Bai-Murabaha:

Bai- Murabaha is a contract between a buyer and a seller under which the seller sells certain specific goods permissible under Islamic Shari’ah and law of the land to the buyer at a price determined by charging agreed profit, margin or mark-up over the cost price. In this case, the buyer either makes cash payment to receive the goods or is allowed to make payment by installments or on a fixed future date. The profit mark-up may be fixed in lump sum or in percentage over the cost price of the goods.

Bai-Muazzal:

The term Bai-Muazzal means “deferred payment sale” or “sale on credit”. Under this mode of investment a contract is made between the buyer and seller for buying and selling of goods approved by Islamic Shari’ah and law of the land on the stipulation to pay the agreed price at a specific future date or by fixed installments.

Bai-Salam:

 Under the Bai-Salam mode of investment, payment is made in advance to purchase the goods and the supplier makes promise to deliver the goods at a future date. Investment under Bai-Salam mode is made to meet other expenses of the exporter excepting the manufacturing cost of exportable goods. The Bank purchases a portion of the exportable goods under the Bai-Salam mode and makes advance payment for the same on the condition that arrangements will be made by the exporter to export the goods purchased by the Bank along with other goods of the exporter. Fixing purchase price of the goods and recovery of bank’s investment: The purchase price is determined by deducting estimated profit of Bank’s purchased portion of the exportable goods. The Bank recovers its dues after realization of export proceeds.

Mudaraba:

Under the Mudaraba mode of investment, the client or businessman or capital user does not invest any capital. In this case, the bank alone invests all the required capital and the entrepreneur (the client) directly manages and looks after the business.

Musharaka:

Musharaka is an Islamic finance term that refers to a joint partnership in which two or more parties contribute capital to an enterprise or project and share in the profits and losses according to pre-agreed ratios. In a Musharaka agreement, all partners contribute capital, either in the form of money, assets, or services. The capital contributions can be in equal or different proportions, depending on the terms of the agreement. Profits generated from the venture are shared according to a pre-agreed ratio, but this ratio does not have to correspond to the capital contribution ratio. For instance, one partner might contribute 60% of the capital but may agree to a 50% share of the profit. On the other hand, losses are shared strictly in proportion to the capital contribution of each partner. If one partner contributed 40% of the capital, they would bear 40% of the losses.

Hire Purchase under Shirkatul Melk (HPSM):

Hire Purchase under Shirkatul Melk (HPSM) is an Islamic finance concept which combines three modes: rent (Ijara), partnership (Shirkat) and buying and selling. It blends the principles of Shirkatul Melk (partnership in ownership) and Hire Purchase (installment purchase). The Bank and the client invest their capital jointly through a contract called partnership (Shirkat).The bank leases its portion at a certain rent. The Bank sells its portion to the client on receipt of the price under this system.