Fatwa and Shari'a Supervisory Board

Our Fatwa & Supervisory Board (FSSB) is comprised of leading Islamic scholars who have extensive experience and expertise in legal, financial and banking-related matters. The Board is responsible for reviewing, approving, and overseeing all of our product offerings, and is empowered to issue rulings in strict adherence to the principles of Shari’a.

At the same time, our FSSB works closely with our various business units to formulate and create innovative and dynamic financial solutions for our clients that are permissible under Islam.

Roles & Responsibilities

The FSSB is a separate and independent entity of Noor Islamic Bank which made of esteemed Shari’a scholars appointed by the BOD. The FSSB is responsible to advice Noor Islamic Bank on the financial transactions executed by Noor Islamic Bank in line with the Shari’a requirements. The roles and responsibilities of the FSSB includes the followings:

• To issue resolutions, decisions (fatwas) and recommendations pertaining to issues presented by the Noor Islamic Bank;
• To supervise and validate on Noor Islamic Bank activities to ensure their compliance with the Shari’a requirements;
• To participate in developing new products based on the request of Noor Islamic Bank;
• To provide appropriate Shari’a solution in the financial concept presented by the Noor Islamic Bank management; and
• To review all forms of contracts and agreements pertaining to the Noor Islamic Bank transaction with the shareholders, depositors etc to ensure their compliance with Shari’a requirements.

Members

The following scholars are members of Noor’s Fatwa & Shari’a Supervisory Board:

Dr. Mohamed Ali Elgari – Chairman

An active member of the International Islamic Fiqh Academy, he serves as an expert at the Islamic jurisprudence academies of the Organization of Islamic Countries and the Islamic World League

Dr. Elgari graduated from the University of California with a Ph.D. in Economics, and currently serves as a Professor of Islamic Economics and Director of Islamic Economics Research at King Abdulaziz University in Jeddah. He is also a member of Shari’a Boards on many Islamic Banks and Takaful Companies across the Middle East, Asia and North America.

Dr. Abdul Sattar Abu Ghuddah - Member

A member of the Islamic Fiqh Academy, Jeddah and the Accounting and Auditing Standards Boards of Islamic Financial Institutions (AAOIFI), he also served on the Fatwa Board of the Ministry of Islamic Affairs in Kuwait.

Dr. Abu Ghuddah formerly taught Fiqh and Islamic studies at the Faculty of Law and Shari’a at Kuwait University. He earned a Ph.D. in Shari’a and Comparative Fiqh and a M.A. in Shari’a and Hadith from Al-Azhar University, and B.A. degrees in Islamic Shari’a and in Law from Damascus University.

Dr. Mohammed Daud Bakar - Member

Dr. Bakar is a member of the Central Shari’a Advisory Council of the Central Bank of Malaysia and Securities Commission of Malaysia, and is also an active member of the Shari’a Board of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI).

He also serves as an Associate Professor in Islamic Law and the Deputy Rector, Student Affairs and Discipline, at the International Islamic University in Malaysia. He holds a Ph.D. from University of St. Andrews, Bachelor of Jurisprudence at University of Malaya and a Bachelors degree in Shari’a from the University of Kuwait.

Dr. Mohammed Abdulrahim Sultan Al Olama - Member

Dr. Mohammed Abdulrahim Sultan Al Olama has a distinguished academic background. He has achieved his Bachelor Degree in Shari’a from Islamic University in Madina Al-Munawara, KSA and has completed his Master and PhD in Islamic Fiqh from Umm-ul-Qura University, KSA.

Dr. Al Olama is currently an Associate Professor in UAE University, Islamic Studies department. Dr. Al Olama is an integral part of various seminars and conferences held locally, regionally and internationally. In addition, he has participated in many research activities and published various books. He is a member of many Shari’a Boards of Islamic banks and financial institutions.

