What is the concept of Islamic Bank?
Islamic Bank is a Bank where all banking and investment transactions are carried out based on Sharia' principles and provisions.
What is the difference between interest in traditional banks and Islamic banks returns?
strong> Interest: a predefined proportion of capital with capital guarantee according to the following equation:
Interest = Interest rate x Tenor x Capital
Return: is the generated realized profit of Sharia-compliant activities from sale or purchase or other, shared between the client and the Bank with no capital guarantee.
Are Islamic branches subject to control and supervision of the Central Bank?
Islamic branches are part of Bank Audi, where all its branches are subject to the supervision of the Central Bank.
What is the difference between conventional loans and Murabaha or other Islamic finance frameworks in General?
is buying a product/commodity based on customer request, then selling it for profit after holding its complete ownership.
- Under a non-binding purchase promise.
- The Bank bears the risk of buying the goods until its sale to client.
- Profit margin is added.
- The contract is a Murabaha contract.
An amount of money given to client to be paid back topped up with a certain predefined interest amount.
- No purchase or sale.
- No risk where there is no a commodity.
- Fixed or variable interest is calculated.
- The contract is a Loan contract.
How Islamic branches operate through a traditional Bank?
Islamic branches operate through a traditional bank conditioned to fulfill the following requirements:
- To be financially and administratively independent.
- To have a mechanism for interaction between the Bank and the Islamic branches.
- To have a Sharia supervisory board to ensure the compliance of the development and implementation of all banking products, activities, and transactions with sharia' principles.
- To have an Independent internal Islamic branches financials.
Is Islamic branches funds entirely separate from other bank's funds and investments?
Islamic banking sector and branches is one of the bank’s sectors that has its independence.
How profit distribution to depositors is done and on what basis distribution percentages are set?
Actual profits are calculated and distributed based on the net profits arising from funds investment activities according to Sharia principals.
What are the means of Islamic banks investments?
Islamic banks operate to encourage investments by attracting capitals and investing it in various economic fields according to Sharia principles, along with maintaining and developing raised capitals.
What do the following terms mean? Murabaha, Musharaka, Mudaraba
Murabaha: is a process of buying and owning a commodity by the bank that was defined by the client based on a promise to purchase that commodity. Murabaha includes purchase cost plus profit covering buying efforts and expenses incurred by the Bank with a guarantee of delivery according to the specifications of the customer, then the customer deferred payment either at once or in installments.
Musharaka: is a partnership contract between the Bank and the client to distribute profits arising from project financing, where capital is raised by both, according to a prescribed proportions which is not necessarily to be same as participation percentages in capital conditioned the losses are bared by participants according to their share in capital.
Mudaraba: is a partnership contract where the project is financed by the Bank (Rab Almal) and work by the client (Mudarib), and profits are distributed based on the realized project profits according to the predefined sharing percentages.
Is it acceptable to provide prizes to Islamic branches depositors?
Prizes can be given on savings and investment accounts holders only not current accounts.
What is the difference between traditional bank loans and Al-Qard Al-Hassan?
Traditional bank loans are granted to be paid back topped up with a predefined interest amount calculated based on tenor.
Al-Qard Al-Hassan is an interest-free loan where the client pays back the provided cash only.
What is the difference between Islamic and conventional banks?
- Subject to Banking and Sharia' regulations.
- Relationship with the client as a partner or a buyer or Mudarib.
- Returns & Profits
- Profits are distributed according to the business results through pre-defined sharing percentages.
- In Murabaha, profit is defined as a profit margin added to the purchase price.
- In Musharaka, project realized profits after capital safety are distributed between the Bank and the client according to the agreed proportions.
- Profit rates based
- Subject only to banking regulations.
- Relationship with the client as a debtor or creditor.
- Interest rates are pre-defined whether for loans or savings.
- Interest rate based.
Are Islamic branches clients participating in profit and loss? In addition, what explains the regularity of profits given to clients every month?
The contract states the participation of the Bank and client in profit and loss in savings and investment accounts; and profits are disbursed to client based on a monthly recalculation of profits based the realized profits of monthly investment activities.
Is it possible for non-Muslims to work or to bank with Islamic banks?
Non-Muslims can work in Islamic banks as well as non-Muslims can deal with Islamic banks
Is there a sharia supervisory board? Who are the members? What is the role of this board?
Yes there is a sharia supervisory board, and the members are :
- Shaikh Dr Hussein Hamed Hassan (Chairman of the Board)
- Sheikh Khaled Al-Faqih (member)
- Sheikh Dr Nedam Yaqubi (member)
The board role is to set all banking activities, transactions, products etc. legitimate controls and frameworks and ensure their application.
Are all the transactions being presented to sharia supervisory board?
Yes, all transactions are presented to the sharia supervisory board; In addition, there is a sharia internal audit department to follow up on the implementation of its recommendations.
What are the advantages of Islamic banks?
- Compliance with sharia principals.
- Commitment to Sharia regulation in all products and services.
- Existence of sharia supervisory board to ensure compliance with the Islamic Sharia principals in all banking transactions.
- All transactions involves goods and services.
What is Islamic banking business?
Receiving funds from depositors through sharia' complaint means and investing these funds in sharia' complaint activities and investments.
What are the Islamic banking products?
- Non-profit bearing current account.
- Savings instruments (Investment – Savings – Certificates of Deposits– Islamic investment funds, etc.)
- Financing products (Murabaha-Musharaka -Mudaraba – ljara– Istisnaa etc.)
- Other banking services such as letters of guarantee, letters of credit, credit cards, wire transfers, safe deposit boxes, etc.)