IFB Training Material

By: Kedir Ali
Mob:0921991212
Main Contents
1. IFB BUSINESS OVERVIEW

• IFB service & Naming
• Islamic Economics Structure
• Historical Background of IFB
2. FUNDAMENTAL PRINCIPLES OF IFB

3. IFB DEPOSIT PRODUCT & SERVICES
4. IFB FINANCING PRODUCT & SERVICES
5. PROFIT DISTRIBUTION
September 4, 2023 2
What is IFB service?
 IFB stands for ‘’Interest-Free Banking”
 As per NBE Directive No. SBB/72/2019 IFB

means “A banking business in which mobilizing
or advancing of funds in a manner consistent
with Islamic law or Sharia principles.”
 IFB is one of the existing types of banks like; Development ,

Co-operative, Rural, Export-Import, Agricultural Bank…….
September 4, 2023 3
IFB Naming
 This Shari’ah based banking is commonly

used as Islamic Banking in the worldwide
 Different countries may have various name

 Ethical Banking
 Community Bank
 Participatory Bank (Turkey& N/Africa)
 Interest-Free Bank (Ethiopia)
 Alternative Banking
 La-Riba/No Riba (USA)
September 4, 2023 4
Shariah & Sources of Shariah
Shariah is a canonical law based on the teaching of the quran and
the traditions of the prophet PBUH (Hadith & Sunna).
Sources of Shariah (LAW)
A. The Glorious Qur’an

The Quran stated that
"0h believers, fear Allah, and give up what is still due to you from the
interest (usury), if you are true believers." [Surah 2 Verse 278]
B. Sunnah (Tradition)
Prophet Muhammad (PBUH) said:
“Exchange of gold with gold, silver with silver, wheat with wheat, barley
with barley, dates with dates and salt with salt should be of equal
quantities and spot. Anyone who varies the quantities or allows one side of
the exchange to be different, indulges in riba for which buyer and seller
are both equally responsible.”
September 4, 2023 5
Sources of Shariah (LAW)…..
C. Ijma (Consensus)
 It is a consensus on various issues amongst the ably-
recognized scholars that provide guidance to the Muslim
Ummah (nation) on various issues.
D. Qiyas (Analogy)
 Qiyas refers to analogy that is extrapolated from a
juristic rule derived from the Qur’an, Sunnah, or
through Ijma on the basis of an underlying principle or
‘illah’(underlying rationale for a legal rule).
September 4, 2023 6
Islamic Economics Structure
Islamic Finance
Insurance Capital
Banking (Takaful) Market Microfinance
(Sukuk)
Mudarabah
Deposit Qard Wadiyah (Time Deposit/CD)
(Current/Demand) (Saving)
Products Restricted & Unrestricted
Financing Trade Based Partnership Based Rental Based

Products - Murabahah - Mudarabah - Ijarah
- Istisna/Parallel - Musharakah - Ijarah Muntahia Bittamleek
- Salam/Parallel
Lending Money
Qard-Al-Hassan - Kafala (Letter of Guarantee)
- Wakalla
Services - Foreign Exchange
- Hawalah
September 4, 2023
- Castodian Services …. Etc.
7
IFB HISTORICAL BACKGROUND
• Historically IFB begins at MinGhamr-Egypt in 1963 .

• Dubai Islamic bank established (Special Law) in 1975.
• Iran Introduces 100% Islamic banking in 1983.
• Sudan launches Islamic banking in 1984.
• Sudan banking System becomes 100% Islamic in 1989.
•Accounting and auditing organization for islamic financial institutions
(AAOIFI) in 1991
•Islamic Financial Service Board (IFSB) in Malaysia in 2002.
•AAOIFI &IFSB act as nodal advising on standards to be followed by
an Islamic institutions world wide.
• In 2021 more than 1,500 IFIs operated in more than 80 countries.
• More than $3 Trillion total assets of IFIs in the globe
• Dominant Non-Muslim Market Players : USA - UK - Canada –
Australia
September 4, 2023 8
IFB HISTORICAL BACKGROUND In Ethiopia
• Interest-Free deposit mobilization allowed.(BBP 592/2008 /22/2).