Islamic Modes of Financing

We offer Shari’a compliant facilities across various industry sectors including trading, manufacturing, commercial real estate, contracting and etc. Some of our products and offerings include:

• Murabaha
  The term refers to a financing facility, where the Bank buys an asset on the order of the customer at the cost price and sells it to the customer at an agreed sale price (cost price + profit). Murabaha is not considered as a personal loan but a commercial transaction and is therefore an Islamic instrument of financing.
• Ijarah
  Ijarah is an Arabic term, literally meaning ‘to give something on rent’. It involves a contract where the Bank buys an asset and then leases the right of usufruct (use) of the asset to the Customer for a particular period of time. The rent amount can be split into a fixed portion and a variable portion (the variable portion should be based on a benchmark).
• Istisna’
  Istisna' is a sale transaction where a commodity is transacted before it comes into existence. It is an order to a manufacturer to manufacture a specific commodity for the purchaser. The manufacturer uses his own material to manufacture the required goods. In Istisna', price must be fixed with consent of all parties involved. All other necessary specifications of the commodity must also be fully settled.
• Musharaka
  A form of partnership between the Islamic bank and its client whereby each party contributes to the capital of partnership in equal or varying degrees to establish a new project or share in an existing one whereby each party becomes an owner of the capital on a permanent or declining basis and shall have his due share of profits.

