Get Even More Visitors To Your Blog, Upgrade To A Business Listing >>

Report on Meezan bank ( Islamic modes of financing)

Contributed by: komal Rizvi & waqar munawar
Topic: Meezan bank ijarah (Islamic leasing )

Definition of IJARAH
A type of contract in Islamic finance.
Islamic financial institutions use IJARAH contracts either as a lesser or a lessee A few legal scholars characterizeIJARAH as responsibility for right to the event of utilizing a benefit for a period as an exchange for an attention.IJARAH is arranged into working IJARAH, which does exclude a guarantee to exchange the lawful title of the rented resource into the tenant toward the end of the lease, and IJARAH "muntahia-bittamleek", which is finished up by passing the legitimate title of the rented advantage for the renter.
For the IJARAH contract to be substantial it must be gone before by securing of the advantage (or the usufruct of the benefit) to be rented by the establishment (lesser). TheIJARAH contract is a coupling contract which not one or the other party may end or change without the other's assent
Meezan Bank & car IJARAH
As a step towards Meezan Bank's mission to give an one-stop search for creative quality included Shariahagreeable items, Meezan Bank's Car IJARAH unit gives auto financing focused around the standards of IJARAHand is free of the component of premium.
Auto IJARAH is Pakistan's first Interest Free auto financing focused around the Islamic financing mode of IJARAH(Islamic renting). This item is perfect for people searching for auto financing while keeping away from an investment based exchange.
Meezan Bank' Car IJARAH is an auto rental assention, under which the Bank buys the auto and rents it out to the client for a time of 1 to 5 years, concurred at the time of the agreement. Upon culmination of the lease period the client gets responsibility for auto against his starting security store.
Eligibility:
In Meezan Bank you can enjoy car IJARAH if you:

Are a salaried individual/ self-employed professional/businessman
Have a net take home income exceeding three times your monthly rental
Have two years working / professional / business experience
Are working with your present employer for at least six months (for salaried individuals)

Process :
1- Client requests bank to purchase a new car(request)
2-Bank ask clients to show up with documents.(Documentation)
3- Salaried person must submit his/her salary statement or a businessman must submit his income statement of his Bank's account. (verification)
4- Bank then purchase the car to rent it to the client for rental specified in the IJARAH Car Lease arrangement.
5-Ownership of the car remains with the ban. (ownership)
6- All risks will be borne by the bank ( Takaful)
7- Customer continues to pay rental till the end of theIJARAH period.
Meezan Bank used car financing: 
In addition to leasing of new cars, Meezan Bank also provides the unique opportunity of leasing second hand, both locally assembled and imported vehicles. This feature is specifically designed as a highly economical option. The Used Car IJARAH facility is made available at a minimum-security deposit as low as 20%. Financing of used cars are subject to the following Selection Criteria.

The second hand car selected should not be morethen twice registered.
The vehicle should not be older than 5 years.
The minimum security deposit for a vehicle up to 2 years of age is 20%, while minimum security deposit for a vehicle over 2 years of age is 30%.
At the time of maturity of IJARAH agreement, the vehicle should not be more than 8 years old. This means that if a car is 5 years old, the Car IJARAHtenure is not more than 3 years and if its 4 years old, the tenure may be set for a maximum 4-year term.
Second hand vehicles selected should not be worth more than Rs. 1.5 million and less than Rs. 250,000/-.Meezan Bank will have the vehicle valued by an independent valuation company accordingly

Meezan bank Residual Value IJARAH.
The value of an asset at the conclusion of the lease term or the price at which a fixed asset is expected to be sold at the end of its useful life is commonly referred as Residual Value (RV).

The average car buyer should take some effort to determine the estimated value of their new car in the future it would be best to know how much your car is worth in the future.

Based on the above definition, Meezan Bank Car IJARAHis introducing Residual Value Financing, enabling customer to afford luxury with economy, where the customer can enjoy the benefits of eased rental. A high residual value would result in a lower monthly lease.