• IFB-Window model allowed by NBE (SBB/51/2011)
• The first 3 banks to start IFB-Window: OIB-CBE-Hibret.
• 2021, 12 conventional banks has been commence IFB window
service.
• more than 200 IFB Full-Fledged branches are perational in
Ethiopia.
• ZamZam Bank & Hijira Bank are the 1st and 2nd (Rammis Bank
is under formation) IFB Full-Fledged Bank who has granted
operational license on 2020 and 2021.
September 4, 2023 9
WHO ISSUE THE IFF STANDARDS ?
 There are 2 organizations globally to prepare suitable standards
for IFIs;
1. AAOIFI (Established on Mar, 1991-Bahrain)

(Accounting & Auditing Organizations for Islamic Financial
Institutions) An international autonomous non-profit corporate
body that prepares Accounting, Auditing, Governance, Ethics &
Shari’ah (67) standards for IFIs.
2. IFSB (Established on Nov, 2002-Malaysia)

(Islamic Financial Services Board)
Promote the stability and resilience of the Islamic financial
services industry through the issuance, and facilitating the
implementation, of global prudential standards and other
initiatives that foster knowledge sharing and cooperation.
An international autonomous non-profit corporate body that
prepares Risk Management, Capital Adequacy, Supervisory,
Corporate
September 4, 2023 Governance & Transparency standards for IFIs. 10
OBJECTIVES & BENEFITS OF IFB
1. Demand cannot cater with conventional banking;
2. Tailor-made banking services facilitate financial inclusion.
3. Financial inclusion helps for high deposit resource.
4. For customer satisfaction-retain existing, expand base.
September 4, 2023 11
FUNDAMENTAL PRINCIPLES OF IFB
Islamic Finance Principles
UNJUST
CONTRACT
RIBA
(INTEREST)
FORBBIDEN
BUSINESS
1) Riba/Usury/Interest
• Riba is an Arabic word which has the meaning of

“growth” or “increase” and denotes the payment or
receipt of interest for the use of money;
• Any predetermined, conditional payment over and
above the actual Principal amount is prohibited;
 Two Common Types of Riba:
Two Common Types of Riba:
• It’s knows as Riba Al-Jahiliya & today's Bank Riba

 Specified, predetermined repayment in excess of
loan/capital. (Fixed, Guaranteed, Increases with the
increase of time) E.g. Simple & Compound interest.
 It’s knows as Riba al-Hadith

 When specified items are exchanged for the same
kind at unequal measures or on deferred basis, this
is Riba. Eg One kg of dates is exchanged for two kg of
dates, irrespective of quality.
2) GHARAR
(Uncertainty, Speculation, Ignorance, Deception)
 Selling goods;
 that the seller is unable to deliver.
 without proper description.
 without specifying the price.
 on the basis of false description.
 without allowing the buyer properly examining the goods.
 Making a contract conditional on an unknown event.
3) Maysir/Qimar (Gambling)
• is a form of Gharar because the gambler is ignorant of
the result of his gamble;
• There is a possibility one party can suffer a total loss;
• Maysir is one of the key elements in the prohibition of
conventional insurance.
4) Impermissible Business Activity
• Products & Services, IFB dealing with, must be
permissible:
• Permissible fund refers to a fund that its source is
from Sharia compliant business activities.
• Dealing with the following business activities is not
permissible: Usury/interest, alcohol, pork, gambling,
pornography, trading dead animal’s meat, etc ….
5) Profit and loss sharing

• The principle encourages people to invest their money
and to become partners in order to share profits and
risks in the business instead of becoming creditors;
• Losses are shared on the basis of the equity
participation, whereas profit are on the basis of a
pre-agreed ratio.
6) Unfair and unjust contracts
• Contractual agreements and business dealings should be

impartial, ethical and in consistent with the principle;
• The foremost principle which should govern all business activities
and dealings is justice and fairness;
• A financial transaction should not lead to the exploitation of any
party to the transaction.
7) Money Concept
• In view of Shari’ah money is only a medium of exchange which is a

way of defining the value of a thing;
• Does not view money as a commodity that should be bought and
sold at a profit or should not be compensated simply by being
placed at a bank or lent to someone else;
• Muslim jurist consider money as potential capital rather than
capital, i.e., money becomes capital only when it is invested in
business.
IFB vs Conventional
Conventional Banking System