Glossary of Terms

Terminology	Meaning
Ahl al-hadith أهل الحديث	Jurists/Scholars who follow the apparent meaning of hadith.
Al Wadi’ah الوديعة	Safe custody. Originally, safe custody is referred to as wadi’ah yad amanah, i.e. trustee custody, which according to Shari’a; the trustee custodian has the duty to safeguard the property held in trust.
‘Aqd عقد	Contract
Aqidan عاقدان	The two parties to the contract
Ayn عين	A tangible (physical) asset or corpus
Bai’ al-Murabaha بیع المرابحة	A sale contract based on cost plus where the acquisition cost and the seller’s profit margin are disclosed to the buyer at the time of the contract. The settlement of the price is normally made on deferred payment terms.
Bai’ al-Istisna’ بیع الإستصناع	A purchase order contract whereby a buyer orders a seller to manufacture an asset according to specifications in the purchase contract to be delivered on a certain future date. The settlement of the purchase price is according to an agreed terms and conditions between the two parties.
Al-Sarf الصرف	A contract of buying and selling of currencies.
Bai’ al-Wadi’ah بيع الوضيعة	Resale of goods with a discount on the original stated cost.
Bay’ بيع	Sale
Dhamanah ضمانه	A contract where a person underwrites claims or obligations that should be fulfilled by a debtor, supplier or contractor. In the event that the debtor, supplier or contractor fails to fulfil his obligations, the guarantor is responsible to fulfil such obligations. Majority of Shari’a scholars view that the dhamānah is similar with kafālah.
Fatwa فتوى	An opinion or pronouncement on Shari’a issued by a group of scholars (fuqaha’ - فقھاء ) who are sufficiently qualified and knowledgeable of the methodology for the issuance of fatwa, as well established under the discipline of Islamic jurisprudence (usul al-fiqh – .(أصول الفقة )
Fiqh فقه	Science of Islamic law
Fiqh al-muamalat فقه المعاملات	Islamic law of transaction
Gharar غرر	An unknown fact or condition. In a commercial transaction, an excessive/major gharar ( غررفاحش /gharar fahish), e.g. the fact or condition of either the contracting parties or the asset in the contract or the price of the asset are not known or made known to contracting parties makes a contract null and void.
Ghish غش	Cheating, fraud, or deception. All of these are prohibited by the Shari’a.
Gharar fahish غرر فاحش	Major uncertainty
Gharar Yasir غرر يسير	Minor uncertainty
Halal حلال	Lawful or permissible. The concept of halāl ( حلال ) has spiritual overtones. In Islam there are activities, professions, contracts and transactions that are explicitly prohibited (harām - حرام ) by the Shari’a. All other activities, professions, contracts and transactions are halāl. The concept of halāl differentiates Islamic economics from conventional economics. In conventional economics all activities are judged on economic utility. In Islamic economics, spiritual and moral factors are also involved, where an activity may be economically sound but may not be allowed if it is forbidden by the Shari’a.
Haram حرام	Unlawful or forbidden. Activities, professions, contracts and transactions that are explicitly prohibited by the Shari’a.
Hiba ھبة	A gift awarded to a person voluntarily or something given to a person without exchange.
Hiwalah حوالة	A contract of transferring a debt obligation of a debtor to a third party.
Hajiyyat حاجيات	General needs
Ibra إبراء	Giving up of a right. In a commercial transaction a creditor gives up part or all of his right to a debtor usually for early settlement of the debt.
Ijarah إجارة	A contract whereby an owner of asset leases out the asset to a lessee at an agreed rental payment and pre-determined lease period upon the contract. The ownership of the asset remains with the lessor while the lessee only owns the right of the use of the asset.
Ijarah Muntahiah Bit-Tamleek إجارة منتهية بالتمليك	Refers to an Ijārah contract to be followed by a bai’ (sale) contract. Under the first contract, the lessor leases out an asset to a lessee at an agreed rental payment over a specified period. Upon expiry of the leasing period, the lessee enters into a second contract to purchase the property from the owner at an agreed price.
Ijtihad اجتهاد	A jurist (faqih)’s endeavor to formulate a rule or legal decision (hukum) by interpretation of the evidence (dalīl) found in the Shariah sources.
IJma إجماع	Consensus of Muslims scholars
Ju’alah جعالة	A unilateral contract promising a reward for the accomplishment of a specific task.
Khiyanah خيانة	A breach of trust, betrayal or treachery which is clearly prohibited by Shari’a.
Kafalah كفالة	Guarantee/surety ship
Maisir ميسير	Gambling. Any activity that involves betting, involving money or any items on the outcome of an unpredictable event. The bet is forfeited if the outcome is not as predicted by the bettor and the person against whom the bet is made takes the bet. This activity is clearly prohibited by the Shari’a.
Mal مال	Anything of natural desire by humankind, and can be stored for times of necessity; has specific or general use and is permissible by Shari’a for the purpose of extracting its benefit.
Mudharabah مضاربة	A contract between a capital provider (rabbul māl) who provides 100% capital for a business and entrepreneur (mudhārib) who manages the business applying his expertise. Under this contract, the resulting profit is to be shared between them according to a pre-agreed ratio, while any loss is to be borne solely by the provider of capital.
Muqasah مقاصة	Debt settlement by contra transaction or setting off.
Musaqah مساقة	An agricultural contract based on partnership whereby the owner of agricultural land shares its produces with another person in return for his services in irrigating the garden.