Premature Termination

In case the customer wishes to terminate the Agreement before the agreed period, the customer will have an option to buy the vehicle on the agreed purchase price as mentioned in the Terminal-value schedule forming part of the lease documents. The purchase price takes into consideration the following amounts:

The principal outstanding as determined by the amortization schedule of the lease.
Residual value amount.

Premature Termination

In case the customer wishes to terminate the Agreement before the agreed period, the customer will have an option to buy the vehicle on the agreed purchase price as mentioned in the Terminal-value schedule forming part of the lease documents. The purchase price takes into consideration the following amounts:

The principal outstanding as determined by the amortization schedule of the lease.
Residual value amount.


Car IJARAH Schedule:
Car value = 200,000 PKR
Down payment = 20,000
Time = 1 years = 12 months
I = 10%
Depreciation = 200000-20000/12 = 15000
Installment by my approach
Installment(Profit + investment) /n
Profit = i/12 { 2 (I) – (n-1)(d)}n/2
In this case it would be:
Profit =   .1/12{ 2 (200000) – (12-1)(15000)}12/2
Profit = 11750
Installment = (11750 + 200000)/12 = 17645
Month
Investment
Depreciation
Balance
Profit
Instalment
0
20000



17645
1
200000
15000
185000
1667
17645
2
185000
15000
170000
1541
17645
3
170000
15000
155000
1416
17645
4
155000
15000
140000
1291
17645
5
140000
15000
125000
1166
17645
6
125000
15000
110000
1041
17645
7
110000
15000
95000
916
17645
8
95000
15000
80000
791
17645
9
80000
15000
65000
667
17645
10
65000
15000
50000
541
17645
11
50000
15000
35000
417
17645
12
35000
15000
20000
296
17645
                                                                Total profit = 11750
Customer opinions on Meezan Bank CarIJARAH:
In Pakistan 40 out 0f 100 have there on conveyance, and usually people buy Car through lease, so car IJARAH is a wide market , trend of Purchasing cars is increasing now a days so it is good for Islamic Banks, to sell their product to customers.  
Consumers consider IJARAH Car leasing most convenient way to fulfil their desires to own a car based on rental system and in the end that has to be in the ownership of lessee. Customers appreciate Meezan Bank's Car IJARAHDue to Following reasons:
Pakistan’s first truly / completely Shariah-compliant Car Financing Scheme
Lowest per month rent – Much lower than normalIJARAH
Lowest processing charges
Lowest upfront payment
First rent after one month of delivery
Availability of Takaful
Free accidental death coverage up to Rs. 400k
Free Tracker (with installation & annual monitoring charges)
Competitive Service

Suggestions:
Islamic Banks should advertise its Islamic products in comparison to conventional products.
Islamic Banks should introduce more easy arrangement for car financing.
Diminishing Musharkah
Diminishing Musharkah is an offering mode of financing. Diminishing Musharkah is essentially the Partnership mode which is utilized by accomplices to the agreement just to build a building.
In Diminishing Musharkah bank helps the measure of fund required for development of building and rest of sum is financed by the customer just. Responsibility for developed building is exchanged to the customer with the steady installment of rent to the bank.
With the installment of every unit proprietorship is exchanged to customer and at last bank exchanges complete property to customer, thus, customer turns into the holder of the property. Reducing Musharkah is Islamic mode of financing which is agreed to the shariah principles of Elimination of Gharar, Prohibition of Riba and chargingintrest over postponement in installment of units.
Meezan Bank Diminishing Musharkahh
Easy Home is a Shariah-compliant Home Finance facility! One that is comprehensive, affordable, and totally hassle-free. Meezan Bank is committed to meet our customers’ needs in a truly Shariah-compliant manner coupled with dedicated service excellence. Why not have the best of both worlds? Isn't that what you are working so hard for anyway?
Easy Home not only allows you to own your own home by paying easy instalments but also keeps you safely away from interest based financing.
Easy Home works on a Diminishing Musharakahbasis
With Easy Home you participate with Meezan Bank in joint ownership of your property, where the Bank will provide a certain amount of financing. You agree to a monthly payment to the bank of which one component is for use of the home, and another for your equity share. In fact, the total monthly payment is reduced regularly as your share in the property grows. When you have made the full investment, which had been agreed upon, you become the sole owner with a free and clear title to the property.
Financing in DHA Creek Vista
Creek Vista is a mega residential project of DHA comprising of high rise complexes equipped with all modern day facilities. Meezan Bank proudly announces to be the first Islamic Bank to extend Home Financing for purchase of apartments in Creek Vista.
Features:
Flexible Financing Tailored to Support You
High financing amounts
Adequate financing against property value
Flexibility to make partial prepayments
Minimal processing charges
Affordable and competitive installment amounts with a regular reducing monthly rental
Rate relaxation for select MNCs & LCGs

