Real Islamic Product
Following are products which are offered by Initiations
Mudarabah: it is the arrangement between two parties in which one party provides finance to the business and other one provides his services. Profits are distributed between two parties according to the pre agreed ratio(Balogh, 2015).
Musharakah: this is considered as joint venture. The profits are made and distributed on an agreed ratio and if losses occur then it is distributed according to the equity participation ratio(Balogh, 2015).
Takaful: it is based on the mutual assistance. It is used to provide financial assistance to those who are members of the takaful scheme;in which members of the takaful scheme agree to provide certain amount of money to for that purpose(Mangrio, 2015).
The institutions which provide such products are as follows:
Meezan bank Limited. It is a publicly listed company and it is the largest bank in the Pakistan and one of the fastest growing banks in the banking sector of the company(Meezan Bank, 2015).
Dubai Islamic bank Limited. It started its operation in 2006, since then DIBL has attempted initiatives in order to expand its branch network throughout the country(Dubai Islamic Bank, 2015).
Development of Products
Musharaka
The customer comes to the bank and requests for project/machinery/house financing. Then the bank enters into a joint venture agreement with the customer and both of them contribute respective shares to the seller of the asset. The customer promises to purchase the share of the bank over the tenure of the transaction. Rents are paid by the customer to the bank for use of the share of bank in the property. Ownership of the asset is transferred over the tenure period to the customer through payment of asset price.
Technical aspects of this agreement include partnership/sharing must be in the immovable property. No legal joint ownership cannot be created until availability of the registered document (Ahmed, 2015).
Mudarabah
The Mudarabah profit is Rs.150.68 and the lender sharing profit sharing is 83.3% and the borrower profit sharing is 16.67% and the new rate of return is 9.1667% (see excel file). First an individual provides the fund to the bank after agreeing on the terms of the Mudarabah agreement then the bank invests that fund in the assets of projects. There are two possibilities; either loss may occur or profit may occur. If profit is made, then it is distributed on the pre agreed ratio. If loss occurs then it will be borne by the provider of the finance. Ultimately, it would reduce the value of the assets (Islamic finance, 2015).
Real Islamic Product Case Solution
Technical aspects of Mudarabah include;
Takaful
All members of the Takaful scheme agree to provide guarantee of each other and make contribution to a mutual fund. Takaful funds are created through the pool of collected contribution. The amount of the contribution are based on their personal circumstances. Takaful operator mange the fund on the behalf of the participants and charges an agreed fee. Any claims made by the members of the Takaful scheme are paid out of the Takaful fund. Remaining surpluses belong to the participant of the fund and are distributed to the member of the Takaful scheme as cash dividends (Islamic Banking, 2015).
Demand and supply: According to survey, respondents are likely to buy home, and health insurance if the same cover is offered in the form of conventional insurance and price are competitive. Among U.K Muslim communities there is a quite lack of awareness about Takaful insurance and most respondents are not sure whether Takaful insurance is accordance with the Islamic or not (Coolen‐Maturi, 2015).