MONEY
Money + Interest
Interest Free Banking System

Goods & Services
MONEY
Characteristic Interest Free Banking System Conventional Banking
System
(interest based)
Business Functions and operating modes Functions and operating

framework are based on Shari’a, and modes are based on
Islamic banks must ensure that secular principles, not
all business activities are in religious laws or
compliance with Shari’a guidelines.
requirements.
Interest Financing is not interest (riba) Financing is interest

charging oriented and should be based on oriented, and a fixed
risk-and-reward sharing. or variable interest
rate is charged for the
use of money.
Interest on Account holders do not receive Depositors receive

deposits interest interest and a
(riba) but may share risk and guarantee of principal
rewards of repayment.
investments made by the
September 4, 2023 Islamic bank. 20
System
(interest based)
Risk sharing in Islamic banks offer equity Risk sharing is not

equity financing financing with risk sharing for a generally offered but is
project or venture. Losses are available through venture
shared on the basis of the equity capital firms and
participation, whereas profit is investment banks, which
shared on the basis of a pre- may also participate in
agreed ratio. management.
Restrictions Islamic banks are allowed to Conventional banks may

participate only in economic finance any lawful
activities that are Shari’a product or service.
compliant. For example, banks
cannot finance a business that
involves selling pork or alcohol.
System
(interest based)
Penalty on Islamic banks are not allowed to Conventional banks

default charge normally charge
penalties for their enrichment. additional Interest in
They may, case of late payments or
however, allow imposition of defaults.
default or late payment .Penalties
may be donated to a charity
Avoidance of Transactions with elements of Speculative investments

gharar gambling or speculation are are allowed.
discouraged or forbidden.
Customer The status of an Islamic bank in The status of a

relationships relation to its clients is that of conventional bank in
partner and investor. relation to its clients is
one of creditor and
debtor.
System
(interest based)
Shari’a Each Islamic bank must have a Conventional banks have

supervisory supervisory board to ensure that no such requirement.
board all its business activities are in
line with Shari’a requirements.
Statutory An Islamic bank must be in A conventional bank must

requirements compliance with the statutory be in compliance with
requirements of the National the statutory
bank of the country in which it requirements of the
operates and also with Shari’a central bank of the
guidelines. country in which it
operates and in some
places, the banking laws
of state or other
localities.
IFB BUSINESS MODELS
A. Window Model
B. Dedicated branch Model
C. Full-fledged Model
D. Subsidiary Model
IFB BUSINESS MODELS are four;
A. WINDOW MODEL
 Refers to conventional banks that offer Islamic banking
products and services using their existing infrastructure,
including staff and branches. E.g. ABSA Islamic Bank
south Africa, Citibank, HSBC, Lioyds of London. (12/17
banks in Ethiopia)
B. DEDICATED BRANCH MODEL
 This model is similar to the windows model, however, in
the case dedicated branch are established for the delivery
of Shari'ah compliant products. (>180/9 banks in
Ethiopia).
C. FULL-FLEDGED MODEL
 This is one types of bank Operations and management are clearly
separated between the subsidiary Islamic bank and the parent
conventional bank. (ZZB-E.g. Al-Baraka Bank-South Africa)
D. SUBSIDIARY MODEL
 In this Scenario, a conventional Bank develops a subsidiary under its
entity to deliver Shari'ah compliant products, advantage can establish its
own
September process and an independent operating structure.
4, 2023 25
IFB DEPOSIT PRODUCTS & SERVICES
IFB DEPOSIT PRODUCTS & SERVICES
 IFB Deposit Products
i. Saving Accounts
ii. Current Account
iii. Investment Account
 IFB Services
I. Hawalah /Money Transfer/
II. Safe deposit box
III. Kafalah /Guarantee/
IV. Wakalah /Agency/
V. Sarf /Forex/
1. IFB Deposit Products

