Global Capital Advisory |
Morabaha financing is the Islamic finance of transactions with known products
and fixed maturity dates. Profit as agreed can be paid during the transaction or at
maturity. The profit rate is always agreed before the transaction begins and hence
cannot fluctuate (conventionally equivalent to fixed interest rate financing).
The finance institution will normally pay the proceeds of a Morabaha facility to
the supplier of the goods being purchased. The buyer would pay profits and
principal to the international financing institution at maturity. On occasions, the
buyer's obligations may need to be guaranteed by a guarantor acceptable to the
financing institution.
Morabaha financing is suitable for transactions of between one month and five
years and would contain lockbox provisions.
Ijara financing is the Islamic equivalent to conventional lease financing. Ijara
will be used when there are products that may be financed by a leasing structure
such as shipping containers, vessels, etc.
The profit rate is re-fixed every three to six months as profit is paid and therefore
may increase or decrease during the life of an Ijara facility.
The financing institution will usually require formal title (or a charge) over the
underlying products being leased, however this is not always the case. Ijara
financing would usually apply to transactions with tenors of between two and ten
years.
For other types of loans, debt, financing, please visit International Commercial
Loans.
and fixed maturity dates. Profit as agreed can be paid during the transaction or at
maturity. The profit rate is always agreed before the transaction begins and hence
cannot fluctuate (conventionally equivalent to fixed interest rate financing).
The finance institution will normally pay the proceeds of a Morabaha facility to
the supplier of the goods being purchased. The buyer would pay profits and
principal to the international financing institution at maturity. On occasions, the
buyer's obligations may need to be guaranteed by a guarantor acceptable to the
financing institution.
Morabaha financing is suitable for transactions of between one month and five
years and would contain lockbox provisions.
Ijara financing is the Islamic equivalent to conventional lease financing. Ijara
will be used when there are products that may be financed by a leasing structure
such as shipping containers, vessels, etc.
The profit rate is re-fixed every three to six months as profit is paid and therefore
may increase or decrease during the life of an Ijara facility.
The financing institution will usually require formal title (or a charge) over the
underlying products being leased, however this is not always the case. Ijara
financing would usually apply to transactions with tenors of between two and ten
years.
For other types of loans, debt, financing, please visit International Commercial
Loans.
TM
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| Morabaha Financing |
| Ijara Financing |
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