Musharakah مشاركة	A contract between two or more parties to contribute capital in various proportions to a partnership. Profits generated by the partnership are shared in accordance with the terms of the mushārakah contract whilst losses are shared in proportion to the respective contributors’ shares of the capital.
Musharakah Mutanaqisah مشاركة متناقصة	Diminishing mushārakah; allows equity participation and sharing of profits in a pre-agreed ratio, and sharing of losses on a pro-rata basis. This provides a method through which the financier – partner (bank) keeps on reducing its equity in the asset, ultimately transferring ownership of the asset to the customer/ partner.
Mahal al-‘aqd محل العقد	Subject matter of a contract
Majlis al –aqd مجلس العقد	Contractual session
Manfa’ah منفعة	Usufruct / Benefit
Muamalat معاملات	Commercial transaction and social sphere of human activity
Al Qabadh القبض	Qabadh means taking possession in the contracts of exchange (‘uqud al- muāwadhāt). Generally qabadh is practiced based on urf i.e. the common practices of the local community in recognizing the way the possession of an asset has taken place. Qabadh varies from one type of asset to another.
Qardh al-Hasan قرض الحسن	Refers to benevolent loan i.e. a loan contract between two parties with no extra charge over and above the loan. Any extra payment imposed by the lender or promised by the borrower is considered as riba, thus prohibited. However during payment of debt the borrower is permitted to pay extra on payment at his absolute discretion as a token of appreciation to the lender.
Qur’an قرءان	The holy scriptures of Islam i.e. the words of Allah revealed to the Prophet Muhammad SAW in Arabic conveyed by the angel Jibrail AS.
Rahn رهن	Making an asset a security or collateral for a debt. The collateral will be used to settle the debt when the debtor is in default. It may also be used as a name for a kind of borrowing with collateral or pawn broking.
Riba ربا	An increase, in a loan transaction or in exchange of a ribawī asset, accrued to the owner (lender or seller) without giving an equivalent counter value or compensation in return to the other party. It is prohibited according to Shari’a. In lending, it is the extra payment imposed by the lender or promised by the borrower over and above the loan (known as ribā qardh). In trade it is mostly the difference in weight in the exchange of gold of different measures of purity, e.g. 10 grams of 750 gold with 8 grams of 835 gold (known as ribā al-fadhl); or the difference in time between payment and delivery in foreign currency exchange, e.g. payment or RM10,000 on 1st January 2010 and delivery of USD3,800 on 2nd January 2010 (known as ribā al-nasīah).
Rabb al-mal رب المال	Owner of wealth who invests under the contract of mudarabah
Sadaqah صدقة	Voluntary charitable giving.
Shari’a شريعة	Islamic laws relating to all aspects of human life established by Allah for his servants. The laws are divided into three i.e. those relating to belief (aqīdah), those relating to deeds (fiqh) and those relating to ethics (akhlāq). In this meaning, Shari’a is another word for Islam.
Sukuk صكوك	Certificates of equal value representing undivided shares in ownership of tangible assets, usufruct and services or (in the ownership of) the assets of particular projects or special investment activity.”
Sukuk صكوك	Certificates of equal value representing undivided shares in ownership of tangible assets, usufruct and services or (in the ownership of) the assets of particular projects or special investment activity.”
Shahadah al dayn شهادة الدين	Certificates of the debt
Sharikah al inan شركة العنان	Partnership under which each partner invests capital and agrees to share profits and losses in a specified ratio
Sharikah al mulk شركة الملك	Proprietary partnership
Tadlis al-aib تدليس العيب	An act of a seller intentionally hiding the defects of goods, which is clearly prohibited by Shari’a.
Takaful تكافل	Shari’a compliant insurance i.e. a protection plan based on Shari’a
Al Tanajush التناجش	A conspiracy between a seller and a buyer wherein the seller is willing to sell the asset at a price higher than that of the market. This is done so that others will rush to buy the asset at a higher price, resulting in the seller obtaining a huge profit. This act is prohibited by Shari’a.
Al Tawarruq التورق	A purchase of an asset/commodity on deferred payment basis by way of either bai al-musāwamah or bai al-murābahah. The commodity is then sold for cash (wàriq) to a party other than the original seller.
Al Ujrah الأجرة	A payment for manfa’ah i.e. benefit of other’s property. Another term related to ujrah is ajr (plural ujūr), which refers to payment for a service. It is also applied to salary, wage, pay, fee(s), charge, enrolment, honorarium, remuneration, reward, etc.
Usul al-Fiqh أصول الفقه	Also called Islamic jurisprudence i.e. the discipline of knowledge and methodologies of understanding and interpreting Shari’a resources.
Al Wakalah الوكالة	A contract of appointment of an agent whereby a person appoints another to act on his behalf.
Al Waqf الوقف	An endowment or a charitable trust set up for Islamic purposes (usually for education, mosques, or for the poor). It involves tying up a property in perpetuity so that it cannot be sold, inherited, or donated to anyone.
Al Zakat الزكاة	A religious obligation of alms-giving on a Muslim to pay a certain amount of his wealth annually to one of the eight categories of needy Muslims (asnāf). The objective is to take away a part of the wealth of the well-to-do to be distributed among the asnāf. According to the Shari’a, Zakat purifies wealth and souls.

