instrument
Following the AAOIFI decree in 2008, most of
the sukuk issued are SukukIjarah, Trust Sukuk and
Wakalah Sukuk
Page 32
DIFFERENCES ACROSS JURISDICTIONS
Shariah Centre of Excellence
IRAN SUDAN & SAUDI ARABIA
SOUTH ASIA GCC & EUROPE SOUTH EAST ASIA
MAZAHIB Shi’ah Maliki (Sudan), Hanbali(SA)
Sunni Hanafi Sunni Hanbali Sunni Shafi`i
BANKING SYSTEM
Single banking system
- Single (Sudan)- Dual (SA)
Dual banking system Dual banking system Dual banking system
SHARIAH GOVERNANCE
Centralized Centralized (Sudan) and self governed (Saudi)
Hybrid (centralized & self governed)
Self governed except UAE (hybrid)
Centralized (Malaysia, Brunei & Indonesia) only
ISSUES ON SHARIAH CONTRACTS
Tawarruq restricted for liquidity
- Tawarruq restricted for liquidity- Salam on currency (Bill acceptance)
Tawarruq widely applied (except for banks supervised by Sheikh Husain–replaced by Salaam)
- Bai` `Inah & Bai` Dayn- Tawarruq widely applied
FINANCING - More on equity & lease based.
- Equity & Salam especially on agriculture (Sudan)- Lease on property financing- No personal “cash”financing facilities (Sudan)- No “revolving credit card”, only charge card
- MM (property) & Ijarah (vehicle) - Restricted “cash”financing facilities- No “revolving credit card”, only charge card (except Standard Chartered Saadiq)- Running Musharakah for working capital
- Large Ijarahproperty financing portfolio- Small equity portfolio
- Debt & lease based financing- Small equity portfolio
OUTLINE OF THE PRESENTATION
Page 33
1. Development of Islamic Finance and Banking
2. Fundamentals of Islamic Banking Operation
3. Similarities and Differences Across Jurisdiction
4. Shariah Governance
5. Moving Forward
Shariah Centre of Excellence
Page 34
POST IFSA 2013 – SHARIAH GOVERNANCE
Issued in 2010 and formulized in the IFSA 2013.
Principles based approach.
BNM illustrated a “model”
Clear roles and responsibilities on key organs of IFIs – Board of Directors, Shariah Committee, Management, internal compliance functions.
Shariah Centre of Excellence
Page 35
POST IFSA 2013 - SHARIAH CONTRACT-BASED REGULATORY FRAMEWORK
Shariah Centre of Excellence
Source: Bank Negara Malaysia
Enhance certainty on Shariah requirements & strengthen compliance with Shariah
Promote efficient product development & minimise Shariah validation process
Drive consistent market practices & improve stakeholders’ understanding
SHARIAH STANDARDS
OUTLINE OF THE PRESENTATION
Page 36
1. Development of Islamic Finance and Banking
2. Fundamentals of Islamic Banking Operation
3. Similarities and Differences Across Jurisdiction
4. Shariah Governance
5. Moving Forward
Shariah Centre of Excellence
1. Customer identifies asset for rental
2. Customer requests the bank to acquire
the identified asset to be leased.
3. Bank purchases the asset
and pays in cash to the
vendor.
4. Bank rents the asset to the customer
at an agreed rental rate and tenure .
5. On maturity:
(i)Ijarah – Bank may extend the lease period or asset can be returned to the Bank or purchased by
customer.
(ii)IMBT – the ownership of the asset should be transfered to the customer either by sale or gift.
1/ ENLARGING IJARAH PORTFOLIO – EQUIPMENT FINANCE
• Servicing Agreement to manage major maintenance inclusive takaful . Amount will be
set off during final installment.
37
CUSTOMER
SUPPLIER
Shariah Centre of Excellence
2/ IJARAH FOR WORKING CAPITAL
IMBT (sale and lease back) may be used
for “working capital” financing.
Alternative to Tawarruq
Customer must own the property and is
ready to sell it to the Bank for subsequent
lease to him.
The purchase price paid by the Bank is the
financing amount.
Other structure is similar to ordinary IMBT:
Lease Agreement
Servicing Agreement/ Service Agency
Agreement
Purchase Undertaking (by the
customer – default/ early settlement)
Sale Undertaking (by the Bank –
maturity).
IMBT (even for property financing) is
commercially as attractive as current BBA/
Inah based financing.
Issues to be resolved:
Settlement formula upon customer ’ s
default (PU exercise price).
Maintenance cost must be reimbursed
to the lessees, subject to submission of
records.
38Shariah Centre of Excellence
3/ IJARAH AL-KHADAMAT TO FINANCE SERVICES
To reduce reliance on Commodity Murabahah to finance personal consumption of the customer and
payment for services, Ijarah al-Khadamaat can be a solution:
Product requires collaboration with service providers:
Education financing – with university and colleges.
Medical financing – with hospitals and health centres.
Travel, hajj and umrah financing – with travel agencies.
Product structure is similar to Murabahah for the Purchase Orderer (MPO) as the Bank purchases
the services and “leases” / “sells” it to the customer on deferred payment basis.
39Shariah Centre of Excellence
4/ ISTISNA’ TO FINANCE PURCHASE
In Malaysia, Istisna’ is always misunderstood as applicable only for project financing
and financing of “properties” under construction.
Our Istisna’ Project Financing-i is still pending at Shariah Advisory Council of BNM
(pending finalisation of Shariah Standard of Istisna’ and Wakalah by BNM).