i. Saving Accounts
 IFB service giving banks can open saving deposit account
based on Wadiah /Safe keeping/ contract.
Wadiah
Feature;
• Literally Wadiah means deposit; i.e., the fund or asset;
• The purpose of the account is Safekeeping the fund/asset from harm &
harram, damage, loss or theft.
• The deposit is guaranteed for full return on demand;
• The usage of the deposit is subject to permission by the depositor;
• No benefit (interest/profit) attached to the account; but the bank may
give voluntary gift-Hibah (monetary or in kind)
Requirements;
• Permissible (Halal) sources of fund
• The customer can take the burden of proof for the source of fund from
permissible source.
• The minimum balance to open the account is Br. 25.00
• Banks operate this account using passbook and digital banking
services.
• No service charge in relation to such account except for transaction
effected via ATM, POS or other cash dispensing outlets and for lost
passbook replacement and other cost recovery activities. (Statement,
Standing
September instruction, Letter, Transfer)
4, 2023 28
Special Wadia Accounts
1) Minor (child)Wadi’ah Saving
2) Umi(Women) Wadi’ah Saving
3) Muday Wadi’ah Saving
4) Tsilal Wadi’ah Saving
Special Wadia Accounts
1) Minor (Children) Wadi’ah Saving
•A guardian/ tutor opens an account for a minor (a person
• less than 18 years of age).
• The minimum balance to open the account is Brr 25.00
• Whenever the minor reaches 18 years of age the account may be
changed to the normal Wadi’ah Saving Account
2) Women Wadi’ah Saving
•The minimum balance to open the account is Brr 100.00
• Free service charge for fund Transfers Within the Bank or
Low Transaction Fee; and the benefit will be applied for all women
who have saving account in IFB.
• It contains special visa/ATM card so that women can get various
services like shopping with a discount.
3) Wadi’ah Muday Saving
 Related to the conventional Muday-Saving Box saving account.
 Designed to daily money makers & wage workers
 The purpose is motivating the saving habit & accelerate the
financial goal of the segmented customers.
 The usage of the account is customers deposited from their
income with own custody “Wadi’ah Muday-Saving”.
 Then the accumulated amount should be deposited in the
 account on regular basis without profit/loss.
 Banks operate this account using passbook and digital banking
services.
 The minimum opening amount is Brr 500.00
4) Tsilal Wadi’ah Saving
• Is a special saving account for-credit scheme that targets
individual employees, trades, Diasporas or any eligible entity.
• save a certain amount of money to get loan for purchase of residential
houses from real estate developers by making special agreement (MOU).
• The minimum saving period is 1 year and the maximum period may
extend up to unlimited years as per the availability of houses on the
project.
• A customer must deposit 40% of the house price within the saving period
ten te reminin 60% to be covered by the bank.
 Features for Tila (Tsilal) local Saving Account

• D/t product ID and unique Passbook.
• Deposit shall be with in one year.
• Withdrawal is forbidden until the loan process is finalized. If there is
withdrawal, it is considered as breach of contract; hence the client will not
get the intended loan.
 Features for Tila (Tsilal) Diaspora Saving Account