Frequently Asked Questions

1. What is Islamic Banking?

Islamic banking is a banking that is consistent with the Shari’a. This activity is carried out in accordance with the rules of Shari’a, known as fiqh mu’alamat which means ‘the rules on financial transactions’. One of the highlights of Islamic Banking is that it promotes a greater degree of fairness and equity in the conduct of banking business.

2. What is Shari’a? What are the principles of Shari’a that apply to Islamic Banking?

Shari’a is the set of rules derived from both the Holy Quran and the authentic traditions (Sunnah) of the Prophet Muhammad (peace be upon him) and the scholarly opinions (Ijtihad) based on al-Quran and al-Sunnah. The principles of Shari’a that govern Islamic banking include:

• Prohibition of interest (riba) in all financial transactions
• Prohibition of gharar (extreme uncertainty) on the subject of the transaction e.g. for sale, the subject matter of sale and the price etc. To Shari’a, this will makes the trade similar to gambling.
• Entitlement to return is due to liability of loss and vice versa.
• Obligations of trust (amanah), covenants (‘uqud), interdiction against unlawful (haram) earnings and expenditures, fraud of giving less than due in measure and weight, and unjust enrichment.

3. How can Noor Islamic Bank and its products be considered Islamic?

The Shari’a requires that the products or transactions be in compliance with the Shari’a rules and principles and promotes halal activities. These products should be approved and certified by the Fatwa and Shari’a Supervisory Board (FSSB) of the Bank and supported by the internal Shari’a Department to ensure that the Bank is operated in line with resolutions of the FSSB. Shari’a Department is actively involves in the product development and review of the operation etc….

4. Who are your Shari’a Board members and what is their role?

The Noor Islamic Bank Fatwa and Shari’a Supervisory Board currently comprise of four of the most eminent scholars in the field of Islamic banking as follows:

• Sheikh Dr. Mohamed Ali Elgari (Saudi Arabia) – Chairman
  An active member of the International Islamic Fiqh Academy, he serves as an expert at the Islamic jurisprudence academies of the Organization of Islamic Countries and the Islamic World League. Dr. Elgari graduated from the University of California with a Ph.D. in Economics, and currently serves as a Professor of Islamic Economics and Director of Islamic Economics Research at King Abdulaziz University in Jeddah. He is also a member of Shari’a Boards on many Islamic Banks and Takaful Companies across the Middle East, Asia and North America.
• Sheikh Dr. Abdul Sattar Abu Ghuddah (Syria) - Vice Chairman)
  A member of the Islamic Fiqh Academy, Jeddah and the Accounting and Auditing Standards Boards of Islamic Financial Institutions (AAOIFI), he also served on the Fatwa Board of the Ministry of Islamic Affairs in Kuwait. Dr. Abu Ghuddah formerly taught Fiqh and Islamic studies at the Faculty of Law and Shari’a at Kuwait University. He earned a Ph.D. in Shari’a and Comparative Fiqh and a M.A. in Shari’a and Hadith from Al-Azhar University, and B.A. degrees in Islamic Shari’a and in Law from Damascus University.
• Sheikh Dr. Mohd Daud Bakar (Malaysia)
  Dr. Bakar is a member of the Central Shari’a Advisory Council of the Central Bank of Malaysia and Securities Commission of Malaysia, and is also an active member of the Shari’a Board of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI). He also serves as an Associate Professor in Islamic Law and the Deputy Rector, Student Affairs and Discipline, at the International Islamic University in Malaysia. He holds a Ph.D. from University of St. Andrews, Bachelor of Jurisprudence at University of Malaya and a Bachelors degree in Shari’a from the University of Kuwait.
• Sheikh Dr. Mohammad Abdul Rahim Sultan Al Olama (UAE)
  Dr. Mohammed Abdulrahim Sultan Al Olama has a distinguished academic background. He has achieved his Bachelor Degree in Shari’a from Islamic University in Madina Al-Munawara, KSA and has completed his Master and PhD in Islamic Fiqh from Umm-ul-Qura University, KSA. Dr. Al Olama is currently an Associate Professor in UAE University, Islamic Studies department. Dr. Al Olama is an integral part of various seminars and conferences held locally, regionally and internationally. In addition, he has participated in many research activities and published various books. He is a member of many Shari’a Boards of Islamic banks and financial institutions.