40
CUSTOMER
CONTRACTOR
Shariah Centre of Excellence
For Trade products, an
Istisna’ credit line may be
created and the customer
is to request for Istisna’
drawdown upon getting
request from the buyer.
Credit enhancement:
Only for approved
buyer
Guarantee from the
customer on the
payment performance
of the buyer.
5/ ISTISNA’ (SALE)
41Shariah Centre of Excellence
6/ MUSHARAKAH: ASSET & WORKING CAPITAL
BNM encourages IB players to enlarge
their Musharakah and Mudharabah
based portfolio.
Musharakah is not only about project
financing and property financing, but it
can be used for “working capital”
financing.
Mechanism – Bank is to invest in the
property owned by the customer by
purchasing shares of the customer. The
purchase value of the shares is the
financing amount.
Subsequent arrangement is to use the
engine of Musharakah Mutanaqisah for
property financing.
42Shariah Centre of Excellence
43
6/ DIMINISHING MUSHARAKAH (SCHEDULE)
Shariah Centre of Excellence
Page 44
INVESTMENT ACCOUNT PLATFORM: A NEW MARKETPLACE
Shariah Centre of Excellence
IAP is a multi-bank platform to facilitate channelling of funds from individual and institutional investors to finance viable ventures
intermediated by participating Islamic banks via Restricted Investment Account as governed under IFSA and DFIA
• Initiated by IMAM – Bank Islam, Maybank Islamic, Affin Islamic & Bank Muamalat
• Objective - to attract participation from individual and institutional investors to boost
development of SMEs through a funding system which is efficient, simple and
transparent.
• Profit earned by individual investors from investments made through IAP be accorded an
income tax exemption.
• Investors can channel their funds to finance targeted industries of his choice
• All investment requests made by investors will be subject to suitability assessment
conducted by banks
• IAP will provide robust disclosure regime to facilitate informed decision making by
investors as well as to support monitoring of their investment
• Operate on secured internet-based architecture to allow wide outreach, including cross-
border investors.
What is
IAP?
Major
features
Page 45
INVESTMENT ACCOUNT PLATFORM: A NEW MARKETPLACE
Shariah Centre of Excellence
…an investment Intermediary instead of Trading Exchange
… sound like a regulated crowd funding
… similar to initial public offering
- over or under subscription …also similar concept to retail sukuk
… gateway for financial inclusion
… just imagine a
“Covered Sukuk”
Funds from RIA is to
finance venture
Provide funding through
opening of RIA with
participating banks using IAP
POTENTIAL
INVESTORS /
IA HOLDERS
VENTURES
ISLAMIC BANKRestricted Investment
Account
1st leg 2nd leg
Page 46
DEVELOPS THE SOCIAL WELFARE – MENARA BANK ISLAM
Shariah Centre of Excellence
The 1.2 acre land at JalanPerak, Kuala Lumpur City Centre was endowed by Ahmad Dawjee Dadabhoy, a Gujerati trader to MAIWP.
Synergy between the 4 (four) parties to develop a 34 stories Class A commercial building with GDV of RM151 mil.
BOT structure. Becomes the most
expensive waqf asset in Malaysia.
A mosque on the Basement 1 and 2 – weekly Jumaatprayers and collecting RM100,000 donation monthly. Intention to build a tahfiz college using the Jumaat contribution.
25 year lease.
RM56.6 mil. To
return the building
after 25 years
Construct the
building. RM151
million
25 years lease as
the HQ of Bank
Islam
Page 47
DEVELOPS THE SOCIAL WELFARE – END FINANCING
Shariah Centre of Excellence
Resolve the issue of waqf asset cannot be sold by applying Tawarruq structure to “pay the rental” of the house.
Already implemented – Taman Wakaf Seetee Aisyah, Penang.
MODUS OPERANDI
1. MAIN appoints the Developer (UDA Land)
2. Develop develops the Project
3. Upon completion, the Developer handover the Project to MAIN (as the Lessor).
4. MAIN leases out the assets to Lessee/ Customer. Lease Agreement is registered in the Land Office.
5. Lessee applies for Tawarruq end financing from the Bank in order to pay the rental to MAIN. The Lease is charged to the Bank.
6. Bank disburses the fund to the Developer based on the performance of the project.
7. Lessee/ Customer pays the Murabahah Sale Price to the Bank (installment)
8. If the Lessee/ Customer fails to pay installement, Bank will sell the Lease to a New Lessee (auction)
NEW LESSEE
CUSTOMER/ LESSEE
(PURCHASER)
6
7
1
32
4
8
5
Page 48
DEVELOPS THE SOCIAL WELFARE - WAFQ
Shariah Centre of Excellence
Cash Waqf Account
Manage the
fund
Distribution to
establishment
and operation
3
Endowment/ donation
via Islamic Credit Card,
ATM, CDM, CQM, iTAP,
e-Channel.
Bank Islam latest
project to develop
religious school in
Perlis – Collected
>RM0.5 mil within two
months.
Donor
(Waqif)
2
1
PROJECTS
1. Schools
2. Old folk care house
3. Commercial building
Page 49
Value-Based Organization
MOHD NAZRI CHIK
Group Chief Shariah Officer, BIMB Holdings Berhad
Chief Shariah Officer, Bank Islam Malaysia Berhad
Email: [email protected]
Tel: +603 2088 8053
Mobile: +6019 338 0047