• Is non-transferable Birr account
• different product ID & unique Passbook.
• shall be deposited only in foreign currency (USD, EURO and GBP)
• Deposit shall be with in one year.
• Withdrawal is forbidden until the loan process is finalized. If there is withdrawal,
it is considered as breach of contract; hence the client will not get the intended
loan.
II. Current account
• IFB service giving banks operate based on Amanah or Qard
principles.
Qard/Amanah:
• The word Amana refers to deposit in trust; Qard is loan;
• Something given by a person to another to keep for safe custody.
• The keeper guarantee & return the money/goods in the same
condition in which she/he received them on demand.
• The account holder shall authorize the Bank to use his/ her funds
at the Bank's own risk, in any Shari’ah compliant investment,
but don’t allow profit/loss which arises from the financing.
 One of the modern application of Qard is Current Account in which
the fund is considered as loans not as deposit;
 Opened with a Minimum balance of Birr 250.00.
 Opened and operated by literate individual.
 Cheque book facility is available to provide ease of withdrawal.
 No restrictions on withdrawals and deposit transactions.
 Entitled to ATM Card
III. Investment Account
A.Mudarabah
 A deposit to generate profit,
 The customer provides the funds while the bank provides expertise
and management;
 Both parties should agree first on the profit sharing rate;
 The fund investor (customer) is called “Rabul Mal”, & the fund
manager (bank) is called “Mudarib”.
 The Bank shall issue to the depositor an investment account
certificate or a fixed-time deposit certificate in his name.
 In case of loss only the customer will be liable.
 Where the Investment Account Certificate is withdrawn before
maturity; No profit is to be paid for investment placed on less
than 3 months or less than half of the agreed tenure.
 The 3 types of time duration/tenure
• Short-Term Mudarabah Fixed time deposit: up to 1 year
• Medium-Term Mudarabah Fixed time deposit: 1-3 years
• Long-Term Mudarabah Fixed time deposit: above 3 years
 All the negotiable profit rates are subject to approval by The
President or Vice President Operations.
There are two kinds of Investment accounts:
1. Restricted Investment Account
2. Unrestricted Investment Account
1.Restricted Mudarabah Investment Account
 It is the owner of the fund (customer) specify the fund to be
used in a particular place or business for a fixed or for specified
purpose
2.Unrestricted-Mudarabah Investment Account
 Depositing money in a Bank without any pre-defined condition;
 The management of the fund is left to the Bank (Mudarib),
 Owner of the fund become a silent partner;
 The bank shares profit with the customer based on pre-agreed
rate.
 The minimum amount required to have such investment
Account shall be Br. 25,000.
 Our all Mudarabah saving accounts will be considered as
Unrestricted Investment Accounts (URIA)
Mudarabah:
Profit & Loss Application
• If the reserve couldn’t cover the loss, it will entirely be borne by
the depositor/investor (unless there is evidence of negligence or
any other cause on the part of the Bank);
• Loss or significant reduction on investible fund is compensated
with ;
i. Profit Equalization Reserve (PER)
ii. Investment Risk Reserve (IRR);
 Mudarabah Saving Accounts
1. Mudarabah Saving
2. Hajj Mudarabah Saving
3. Mudarabah Hybrid Saving Account
1) Mudarabah Saving
Opened with a minimum balance of Birr 1,000.00
 Operated with passbook & entitled to ATM Card
 Profit rate to be paid is determined based on the
banks performance during the profit payment period
 No service charge in relation to such account except
for transaction effected via ATM, POS or other cash
dispensing outlets and for lost passbook replacement
and other cost recovery activities.
(Statement, Standing instruction, Letter, Transfer)
2) Hajj Mudarabah Saving
Designed specifically to help customers realize their
desire of performing Hajj.
 The minimum opening balance is Br. 500;
 The profit calculation is based on the lowest monthly
balance but more than the minimum balance.
 No service charge in relation to such account except
for transaction effected via ATM, POS or other cash
dispensing outlets and for lost passbook replacement
and other cost recovery activities.
(Statement, Standing instruction, Letter, Transfer)
3) Mudarabah Hybrid Saving Account
Also called Zero Balance Account
 The account to be transacted using cheques shall be
opened to Edir, Equib, cooperatives, trade unions and
other communal associations.
 The minimum balance to open this Account is Br. 10,000;
 The total number of cheque withdrawal to be made per month
shall not exceed three cheques. In case of its occurrence the
customer shall be charged Br. 25/cheque.
 No debit card shall be issued
IFB SERVICES
IFB SERVICES
1. Hawalah /Money Transfer/
2. Safe deposit box
3. Kafalah /Guarantee/
4. Wakalah /Agency/
5. Sarf /Forex/
1. Hawalah (Money Transfer)
• Hawalah refers to the transfer of money (local/foreign) from one
person/ party to another;
• Hawalah can be made from one customer bank account to
another customer bank account or through a transfer of cash;
• The transfer request can be initiated by the customer using letter
of instruction or standard bank forms.
2. Safe Deposit Box
• The service has Wadiah Amanah nature, where the bank:
- Acts as trustee safe custodian.
- Can’t use the deposited assets.
- The customer pays service charges.
• It is a type of service which is rented to customers to store
valuable
September items in safe deposit box.
4, 2023 39
3. Kafalah (Letter of Guarantee)
A letter of guarantee facility /Kafala/ is a written promise issued by a
bank / irrevocable obligation
 The Bank compensate to the beneficiary in the event that the
obligor fails to honor his/her/its obligations in accordance with
the terms and conditions of the contract.
 The Bank shall require guarantee in the form of accepted collateral
based on the guarantee value.
 Major types of Kafalah
1. Bid Bond – a commitment of the bank to meet claims if the
bidder/customer fails to meet his/her obligation of the awarded bid;
2. Performance Bond – it is issued to meet claims if the winner of the
bidder fails to deliver the goods or to perform the service which
may against the contracts;
3. Advance Payment – issued by the bank in favor of a buyer who
makes the advance upon the request of the seller or the contractor
who received the advance.
4. Wakalah (Agency)
 It is the assignment of rights and obligations to other party;
 A bank can act as an agent of a customer and charge agency fee
for the services rendered;
 The agency fee can be collected for the services: Payment/
receiving of cash on behalf of the customer, cash pick up and
implant, LC opening and acceptance, collection of export bills /
bills of exchange, inward/outward bill collection, . . .
5. Serf (Forex)
• Sarf is the exchange of foreign currencies and monetary units;
• The exchange of one currency against another currency must be
on the spot and simultaneous;
• Forward purchase of currency and sale is not allowed.
IFB FINANCING
 IFB Financing products are (3)
1) Trade Finance
2) Equity or Investment Participation Finance
3) Lending Money.
 trade based IFB financing products (4):
1. Murabahah/Markup/Cost-Plus-profit/
2. Ijara/Leasing/
3. Istisna’a /Work-in-Progress/
4. Salam /Advance Payment against-deferred-delivery-of-goods/
I. Murabahah/Markup/Cost-Plus-profit/
• It is a sale on profit;
• A contract of sale between a buyer and a seller in which a seller
purchases the goods needed by a buyer and sells the goods to the
buyer on a cost-plus basis;
• The client agree to repay the bank the price and an agreed profit
later either on installment or lump sum bases.
86% of
• September Ethiopian IFB Financing
4, 2023 43
General Eligibility Criteria;
1. Customers applying for any type of IFF(Interest Free Finance)
shall pass:
 Sharia’h screening
 Financial screening
2. All person who engaged in Shari’ah compliant, lawful and
creditworthy business activity are eligible to request IFF;
 Types of Murabaha
A. Murabaha Revolving Financing

