[Year]

Credit Department, WEGAGEN BANK SC

Credit Follow-up
Division
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‘WEGAGEN-AMANAH’
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summary of the contents of the document. Type the abstract of the document
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SERVICES

INTEREST FREE FINANCING

PROCEDURE

WHOHR
WEGAGENBANK
October 2014
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 Contents
1. INTRODUCTION ............................................................................................... 3
1.1 BACKGROUND ..................................................................................................................... 3
1.2 OBJECTIVES ......................................................................................................................... 3
1.3 REVISIONS ........................................................................................................................... 3
1.4 COMPLIANCE ...................................................................................................................... 4
2. IFB PRODUCTS AND SERVICES ......................................................................... 4
2.1 MURABAHA......................................................................................................................... 4
2.2 MUSHARAKA ....................................................................................................................... 5
2.3 IJARAH ................................................................................................................................ 6
2.4 ISTISNA ............................................................................................................................... 7
2.5 SALAM ................................................................................................................................ 8
2.6 MUDARABAH ...................................................................................................................... 9
2.7 BANK GUARANTEES AND LETTER OF CREDITS .................................................................... 9
2.7.1 Bank Guarantees (Kafalah) .................................................................................................. 9
2.7.2 Letter of Credits (L/C) (Wakalah) .......................................................................................10
3. IFB APPROVING ORGANS AND STRUCTURE .................................................... 11
3.1 THE PRESIDENT/CEO ....................................................................................................... 11
3.2 THE VICE PRESIDENT, OPERATIONS .................................................................................. 11
3.3 IFB UNIT........................................................................................................................... 12
3.4 BRANCHES ........................................................................................................................ 12
3.5 CUSTOMER RELATIONSHIP MANAGER (CRM) ................................................................... 12
3.6 IFB APPROVING COMMITTEE ............................................................................................ 12
3.7 RULES OF APPLICATION TO IFB COMMITTEES ................................................................... 13
4. IFB PROCESSING ............................................................................................. 14
4.1 INTERVIEW ........................................................................................................................ 14
4.2 FINANCIAL STATEMENTS................................................................................................... 15
4.3 BUSINESS VISIT .................................................................................................................. 15
4.4 CREDIT INFORMATION ...................................................................................................... 15
4.5 EVALUATION OF COLLATERAL .......................................................................................... 16
4.6 IFB ANALYSIS AND EVALUATION ...................................................................................... 16
4.7 IFB PRESENTATION ........................................................................................................... 17
4.8 APPEAL HANDLING ........................................................................................................... 18
4.9 IFB CONTRACTS ................................................................................................................ 18
4.10 REGISTRATION OF MORTGAGE/PLEDGE CONTRACTS ....................................................... 20
4.11 MAINTAINING SECURITY REGISTER BOOK ........................................................................ 22
4.12 IFB FUND DISBURSEMENT PROCEDURE ............................................................................ 22
4.13 DOCUMENTATION ............................................................................................................. 23
4.14 IFB FILE ADMINISTRATION ............................................................................................... 26
5. COLLATERAL/AL-RAHN ................................................................................. 26
5.1 TYPES OF ASSETS TO BE HELD AS COLLATERAL................................................................... 26
5.2 COLLATERAL SAFETY MARGIN REQUIREMENTS ................................................................. 27
5.3 ESTIMATION OF COLLATERAL ........................................................................................... 28
5.3.1 Deposit Accounts with Banks ...............................................................................................28
5.3.2 Share Certificates ................................................................................................................28
5.3.3 Residential or Commercial Buildings ....................................................................................28
5.3.4 Estimation of Motor Vehicles ...............................................................................................28
5.3.5 Mortgage over Plants & Machinery (Business Mortgage) ........................................................29
5.3.6 Re-estimation of Collateral ..................................................................................................29
 5.4 RELEASE OF COLLATERAL ................................................................................................. 30
5.5 CHANGE OF COLLATERAL ................................................................................................. 30
5.6 INSURANCE OF COLLATERAL/TAKAFUL............................................................................ 30
6. MANAGING NON-PERFORMING INTEREST FREE FUNDS (NPF)......................... 31
6.1 GENERAL REMARK ........................................................................................................... 31
6.2 INTEREST FREE FUND PROVISIONING ................................................................................. 31
6.3 CLASSIFICATION OF LOANS (INTEREST FREE FUNDS) ......................................................... 31
6.4 WORKOUT......................................................................................................................... 31
6.5 WORKOUT STRATEGIES ..................................................................................................... 32
6.6 APPLICATION OF PENALTY RATES ON NPLS...................................................................... 34
6.7 NPLS PRESENTATION AND RECOMMENDATION ................................................................ 34
6.8 COMMUNICATING THE DECISION ...................................................................................... 35
6.9 IMPLEMENTATION AND FOLLOW-UP.................................................................................. 35
1. INTRODUCTION