The roles of these scholars are:

• Issue resolutions, decisions (fatwas) and recommendations pertaining to issues presented by the Companies.
• Supervise and validate on the Companies’ activities to ensure their compliance with the Shari’a rules and principles.
• Participate in developing new products based on the request of the Companies.
• Provide appropriate Shari’a solution in the financial concept presented by the Companies’ management.
• Review all forms of contracts and agreements pertaining to the Companies’ transaction with the shareholders, depositors etc to ensure their compliance with Shari’a rules and principles.
• The FSSB shall present a comprehensive annual report to the Board of Directors summarizing the transactions referred to it and the opinions relating to transactions which were implemented in accordance with the applied rules and regulations. A representative of the FSSB shall read such report before the Ordinary General Assembly.
• While the FSSB is responsible for forming and expressing of decision on the extent of the Companies’ compliance with the Shari’a rules and principles, the responsibility for compliance therewith rests with the management of the Companies.

5. What is the advantage of the products of Noor Islamic Bank over products offered by other Islamic financial providers?

At Noor Islamic Bank, we constantly strive to provide financial solutions that meet the requirements of our customers. Noor Islamic Bank offers Islamic banking solutions which combine our financial expertise with your enduring values. Now customers can conveniently experience banking activities within the confine of the Shari’a rules and principles.

6. What is the purpose of Islamic financial providers?

The International Association of Islamic Banks (IAIB) explains the purposes of Islamic banks as follows:

“The Islamic banking system involves a social implication, which is necessarily connected with the Islamic order itself, and represents a special characteristic that distinguishes Islamic banks from other banks based on other philosophies. In exercising all its banking or developmental activities, the Islamic bank takes into prime consideration the social implications that may be brought about by any decision or action taken by the bank. Profitability--despite its importance and priority--is not therefore the sole criterion or the prime element in evaluating the performance of Islamic banks, since they have to match both between the material and the social objectives that would serve the interests of the community as a whole and help achieve their role in the sphere of social mutual guarantee. Social goals are understood to form an inseparable element of the Islamic banking system that cannot be dispensed with or neglected.”
Within the broader financial system, Islamic finance can play a role in reestablishing a sense of ethics that has been lost and to try to make its concept and products acceptable to ethically minded Muslims, Christians, Jews and others who are engaged in financial transactions.”

7. What constitutes Riba?

Simply, riba is interest i.e. any amount, big or small, over the principal, in a contract of loan or debt. Riba is prohibited by the Shari’a and has been classified by Islamic scholars into Riba al-Nasi’ah and Riba al-Fadl.

Riba al-Nasi’ah is collected in compensation for deferring a due debt to a new term of deferment regardless of the source of the due debt: whether it resulted from a loan, or a deferred price in a sale. It is associated with interest as being practiced in conventional banking industry and also known as Riba al-Quran because of the clear prohibition on this type of riba in the holy book or Riba al-Jahiliyyah due to it wide practiced during the age of ignorance (jahiliyyah). The prohibition of this form of riba is primarily based on the following verse of the Quran:

“O you who have believed, fear Allah and give up what remains (due to you) of interest, if you should be believers. And if you do not, then be informed of a war (against you) from Allah and His messenger! But if you repent, you may have your principal – (thus) you do no wrong, nor are you wronged. (Al-Quran 2 (Al-Baqarah):278-279)”

8. Why did Islam prohibit Riba?

“But if you repent, you may have your principal – (thus) you do no wrong, nor are you wronged. (Al-Quran 2 (Al-Baqarah): 279)”

As is evident from the verse quoted above, the rationale behind the prohibition of interest suggests an economic system where all forms of exploitation (“neither wrong or be wronged”) are eliminated. In particular, Islam wishes to establish justice between the financier and the entrepreneur: the financier should not be assured of a positive return without doing any work or sharing in the risk, while the entrepreneur, in spite of his management and hard work, is not assured of such a positive return.

9. Noor Islamic Bank remunerates Shari’a scholars for their services. Isn’t there a conflict of interest here?

Just like external auditors are required to ensure that the activities of a certain institution are in line with regulations, Shari’a scholars are mandated to ensure that financial activities of the institution they supervise are in accordance with the Shari’a. Their decisions are also watched very closely by the market and hence their peers. This adds a further layer of comfort that the decisions of Shari’a scholars are independent of the pressures of the institution they work for.

