- the regime of interest rates: Islamic banks may, in accordance with the principles of Sharia, perceive neither use as interest rate; remuneration for depositor and the bank is based on the system of sharing profits and losses;
- conducting transactions other than banking: Islamic bank, in addition to banking transactions is required to regularly and permanently carry out commercial, real estate and financial investment transactions.
Apart from these exemptions, all other provisions of the banking regulations applied to traditional bank are also for Islamic bank. However, in terms of monetary and credit policy, the resort to refinancing of the Central Bank, money market, interbank lending system will not be open to Islamic banking because of the implications of the interest rate.
Islamic bank renders the same services as conventional bank; it is an intermediary between the capital regulators and the operators.
II Financial Sources
Besides the capital and our stockholders’ equity, Man Brothers Group finds their main resource in the following operations:
Deposits: At this level, Islamic banks assume all risks and the regulators of these accounts receive neither profit nor income, regardless of the account balance.
The investment accounts: The deposits for purpose of investments constitute the main source of funds for the banks and they resemble even more to a company’s shares as to fixed-term deposits and savings.
Zakat or social service account: The funds collected are spent in accordance with Islamic law and they have the actual function of allowing the poor to stand on its own by its own means in such a way that it has a source of fixed income that obviate the need for help from others.
Other paid banking services offered by the Islamic bank are identical to those proposed by conventional banks.
III Use of funds by Man Brothers Group
Different resources collected by us are invested by using different types of financing recognized by our financial institution:
- Morabaha: it is a contract by which a customer who wishes to acquire products or capital goods requests the Islamic bank to buy them from it at a fixed price plus a reasonable profit margin. The contract specifies, in addition to the profit margin, terms of delivery and payment of the total price; In African subsidiaries, we can say that 80 to 90% of financing are allocated on the basis of Morabaha contracts.
- Musharaka: In this type of contract, the customer and the bank jointly participate in the financing of an operation and jointly assume the risk in proportion to their participation. The latter can be done, either by cash contribution by both parties, or by contribution in kind by one of the two parties. Losses are distributed between the customer and the bank on the basis of the implementation of each; as profit sharing, two theories are developed:
- the profit can be determined according to the convention (thesis of Hanbalite or Hanafi School);
- the profit can be determined depending on the setting of each (thesis of Chafite and Maliki School).
Modaraba: It consists of association of a capital with an industrial input (work) in order to share the profits and losses that may arise from it. In this case, the customer provides its expertise and the bank provides financing necessary to carry out the transaction. Only management incumbent upon Modareb (the customer who uses the money in the work). In case of profit, the customer is paid by its work and expertise, while the bank is paid by its capital contribution. In case of loss, the customer loses its job if it is not proved that the loss is due to negligence in management from its side and the bank loses its funds. If there was negligence in management by the customer, the loss is borne by both parties. This kind of financing, very delicate, has not been experienced in Africa.Ijara: For the bank, Ijara consists to purchase the goods that it makes available to the customer by simple renting.Ijara Wa Iktina (or hire – purchase). In such a contract, the bank finance an equipment for the customer, a building or a turnkey plant through payment of a rent agreed upon by mutual agreement between the parties with the customer’s commitment to pay these rents on an investment account that will allow him, eventually, to purchase the financed asset. Profits generated by the rents deposited in this investment account are for benefit of the customer. With regard to buildings, the difficulties encountered by the bank remain in high costs under double transfer.
Khard Hassan: This is an exceptional free loan granted, in general, to a loyal customer who encounters difficulties. The bank does not take profits and therefore the customer pays only the principal that has been granted to it. This product represents just 1% of jobs in Islamic banks.
IV Areas of intervention
Our financial institutions finance all sectors of the economy provided that they comply with Shariah. Thus the projects related to the creation of beer, sausage (pork-based) or construction of places (restaurants, hotels) where these products are used are excluded.