1.1 BACKGROUND

1.2 OBJECTIVES

1.3 REVISIONS
1.4 COMPLIANCE

2. IFB PRODUCTS AND SERVICES

2.1 MURABAHA
2.2 MUSHARAKA
2.3 IJARAH
2.4 ISTISNA
 

2.5 SALAM
2.6 MUDARABAH

2.7 BANK GUARANTEES AND LETTER OF CREDITS

2.7.1 BANK GUARANTEES (KAFALAH)

2.7.2 LETTER OF CREDITS (L/C) (WAKALAH)
3. IFB APPROVING ORGANS AND STRUCTURE

3.1 THE PRESIDENT/CEO

3.2 THE VICE PRESIDENT, OPERATIONS

3.3 IFB UNIT

3.4 BRANCHES

3.5 CUSTOMER RELATIONSHIP MANAGER (CRM)

3.6 IFB APPROVING COMMITTEE

3.7 RULES OF APPLICATION TO IFB COMMITTEES
4. IFB PROCESSING
4.1 INTERVIEW
4.2 FINANCIAL STATEMENTS

4.3 BUSINESS VISIT

4.4 CREDIT INFORMATION

4.5 EVALUATION OF COLLATERAL

4.6 IFB ANALYSIS AND EVALUATION

4.7 IFB PRESENTATION
4.8 APPEAL HANDLING

4.9 IFB CONTRACTS

(a)
(b)
(c)
4.10 REGISTRATION OF MORTGAGE/PLEDGE CONTRACTS
4.11 MAINTAINING SECURITY REGISTER BOOK

4.12 IFB FUND DISBURSEMENT PROCEDURE

4.13 DOCUMENTATION
4.14 IFB FILE ADMINISTRATION

5. COLLATERAL/AL-RAHN

5.1 TYPES OF ASSETS TO BE HELD AS COLLATERAL

5.2 COLLATERAL SAFETY MARGIN REQUIREMENTS
5.3 ESTIMATION OF COLLATERAL

5.3.1 DEPOSIT ACCOUNTS WITH BANKS

5.3.2 SHARE CERTIFICATES

5.3.3 RESIDENTIAL OR COMMERCIAL BUILDINGS

5.3.4 ESTIMATION OF MOTOR VEHICLES

5.3.5 MORTGAGE OVER PLANTS & MACHINERY (BUSINESS MORTGAGE)

5.3.6 RE-ESTIMATION OF COLLATERAL

5.4 RELEASE OF COLLATERAL

5.5 CHANGE OF COLLATERAL

5.6 INSURANCE OF COLLATERAL/TAKAFUL

6. MANAGING NON-PERFORMING INTEREST FREE FUNDS (NPF)
6.1 GENERAL REMARK

6.2 INTEREST FREE FUND PROVISIONING

6.3 CLASSIFICATION OF LOANS (INTEREST FREE FUNDS)

6.4 WORKOUT
6.5 WORKOUT STRATEGIES
 










6.6 APPLICATION OF PENALTY RATES ON NPLS

6.7 NPLS PRESENTATION AND RECOMMENDATION

6.8 COMMUNICATING THE DECISION

6.9 IMPLEMENTATION AND FOLLOW-UP