Key products and how they compare

image of Key products and how they compare

The common methods used in Islamic financing include sales contracts such as Murabahah (cost-plus sale), leasing (Ijarah), Salam (forward sale) and Istisna (construction or manufacturing sale). They also include Wakalah (agency), Musharakah (joint venture or partnership), and Mudarabah (managed partnership). These contracts are used to manage credit and investment processes. They are frequently joined with some form of undertaking or promise to synthesize a bias towards credit risk as compared to asset risk. This chapter examines each of these methods by way of concrete examples, presented both textually and in illustrations, and shows how they fit in an Islamic bank. All the methods have been tested in micro-enterprise and SME markets and all may be used to support trade finance activities.

Related Subject(s): International Trade and Finance
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