Meezan Bank Limited. · PSX:MEBL
Meezan Bank — Investor Presentation (June 2009)
17 slides from Meezan Bank's investor presentation, Jun 25, 2009
Slide 1: Introduction to Diminishing Concept of Musharakah
Introduction to Diminishing Concept of Musharakah Diminishing Musharakah Release Date: Version 2.0ul Thani 31, 1430 H Jamad June 25, 2009 Prepared By: Product Development and Shariah Compliance Department
Slide 2: Presentation Outline
Presentation Outline • Diminishing Musharakah - Introduction • Basic Structure • Shariah Principles • Illustration • DM in trade & business
Slide 3: Musharakah
Musharakah Musharakah is a form of partnership (Shirkat) There are two types of Shirkah: 1. Shirkat-ul-Milk Joint ownership of two or more persons in a particular property 2. Shirkat-ul-Aqd A partnership affected by mutual contract. It can also be translated as a joint commercial enterprise
Slide 4: Diminishing Musharakah
Diminishing Musharakah • In Diminishing Musharakah the financier and the client participate either in joint ownership of – a property or an equipment, or in a joint commercial enterprise • The share of the financier will be divided into a number of units • The client will purchase these units one by
Slide 5: Diminishing Musharakah
Diminishing Musharakah Three components of Diminishing Musharaka Joint ownership of the Bank and customer Customer as a lessee uses the share of the bank Redemption of the share of the Bank by the customer
Slide 6: Diminishing Musharakah: Mode of Fixed Asset Financing
Diminishing Musharakah Mode of Fixed Asset Financing Diminishing Musharakah is commonly used for the purpose of financing of fixed assets by various Islamic banks. House financing Car Financing Plant and machinery financing All other fixed Assets
Slide 7: Basic Structure
The Premier Islamic Bank — Basic Structure
Slide 8: Customer approaches the Bank for financing
Joint BANK Ownersh Rent ip CUSTOMER Musharak a The customer approaches the Bank with the request for Project/Machinery/House financing The Bank enters into a Musharakah (Joint Ownership) agreement with the customer and both of them pay their respective shares to the seller of the asset. Client
Slide 9: Gradual Transfer of Ownership
Joint BANK Ownersh Gradual Transfer of Ownership ip CUSTOMER Musharak a Client promises to purchase Bank’s share (units) over the tenure of transaction with the help of Undertaking to Purchase Customer pays rent for the use of banks share in the property Client purchases the units every month
Slide 10: Ownership gradually transferred to the customer
Joint BANK Ownersh Gradual Transfer of Ownership ip CUSTOMER Musharak a Ownership of the asset is gradually transferred to the customer upon payment of asset price. (with the help of a Sale transaction between bank & customer at the end of each period)
Slide 11: Shariah Principles
The Premier Islamic Bank — Shariah Principles
Slide 12: Shariah Principles
Shariah Principles • To create joint ownership in property is called Shirkat-ul-Milk and is expressly allowed by all schools of Islamic Jurisprudence. • All Muslim Jurists agree on the permissibility of the Financier leasing his share in property to client and charging him rent i.e. the permissibili
Slide 13: Shariah Principles
Shariah Principles • Promise of client to purchase units of share of financier is also allowed. • The Transactions cannot be combined in a single arrangements and they have to be executed independently. • This is because it is a well settled rule of Islamic Jurisprudence that one transaction cannot
Slide 14: Illustration
The Premier Islamic Bank — Illustration
Slide 15: DM - Illustration
DM - Illustration 1. Customer request financing for a fixed Asset costing Rs. 300 million. 2. Islamic Bank agrees to provide financing up to 90% of the cost. 3. Joint Ownership Agreement is executed between the bank and the Customer. 4. Bank will purchase 90% share in the asset by paying Rs. 270 mil
Slide 16: DM - Illustration
DM - Illustration 6. Bank’s share is divided into five units. 7. Customer agrees to buyout Bank’s share (units) on yearly basis and the Undertaking is executed by the customer. 8. Customer pays the rent for the usage of the Bank’s units . 9. Rental reduces after purchase of each unit by the customer
Slide 17: Thank You
THANK YOU