B. Murabaha Term Financing
C. Murabahah Pre-Shipment Export Financing
D. Murabahah Import Letter of Credit (LC)
E. Murabahah Import LC Settlement Financing
F. Murabahah Tsilal Mortgage finance
II. Ijarah/Leasing/
• The bank buys/prepares an item for a client and leases it to customer

for a special rent and term. The term may be the assets’
expected/economic life.
• Types of Ijara
I. Standard Ijarah – Lessee benefit from asset but no transfer of
ownership involved.
II. Ijarah wa Iqtina –a promise Conducted solely for ultimate transfer of
ownership to lessee at the end of the lease period
o Must be with a separate agreement of sale independent of the lease

agreement unless will consider as Standard Ijarah.
o The promise should be unilateral and binding on the promiser only.
Because; if it is bilateral, will be a full contract effected to a future
date, which is not allowed in the case of sale or gift.
Examples of-Ijarah
• Fixed asset Financing
– Transport
– Manufacturing
– Construction
C. Istisna/Work-in- Progress/
• It is a contract for the acquisition of goods manufactured or

constructed on order.
• Involves advance payments for future delivery of goods.
• Banks pre-sell the goods to a client for cash on delivery
basis, and negotiate the purchase of the commodities with
the supplier
• Parallel Istisna is a transaction executed simultaneously

with original Istisna.
• The buyer of good in the first Istisna is the seller of goods
in the second or Parallel salam.
Examples of -Istisna
– Construction
– Manufacturing
– Import
D. Salam/Advance Payment against-deferred-
delivery of goods/
• An agreement of purchase at a predetermined price, a
specified kind of commodity/farm products, not available
with the seller, which is to be delivered on a specified
future date, in a specified quantity.
Parallalel Salam; is When the bank enters into two

different contracts. in one of them, the bank is a buyer and
the second one a seller.
2. Equity or Investment Participation
• Is a partnership between two or more parties.
There are mainly two Partnership financing models:
A. Silent Partnership (Mudarabah).
B. Joint-Venture(Musharakah);
A. Silent Partnership (Mudarabah).

