Entire section Custom print Link Text Only Rich Text Print
  Versions

 

CA-3.7.13

An Islamic bank licensee advances funds to a customer who acts as Mudarib in a construction contract for a third-party customer (ultimate customer). The ultimate customer will make progress payments to the Mudarib who, in turn, makes payments to the Islamic bank licensee. The essential role of the Islamic bank licensee in this structure is to provide bridging finance to the Mudarib pending its receipt of the progress payments. In this type of construction contract Mudarabah investment structure:

(a) The Islamic bank licensee has no direct or contractual relationship with the ultimate customer (but the Islamic bank licensee may stipulate that payments by the ultimate customer to the Mudarib be made to an account ("repayment account") with the Islamic bank licensee which has been opened for the purpose of the Mudarabah and from which the Mudarib may not make withdrawals without the Islamic bank licensee's permission); and
(b) The Islamic bank licensee as investor advances funds to the construction company as Mudarib for the construction project and is entitled to a share of the profit of the project but must bear 100% of any loss.
January 2015