Concepts Used In Islamic Banking

**Admin** Fri Oct 15, 2010 7:11 pm

Concepts Used in Maybank's Islamic Banking Products

"Wadiah Yad Dhamanah" It means savings with guarantee. It refers to a contract between the owner of the funds (account holder) and the Bank for safe-keeping purposes. In this instance, the accountholder as depositor places his deposits on basis of trust. Maybank, as trustee, guarantees the repayment of the whole amount of deposits, or any part thereof, upon request.

"Mudharabah" This is an agreement made between 2 parties, 1 to provide the capital (financier) and the other (the Mudarib), using their business acumen, to provide the management. The profit-sharing ratio is agreed upon before hand. Capital losses are borne solely by the financier. In the case of our deposit products, it refers to a profit-sharing agreement between the Bank (Mudarib) and the depositors (financier) for the Bank to invest depositors' funds to generate profits.

"Bai-Bithaman Ajil (BBA)" It means deferred payment sales. It refers to the sale of goods on a deferred payment basis at a price which includes a profit margin agreed to by both the buyer and seller.

"Murabahah" This contract involves a request from a customer to the Bank to purchase and then on-sell to the customer certain goods. The sale by the Bank to the customer is at cost plus an agreed margin. Payment by the customer is in 1 or more pre-determined instalments at agreed points in time. Ownership of the goods passes to the customer upon delivery by the Bank. Such a sale contract is valid on condition that the price, other cost and the profit margin of the seller are stated at the time of the agreement of sale.

"Kafalah" It means guarantee. It refers to the guarantee or surety given by one party who agrees to discharge the liability of a third party, in case of default.

"Bai-al-Dayn" It means debt-trading. It refers to the sale of debt arising from a trade transaction in the form of a deferred payment sale.

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