• a partnership between two or more parties engage in business,
trade or investment.
• Typically the partnership is between Capital provider (S) – Robb al
Maal And investment manager – Mudarib.
• The relationship has a form of principal and agent.
• The parties enter into business project in expectation of profit,
• Mudarib is entrusted with the Rabb al Maal’s capital and assumes
full management responsibility.
• Profit is shared between them in a pre-agreed ratio Where as any
loss should fully be borne by the Rabb- al Maal.
NB:Mudarib is only accountable for loss if found negligent

B. Joint-Venture(Musharakah);
• a partnership b/n two or more parties to conduct investment or
trade
• Is typically created
 By an investment of capital
 By pooling together expertise or good will
• Sharing of profit is the combination of
• Proportion of ownership in business and.
• Degree of participation.
• Losses are shared strictly in proportion of investment partner.
3.Lending Money. (only Qard Al Hassen)

 Quard al hassn is a type of loan accepted by Islamic banks coz it
demands no profit.
 In quard al hassen the lender expects from borrower.
• No interest
• No Any sort of compensation
• It is rather given
 To help some customers in the interest of long term
relationship.
To fulfill social responsibility.
To safeguard ones wealth.
• The borrower with his own discretion may give extra money as a
sign of appreciation up on settlement;
 Provided this fact has not been known at the beginning
 The lender does not demand it at the beginning of the
transaction.
THANK YOU !!!
09 21 99 12 12
Kedir Ali

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By: Kedir Ali

1. IFB BUSINESS OVERVIEW

2. FUNDAMENTAL PRINCIPLES OF IFB

 As per NBE Directive No. SBB/72/2019 IFB

 IFB is one of the existing types of banks like; Development ,

 This Shari’ah based banking is commonly

 Different countries may have various name

Sources of Shariah (LAW)

A. The Glorious Qur’an

Financing Trade Based Partnership Based Rental Based

• Historically IFB begins at MinGhamr-Egypt in 1963 .

• Interest-Free deposit mobilization allowed.(BBP 592/2008 /22/2).

1. AAOIFI (Established on Mar, 1991-Bahrain)

2. IFSB (Established on Nov, 2002-Malaysia)

• Riba is an Arabic word which has the meaning of

 Two Common Types of Riba:

• It’s knows as Riba Al-Jahiliya & today's Bank Riba

 It’s knows as Riba al-Hadith

5) Profit and loss sharing

• Contractual agreements and business dealings should be

• In view of Shari’ah money is only a medium of exchange which is a

Conventional Banking System

Interest Free Banking System

Business Functions and operating modes Functions and operating

Interest Financing is not interest (riba) Financing is interest

Interest on Account holders do not receive Depositors receive

Risk sharing in Islamic banks offer equity Risk sharing is not

Restrictions Islamic banks are allowed to Conventional banks may

Penalty on Islamic banks are not allowed to Conventional banks

Avoidance of Transactions with elements of Speculative investments

Customer The status of an Islamic bank in The status of a

Shari’a Each Islamic bank must have a Conventional banks have

Statutory An Islamic bank must be in A conventional bank must

1. IFB Deposit Products

 Features for Tila (Tsilal) local Saving Account

 Features for Tila (Tsilal) Diaspora Saving Account

 Mudarabah Saving Accounts

A. Murabaha Revolving Financing

• The bank buys/prepares an item for a client and leases it to customer

o Must be with a separate agreement of sale independent of the lease

• It is a contract for the acquisition of goods manufactured or

• Parallel Istisna is a transaction executed simultaneously

Parallalel Salam; is When the bank enters into two

A. Silent Partnership (Mudarabah).

NB:Mudarib is only accountable for loss if found negligent

3.Lending Money. (only Qard Al Hassen)

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