Structure for tawarruq-based financing
| Step | Details |
|---|---|
| 1 | Customer approaches the bank applying for financing facility |
| 2 | Once approved, the bank purchases commodity from commodity trader 1 |
| 3 | Upon purchase of commodity from commodity trader 1, the bank is the owner of the commodity |
| 4 | As the owner, the bank sells the commodity to the customer at the bank’s selling price based on murābaḥah (cost-plus-profit). The customer will pay the bank’s selling price on a deferred payment basis |
| 5 | Upon sale of the commodity, the customer is then the commodity owner. As per agreed upfront in the Facility Agreement (prior to the execution of commodity murābaḥah trading), the bank shall act as an agent to the customer and sell the commodity to commodity trader 2 on spot basis at cost price The proceeds of the sale will be channelled to the customer’s designated account *Wakālah occurs here Relationship between bank and customer Bank = Agent of customer Customer = Principal |
| 6 | Customer pays the bank’s selling price based on the agreed schedule and instalment |
| Step | Details |
|---|---|
| 1 | Customer approaches the bank applying for financing facility |
| 2 | Once approved, the bank purchases commodity from commodity trader 1 |
| 3 | Upon purchase of commodity from commodity trader 1, the bank is the owner of the commodity |
| 4 | As the owner, the bank sells the commodity to the customer at the bank’s selling price based on |
| 5 | Upon sale of the commodity, the customer is then the commodity owner. |
| 6 | Customer pays the bank’s selling price based on the agreed schedule and instalment |