1. PREPARED BY MOULANA SHOAYB JOOSUB 1

2. 2  1950  1950 – Islamic Banking in Theory  1970  1970 – Islamic Banking in Practice  180  180 – Islamic Financial Institutions  $300  $300 Billion

3. PREPARED BY MOULANA SHOAYB JOOSUB 3 Exodus Leviticus Deutronomy Psalms Proverb  Nehemiah  Ezakhiel  7 Verses of the Quraan  More than 40 sayings of the Prophet Muhammad (Peace Be Upon Him) Interest is Forbidden :

4. PREPARED BY MOULANA SHOAYB JOOSUB 4 1. Procedures 2. Interest 3. Uncertainty 4.Speculation 5.Unlawful Products 6.Unlawful Services

5. PREPARED BY MOULANA SHOAYB JOOSUB 5 Deposits Financing Services

6. PREPARED BY MOULANA SHOAYB JOOSUB 6

7. 7

8. 8 (Mudarib) Investor of Capital CLIENT Payment of Mudarabah Capital INVESTMENT / TRADING ACTIVITIES Earning of Profits (Mudarib) Distributor of Profits Earned CLIENT Periodic proportionate Profits / Return of Capital

9. PREPARED BY MOULANA SHOAYB JOOSUB 9

10. 10 ISLAMICBANKISLAMICBANKCUSTOMERCUSTOMER VENDORVENDOR Transfer of title to bank Transfer of title to customer Payment of purchase price (P) Payment of marked up price (P + X) The structure of a Murabaha Contract

11. PREPARED BY MOULANA SHOAYB JOOSUB 11 The Bank Buys the asset from the Vendor The customer then buys the asset from the bank at a mark-up price (P+X), which is payable on a deferred payment basis. The period covering the deferred payment is effectively the period of financing. The title to the asset is transferred to the customer at the time of purchase but usually the customer provides the same or other assets as collateral to the bank for the period of financing.

12. PREPARED BY MOULANA SHOAYB JOOSUB 12 ISLAMICBANKISLAMICBANKCUSTOMER (Lessee)CUSTOMER VENDORVENDOR Transfer of title to bank Assets leased to customer – title does (not) pass at end of lease term Payment of purchase price Ijarah Installment The structure of an Ijarah Wa Iqtina Contract

13. PREPARED BY MOULANA SHOAYB JOOSUB 13 The bank buys the asset from the vendor The bank then leases the asset to the customer Periodic rentals are collected by the bank The title of the asset remains with the bank under as operating ijaarah Title passes to the customer under a Lease ending with transfer of ownership, either gradually over the period of the contract, at the end.

14. PREPARED BY MOULANA SHOAYB JOOSUB 14 The structure of a Musharaka ContractISLAMICBANKISLAMICBANKPARTNER (Customer)PARTNER MUSHARAKAMUSHARAKA 60% Ownership 40% Ownership

15. PREPARED BY MOULANA SHOAYB JOOSUB 15 Both the Bank and the customer contributes towards the capital of the enterprise Under a “diminishing” musharakah, the customer buys out the bank`s share over a period of time. The customer and the bank share in the profits according to the agreed proportions, which may be different from the proportions of capital contributed. Any losses of the enterprise will be borne by the customer and the bank according to their capital contributions.

16. PREPARED BY MOULANA SHOAYB JOOSUB 16 CLIENT (Mudarib) Investor of Capital ISLAMIC BANK Payment of Mudarabah Capital INVESTMENT / TRADING ACTIVITIES Earning of Profits CLIENT (Mudarib) Distributor of Profits Earned ISLAMIC BANK Periodic proportionate Profits / Return of Capital

17. PREPARED BY MOULANA SHOAYB JOOSUB 17 The bank provides to the customer (mudarib) all the capital to fund a specified enterprise The customer contributes only entrepreneurship. The customer is responsible for the day to day management of the enterprise and is entitled to deduct its management fee(mudarib fee) from the enterprise`s profits. The mudarib fee could be a fixed fee (to cover management expenses) and a percentage of the profits or a combination of the two. A classical mudarib fee is based on a percentage of the profits only. The balance of the profit of the enterprise is payable to the bank If the enterprise makes a loss, the bank (as the fund provider or Rabbul Mal) has to bear all the losses unless the loss has resulted from negligence on the part of the mudarib.

18. PREPARED BY MOULANA SHOAYB JOOSUB 18 ISLAMICBANKISLAMICBANKCUSTOMERCUSTOMER COMMODITYOWNERCOMMODITYOWNER Delivery of asset at future date Delivery of asset At future date Advance payment of purchase price (P) Advance payment of purchase price The structure of a Salam Contract

19. PREPARED BY MOULANA SHOAYB JOOSUB 19 A Salam (sometimes referred to as Salaf) is a short term agreement in which a financial institution makes full pre-payments for future delivery of a specified quantity of goods on a specified date. A salam is primarily a deferred delivery sale contract usually used for commodity finance. It is similar to a forward contract where delivery is in the future in exchange for spot payment. To mitigate the asset risk a financier can enter into parallel Salam

20. PREPARED BY MOULANA SHOAYB JOOSUB 20 ISLAMICBANKISLAMICBANKMANUFACTURERMANUFACTURER CUSTOMERCUSTOMER Delivery of asset at future date Delivery of asset At future date Payment of purchase price on delivery Progress payment of purchase price The structure of a Istisna` Contract

21. PREPARED BY MOULANA SHOAYB JOOSUB 21 Istisna` is primarily a deffered delivery sale contract similar to salam. It is similar to conventional work in progress financing for a capital project. In practice it is usually used for construction and trade finance such as pre shipment export finance.

22. PREPARED BY MOULANA SHOAYB JOOSUB 22

23. PREPARED BY MOULANA SHOAYB JOOSUB 23 Four fundamental Principles

24. PREPARED BY MOULANA SHOAYB JOOSUB 24 ISLAMICBANKISLAMICBANKINVESTORSINVESTORS CUSTOMERCUSTOMER TRANSFER OF ASSETS ISSUE OF SUKUKS CASH The structure of a Sukuk Contract

25. PREPARED BY MOULANA SHOAYB JOOSUB 25 Sukuks represent proportionate beneficial ownership. For a defined period the risk and returns associated with the cash flows generated from the assets belong to the sukuk holder. The characteristics of a sukuk are similar to a conventional bond with the difference being that they are asset backed.

26. PREPARED BY MOULANA SHOAYB JOOSUB 26