10. Is there any independent central body that regulates Shari’a scholars globally, in order to maintain some degree of consistency within the Islamic banking industry?

There are global bodies of Shari’a scholars that work towards promoting consistency and standardization i.e. the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and International Islamic Fiqh Academy under the ambit of the Organization of Islamic Conference (OIC) . The Shari’a Board of AAOIFI has issued Shari’a Standards that are widely followed within the Islamic banking Industry. However, the scholars are not regulated by a central authority and it is expected that the general acceptance of Shari’a standards will create a market Precedent and consistency.

11. Is it permissible to use EIBOR (Emirates Inter-Bank Offer Rate) as a Benchmark?

Shari’a permits using the conventional market as a benchmark. For example for home finance based on Ijarah. According to the Shari’a, the rent in an Ijarah transaction can be set at any value agreed between the Bank (lessor) and customer (lessee/ tenant). If the rent is not ideal, it is certainly permissible to use the prevailing interest rate as a benchmark in determining the rate. The criterion for acceptability by the Shari’a is that the transaction is compliant with the Shari’a rules and principles, regardless of the price of the goods or how that price is determined.

Consider the example of a Muslim butcher in a non-Muslim country. If he wishes to sell meat that has been slaughtered to the Shari’a, there is no reason for him not to benchmark his prices to that of conventional Chinese butchers selling the same meat that is not halal. The way he priced his goods is independently of haram meat and we cannot conclude that the meat he sells is no longer halal.

12. Is it permissible to impose a charge for any late or partial payments?

It is permitted by the Shari’a to prescribe in the contracts involving indebtedness (such as Murabaha) an obligation on the customer, in the case of default in payment, to donate an amount or a percentage of the payment due on condition that this be donated to charitable causes under the supervision of the bank’s Fatwa and Shari’a Supervisory Board.

Such charge can be imposed in order to encourage financial responsibility and to recover administrative losses (other than opportunity cost) by the Bank due to customer’s default in paying installment. This charge is not interest, and does not reflect the interest rate. If the charge collected is more than the actual losses of the Bank, the remaining will be donated on the customer’s behalf to charitable organization.

13. How is Ijarah financing different from conventional lending? Isn't it simply relabeling interest as profit?

Ijarah is a contract “to transfer the usufruct of a particular property to another person in exchange for a rent claimed from him.” In other words, the term Ijarah is comparable to a conventional leasing mode of financing.

Under this arrangement, the customer being the lessee pays rent for the use of the property, instead of paying interest on the loan amount. Throughout the term of finance, the assets remain the property of Noor Islamic Bank and it is responsible to bear all the ownership related risks attributable to those assets.

14. Is Islamic banking meant for Muslims only?

No. Islamic banking is available for all individuals of all religious beliefs.

15. How do Islamic banks reward their depositors since payment of interest is not allowed?

Shari’a allows a profit sharing arrangement between the bank and the depositor. Profits from Islamic banking activities will be shared between the bank and the depositor based on an agreed profit sharing ratio and paid in the form of dividends. The amount of dividend payout depends on the profits generated from the bank’s operation. This arrangement is called Mudarabah.

16. What is mark-up in Murabaha? How is it different from interest?

The mark-up is the margin added as a profit in addition to the real cost of the commodity sold under Murabaha sale. The mark-up should be agreed upon between the bank and the customer.

Mark-up is different from interest in that it is related to machinery, equipment, commodity etc., whereas interest is related to money.

17. Shari’a prohibits interest on loans. How does Noor Islamic Bank earn income?

Noor Islamic Bank does not charge interest in its financing operations. Most of its income is derived from leasing (rental payment), sale (installment) and foreign trade financing on which a mark-up rate is applied in accordance with Shari’a rules and principles. Further, it recovers the administrative costs of financing and technical assistance financing by charging a service fee on the service rendered to the customers subject to the approval of the Fatwa and Shari’a Supervisory Board.