Different Shariah Compliant Products Offered by Islamic Banks

Running head: ISLAMIC FINANCE
Islamic finance
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ISLAMIC FINANCE
Different Shariah compliant products offered by Islamic banks:
Some of the Shariah compliant home financing products include Ijara Muntahiyah Bi-
Tamleek, Bai-Bithaman-Ajil, Musharaka and Murabaha plans. In Ijara Muntahiyah Bi-
Tamleek which is a termination of lease with ownership. Under this plan, property is
purchased by the bank and it is leased to the borrower. When the term ends, in return for the
fixed balloon payment, property is purchased from the bank. In this plan, there do not exist
obligation on part of any parties to either sell or purchase the property. Mushsraka plan is
also known by a name of diminishing mushsraka where the property is jointly bought by the
provider and rent is paid by the borrower on a monthly basis and at the end of the term,
property would be owned by the borrower (Mahfudz et al. 2016). The less rent is paid to the
bank, the more shares are owned by the borrower. Murabaha which is better known as the
cost plus financing method, is an effective Islamic financial structure where the seller and the
buyer both come up to an agreement to cost and markup of an asset. However the mark up
comes in place of interest which is found to be illegal in the Islamic financial management.
So, it can said that Murabaha is an Islamic form of selling credits and not an interest bearing
loan. In this system of credit selling the purchaser is not authorized with the ownership of
loan unless and until it is fully paid. Murabaha is a short term Islamic financing method in
order to achieve the assets which are based on the customer’s capital for the capital. It is
mostly used by small, medium and corporate entities inclusive of all the enterprises doing
business which lies under the laws of Islam.