BAI AL’INAH AND TAWARRUQ:

Bai al’ Inah is the sale of the same object between the same counterparties at a
different price, directly synthesizing a loan of money. In Tawarruq, the client buys
a commodity, e.g. Copper ingots on credit and sells immediately to a third party on
spot for cash. This is a form of reverse Murabaha. It consists of the following
steps:
1. Islamic bank buys spot commodities from the market through its broker.
2. Islamic bank pays a price.
3. Islamic bank sells the commodities to a client at P + Margin.
4. Client sells the commodities to a third party.
5. Client receives price from the third party.
6. At maturity, client pays back the Islamic bank at P + Margin.

IJARA:
Ijara is the Arabic word for providing goods or services for temporary use against a wage. The
process of an Ijara structure is defined below:

1. The purchaser, willing to finance the purchase of a asset, negotiates the specifications of
the asset with the seller.
2. The purchaser contacts the financial institution and negotiates with Islamic bank, the
financing of the asset based on Ijara.
3. Islamic bank purchases the asset from the seller, usually Islamic bank appoints the
purchaser as its agent to buy the asset from the seller.
4. The seller delivers the goods to Islamic bank.
5. Islamic bank (lessor) leases the asset to the purchaser.
6. At maturity, if the contract between the purchaser and Islamic bank is an Ijara wa iqtina
contract, the ownership of the asset is transferred to the purchaser according to specific
terms and conditions as agreed between the lessor and the lessee.