1. Yumyme Chocolates NAMES: HUSSAIN ALI MUSTAFA HASSAN ABDULLA ALTURABI Financed by

2. Table of content:  Definitions and legal/Shari’a basis of Murabaha  Advantages and disadvantages of the Murabaha compared to other modes of finance  The required forms and documents used in Al-Baraka  The procedures for providing the money in Al-Baraka  The risks involved in Murabaha contract and how can they be mitigated

3. Definition Murabaha Steps: 1.Discuss establishing chocolate factory 2.Buy back + profit margin ◦Ordinary murabaha ◦Murabaha sales connected with a promise 3.First sale contract takes place ◦Customer is agent 4.Contractor begins construction 5.Client will buy back

4. Legal/Sharia Basis Contracts based on Quran and Sunna Examples of fatwas: 1.Meaning and purpose (i.e. simply replace “interset” with “profit”) 2.Promise (Malki vs others) 3.Insurance 4.Commission via administrative costs 5.Property as guarantee 6.Bank can use a mode of finance with other banks 7.Customer bears costs if purchase promise not executed

5. Advantages of Murabaha MudarabaMurabaha High level of risk Responsible for losses if no negligence There is guarantor IjaraMurabaha Major maintenance for bank Ownership will transfer to client So client is responsible for defects IstisnaMurabaha Bound to one contractor Multiple contractors Other modes of financeMurabaha Doesn’t include it Revovling Murabaha Other modes of financeMurabaha Doesn’t include it Retain 50% of costs in case of default MusharakaMurabaha Provide working capital Only down payment

6. Disadvantages of Murabaha IstisnaMurabaha No need to reveal costs and profit Have to quote all costs IjaraMurabaha No upfront rentals There’s down payment IjaraMurabaha Flexible repayment terms No flexibility Legal consequences + overdue repayments Musharaka and other modesMurabaha Less costly for bank Costlier since bank is payment full amount at first

7. The procedures for providing the money  Step 1: filling the application form and attaching the required documents  Step 2: analyzing the client application  Step 3: signing the facilities agreement and the offer letter  Step 4: sign an Agency contract (Wakala) – client trustworthy

8. The procedures for providing the money  Step 5: Murabaha financing process: A- One off B- Revolving  Step 6: local purchase order  Step 7: payment request letter with an invoice

9. The procedures for providing the money

10. The required forms and documents used in Bank AL-Baraka:  Application form  Required documents from the client  Credit Approval Routing Slip  Facilities agreement  Offer letter  Agency contract (Wakala)  Local purchase order  Invoice  Payment against invoice letter

11. Risks  Credit Risk  Market Risk  Operational Risk

12. Credit Risk  Defaults in payment  1% Late Payment  Postponed Cheques

13. Market Risk

14. Operational Risk

16. Thank you for listening