Islamic Products

CONSUMER INFORMATION

Murabaha

Murabaha is a non interest bearing loan where the bank sells the good to the borrower. For example if the person wants to buy a house, for $100,000 then the bank purchases the property and sells it for $120,000. That would be financing through murabaha.

Mudarabah

Mudarabah is a form of a business contract whereby one person brings the capital and another person the manpower (effort). The bank offers the capital and the entrepreneur is considered as a mudarabah. All the profit & loss is shared by both parties; through an agreement a percentage is stated for profit.

Banks in Somaliland get a profit rate of 9-12% for Mudarabah.

Musharakah

Musharakah is a contract based on partnership between the bank and the other entity (Joint venture) whereby they both share profit and loss. A percentage of the profit is determined based on the ratio of investment by both parties.

Ijara (Lease financing)

Ijara is providing products or services on a lease or a rental basis. An Ijara contract involves the lease of those items or goods for a period of time until the person is able to pay off the full loan and then is the official owner of the good (depending on the type of lease). This contract allows the borrower time to pay the debt in small installments for the period stated in the contract. If the person paying the lease, can’t make payment no interest is charged.