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  • Mudarabah Investment in Project Finance

    • CA-3.7.23

      The Islamic bank licensee's overall credit exposure in respect of the Mudarabah in such a case is divided into three parts:

      (a) The amount receivable by the Islamic bank licensee from the Mudarib in respect of progress payments due to the Mudarib from the ultimate customer for work certified as having reached a certain stage of completion: If a binding agreement exists as described in Paragraph CA-3.7.13, whereby the amount will be paid by the ultimate customer into a "repayment account" with the Islamic bank licensee, the RW reflects the credit standing of the ultimate customer. In the absence of such an agreement, the RW reflects the credit standing of the Mudarib (or 100% RW for unrated customer);
      (b) The amount held in the "repayment account" with the Islamic bank licensee, which has a risk weighting of 0%; and
      (c) For any remaining balance of the funds advanced by the Islamic bank licensee to the Mudarib, which incurs a RW of between 300% and 400% under the simple RW method, or between 90% and 270% under the slotting method, unless otherwise rated, the treatment as set out in Paragraph CA-3.7.12 applies.
      January 2015