Question-1: Distinguish between the following terms:

 Ariyah: Under an ʿārīyah contract, a Muslim may pay a debt by

allowing his debtor to use, for example, his house or his land for a
certain period of time while maintaining full ownership of the
premises.
 Ijarah: Ijarah is contract between two parties, the lessor(
Asset/Property provider) and the lessee (Asset/Property user)
where the lessees have the right to enjoy a specific benefits
against a specified consideration from the lessor.
Ijarah al-Dimmah and Ijara-al-Ain
 Ijarah Al-Dimmah: An Ijarah Al-dhimmah (forward lease) is a
method of leasing where the lessor( Asset/property provide)
accepts rent prior to the delivery of an asset or property. The
rental paid is refunded if the asset is not delivered.
 Ijara-al-Ain: Operating lease (Al-ijarah ‘ain. Traditionally, the only
kind of Ijarah that was only operating lease, whereby one owns an
asset or equipment and leases it to others for rental for a
specified period. This form of ijarah is known in Islamic banking
and finance as operating lease. In this form of lease, the
ownership of the leased assets will remain with the bank at the
end of the lease period. In operating lease, the bank may already
own a property which it wants to lease it out. In other words,
Question 02: What do you mean by Bai-Muajjal? State the rule of
Bai-muajjal.
Bai-Muajjal: A contract between a bank and client in which the bank
purchases goods according to the demand of the client and provide
possession to the client of that certain goods, and the client pay the
payment to the bank after a certain period that agreed in the contract.
Rules of Bai Muajjal (Deferred Payment Sale)
 There is a promise between the client and the bank.
 The price needs to be fixed.
 The date needs to be fixed.
 The responsibility of goods is totally on the bank until it will
deliver to the client.
‘Bai-Murabaha’ means sale on agreed upon profit.
Question 03: Differentiate between general Bai-Murabaha and
Banking Bai Murabaha.
Briefly Discuss the step in Bai-Murabaha.
Murabha: Bai-Murabaha may be define as a contract between a Buyer
and Seller Under which the seller sells certain specific goods permissible
under Islamic shariah and the Law of land to the Buyer at a cost plus
agreed profit payable in cash or on any fixed future date in limp sum or
by installments.
Ordinary Murabaha(the seller is an ordinary trader who purchases
goods from the market in the hope of selling these goods to another
party for a profit.)
Banking Murabaha: the Bank purchases commodity as per your
requirements and sells to you at cost-plus-profit basis.

Steps in Bai-Murabaha

1st Step: The client submits a proposal specifying the commodity,

date, time and place of delivery, price and form of payment
information. The bank responds by sending counter proposal ether
accepting the price or stipulating a different price.

2nd Step: The client promises to buy the commodity from the bank
on a Bai-Murabaha basis at the stipulated price. The bank accepts
the order and establishes the terms and conditions of the
transaction.
3rd Step: The bank informs the client of its approval of the
agreement to purchase.

4th Step: The two parties sign the Bai-Murabaha Sale contract
according to the agreement to purchase.

5th Step: The Bank authorizes the client or its nominee to receive
the commodity.

Question 04: What is Musaraka? Write down the shariah rules

regarding capital, management, and distribution of profit.

Musharaka
Basic rules of Capital:
The capital in a Musharakah agreement should be:
1. a) Quantified (Ma’loom): Meaning how much etc.
2. b) Specified (Muta’aiyan): Meaning specified currency etc.
3. c) Not necessarily be merged: The mixing of capital is not required.
4. d) Not necessarily be in liquid form: Capital share may be
contributed either in cash/liquid or in the form of commodities. In case of
a commodity, the market value of the commodity shall determine the
share of the partner in the capital

Basic rules of distribution of Profit

1. The ratio of profit for each partner must be determined in proportion
to the actual profit accrued to the business and not in proportion to the
capital invested by him.
2. It is not allowed to fix a lump sum amount for anyone of the partners
or any rate of profit tied up with his investment.
3. If both partners agree that each will get percentage of profit based
on his capital percentage, whether both work or not, it is allowed.
4. It is also allowed that if an investor is working, his profit share (%)
could be more than his capital base (%) irrespective whether the other
partner is working or not.
5. If a partner has put an express condition in the agreement that he
will not work for the Musharakah and will remain a sleeping partner
throughout the term of Musharakah, then his share of profit cannot be
more than the ratio of his investment.
6. If both are working partners, the share of profit can differ from the
ratio of investment.
7. If only a few partners are active and others are only sleeping
partners, then the share in the profit of the active partner could be fixed at
higher than his ratio of investment

Question 05: What is Mudarabah? Briefly discuss the different

types of Mudarabah.
Mudarabah: Mudarabah is a contract between the mudarib and rabbual al-
mal in which rabbual al mal provides capital and mudarib provides
expertise in order to perform a business under the rules of Islamic
Shariah.
What are the different types of Mudarabah?
There are two types of Mudarabah: restrictive and unrestrictive.

Restrictive Mudarabah means that the investor has specified

investment details in the Mudarabah contract and has restricted the
working partner within the scope of such specifications. Due care and
precaution must be taken by the working partner to honor the restrictions
imposed by the investor.

Unrestrictive Mudarabahs mean that the investor has granted the

working partner the left to undertake any la wful investment. The
working partner has the left to invest in any suitable investment that is
reasonably expected to yield profits. It is the responsibility of the
working partner to avoid unlawful and high-risk investments, and the
working partner is liable for any losses suffered from such investments.

Short Notes
 Musharaka,
 Mudaraba.
 Muajjal,
 Muarabaha
 Ijarah
 Ijarah Al dimmah
 Ijarah Al-Ain
 Ariyah.
 Hire Purchase Under Sherkatul Melk: Islamic banks purchase
assets to be leased out, jointly with a client under equity
 participation, own the same, and share benefits jointly till the
full ownership is transferred to the client.
 Bai-Salam: Advance payment by buyer to seller for final goods
 Istisina: Advance payment by buyer to producer for produced
goods.
Difference between Bai-Muajjal & Bai-Murabaha