#2 Types of Islamic Finance - ACCA / CPA / SFM -By Saheb Academy

In this video I have explained 5 popular contracts or types of Islamic Finance
with examples and illustrations.

⏱TIMESTAMPS
0:00 - Intro
0:12 - Fast Recap of Concept
3:27 - Mudaraba
6:24 - Musharaka
8:33 - Sukuk
12:30 - Ijarah
16:04 - Murabaha

This video is relevant for ACCA F9 Financial Management students, Strategic Financial Management (ICAI) and also for CPA students.

After watching this video your will feel this topic is very easy.

Previous - #1 Principles of Islamic Finance

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[anirudhjahagirdar]

A great thanks to this video!! I just saw this video, just before 30 mins of my exam, and to my luck, a theory question was asked on Islamic finance!✨ much relieved!!!

[niraj]

The forms of Contract allowed (Types of Products or services offered by the banks)

1. Mu da raba - partnership

2. Mus haraka - equity partnership

3. Su kuk - Islamic Bond

4. Ija  rah - a from of lease

5. Mu ra baha  - a form of Credit sale





1. Mudaraba

It is a partnership transaction where 

- 1 party supplies the money (100% capital), this party is called "rab-all-maal"

- The other party provides management expertise (Skills), "this party is called "Mudarib"

- In order to undertake a spefic trade




- Resultant profit - is shared on pre-decided ratio

- Resultant loss - shall be borne by the Financer ie. by "RAB-ALL-MAAL". WHY? it is argued that Mudarib does not have money so he brought the skills only, so he shall not be penalised.

However, if there is loss due to the gross negligence or fraud or guilty or misconduct on behalf of Mudarib then the loss shall be borne by Mudarib. Othewise, generally the entire loss is borne by "Rab-all-maal" 






2. Musharaka

It is a joint enterprise or

partnership structure where at least two parties or more bring capital and skills. 

Every one can bring the capital and skills.

Every one can participate in the management or can be a sleping partner also. It is at their option.

Musharaka is different from Mudaraba in profit or loss sharing.




Resultant profit - is shared on pre - decided ratio

Resultant loss- is shared in the capital contribution ratio






3. Sukuk

Bonds that are structured in such a way 

- as to generate returns to investors 

- without infringing islamic law that prohibits interest that prohibits the interest

It aims at "profit sharing" by offering the investors, ownership in business and assets.

Steps involved

Step 1 - a company issues Sukuk 

Step 2 - investors subscribe the Sukuk bonds

Step 3 - company receives money and appoints the Sukuk Manger to manage Sukuk Bonds

Step 4 - Company will procure or invest in assets

Step 5 - Company will give ownership of assets to the Sukuk Holders

Step 6 - The income earned from that assets is shared to the Sukuk Holders (the participation in the profit)

Step 7 - The benefit and risks is shared by the Sukuk Holders

So, unlike the conventional bonds, Sukuk are linked to an underlying tangible assets





4. Ijarah

An ijarah transaction is the Islamic equivalent of a lease where one party (lessor) allows another party (lessee) to use their asssets against the payment of a rental fee.

Steps involved

Step 1 - An individual needs a car. 

Step 2 - Bank purchases car based on Ijarah agreement and initial payment of installment and "Rentals agreed hereonly"

Step 3 - Bank pays in a one go to the car dealer/manufacturer

Step 4 - The ownership of car remains with the bank

Step 5 - The car is delivered to the individual

Step 6 - At end of the lease period the bank gives the option to the individual either to return the car or to buy car based on the new contract

Step 7 - Major Maintenance work is carried by Bank as the ownership is with the bank






5. Murabaha

A murabaha transaction is a

deferred payment sale or

on installment credit sale 

and 

is mostly used for the purchase of goods for immediate delivery on deferred payment basis.

Step 1 Individual needs to buy assets, with low amount in hand

Step 2 Enter Murabaha contract with bank

Step 3 Bank will sell the assets on mark up to the individual (Cost + Profit)- this will be disclosed 

Step 4 Individual will pay in Installment

[electrofiedgaming]

Need more videos in this series, or atleast share some sources where we can find information and education about this.
Mashallah this is Sadqa e Jariah.❤

[TinymightyJ]

Thank you so much for the video. Hopefully you'll do more for the ACCA exams!!!

[gulnazfathima]

After seeing this video only i realised that there is a islamic finance in this world

[yusufathman]

I am an economists.. i would like to venture to this type of finance in shaa allah for the benefit of hereafter.
Murabaha is the best♥️
Jirani Smart in Kenya is practising this.

[SudhanshuHACKER]

Someone is making real information on the Web. Thanks a lot bro. 💯👌

[QuranTheWay]

Good Lecture to learn the terms and Islamic banking basic. but Islamic banking is always bound by KIBOR and in long term finance SBP polices which are same for all. It is just name because it ends in fractional Banking by central bank.

[y_p]

May Allah reward you Jannah, such a nice and clear explanation.

[hennawithrehana]

MashaAllah Amazing explaination!! Looking forward for more such videos😊

[TINYMINI-]

Plant Assets, Natural
Resources, and
Intangible Assets WANT VEDIO ON THIS

[aissatouahmadou]

Thanks for this video very interesting I will love to have more explicit details on islamic finance concerning the other types of contracts like sales contrat Salam, murabaha, istisna etc

[hameedkhan-qekd]

Sir, I have plz read my problem and give me a solution.
I want to invest in small businesses like tea shops, etc.
Plan ye hai k shop walay ko Rs 50k du and return mein first 4 months mein 25% means 12k shop walay se lu jo 4months baad 50k return ho jaiga investment. Next months se 12k (25%) k bajaiy 12% means 6k lu and so on. Baaqi k 6k shop walay ko du tha k wo bhi benefit Le sakay bcz it's a small business. Isi Tarah area k saray shops mein Thora Thora investment karna Chahta hu. Loss se bachnay k Liye 6k monthly wesay bhi Le Raha hai tho hamain UN k loss se dur rehna.
Plz give mein answer of my questions.
1-Kya ye plan possible halal hai?
2-If no than why?
3-If loans Le and invest karay, Baad mein loan wapis kar de 4months and ud k Baad Jo income ayegi wo halal hogi or nhe?

[sirtajwazir]

Amazing really enjoy proud on your teaching teachniques

[sahazmarkk]

How do banks make profit in Ijarah contract?

[zerma]

I believe the ijarah is probably not halal in the way you present it . The fact there is no defined end but it can be bought or return introduce the “1 contract 2 outcome” that I believe is not acceptable .

[TINYMINI-]

SIR, PLEASE SHARE NOTES THAT YOU MAKE DURING LECTURES ON ACCOUNTING AND BUSINESS ECNOMICS

[FNDesigning]

What should be the pre decided ratio in mudarabha ??

[mdimroz]

Hi sir I want to do US Cma.. Please upload video on courses like cpa, uscma, cfp, cwm

[arififtekharrabbi]

MaSha'Allah. Very well explained 👍👍👍