Quick Processing Time
Absolutely hassle-free. Quick turn-around-times, with no burdensome complexity or excessive paper work. It is simple, halal, and easy! Click here for details

Even the eligibility is Easy!
We at Meezan Bank, as prescribed by IslamicShariah, seek to guarantee equal access to financing for all qualified applicants, while ensuring that the qualification process is bias-free. Click here for details

Non Resident Pakistanis
Non Resident Pakistanis can apply with peace of mind for the fastest processing of their case.

Procedure:
Applying for Islamic Housing Finance is Easy! Simply download the application form and follow the 10 easy steps given below to make your dream of owning a Home, in a truly Halal way, come true. 
Step 1: Application Form & Initial Payment
Submit a filled & signed application form to Meezan Bank.
Submit the required cheque for Processing Fee & External Agency costs.

Step 2: Required Documents
Kindly attach all the required documents, as mentioned below, along with your Application Form:
Personal Information

Copy of Applicant's CNIC
Copy of Co-Applicants CNIC (if applicable)
2 latest passport-sized colored Photographs of Applicant / Co-Applicant
Copy of last paid Utility Bills (Electricity/Gas/Telephone)
Borrowers Basic Fact Sheet
Copy of CNICs of legal heirs
Copy of recent Credit Card Bills and any other credit facilities (if applicable)
Copy of professional Degree / Certificate (if applicable)
Copy of Rent Agreement (if applicable)
Life Takaful documents (Declaration of Good Health / Health Questionnaire)

Income Information

For Salaried Individuals
Employment Certificate including salary, date of joining & present designation
Original or Certified salary slip of last three months
Previous employment proof (if applicable)
Salary A/c Bank statement - last 6 months
For Businessman / Self Employed / Professional
3 years proof of business (e.g. Tax Return / Bank Certificate)
Copy of NTN Certificate & last three years tax returns
Bank Statement of Business Account - Last 12 Months
Copy of Partnership deed (In-case of Partnership)
Professional Association Membership Certificate / Practice License (if applicable)
If you have selected the property to buy or want financing for construction/ replacement/renovation
Complete chain of property documents (copies at initial stage & original before disbursement)

In the case of a Co-Applicant, all income related documents will also be required.

Step 3: Address Verification
Meezan Bank will verify your residential & office addresses and the addresses of references submitted.

Step 4: Income Estimation
For Businessman / Self Employed professionals 
Meezan Banks External Consultant will contact you to determine your monthly income to help you in obtaining the maximum possible financing from the Bank.

For Salaried Individuals
Meezan Bank will verify the income with your employer.

Step 5: Legal opinion
Meezan Bank will obtain a legal opinion on the property documents provided by you.
Step 6: Property Valuation
Meezan Banks appointed Valuation Agency will evaluate the property to determine its market value
Step 7: Credit Approval & Sanction Letter
After you have fulfilled all Meezan Banks credit requirements, we will give you a conditional sanction letter.
Step 8: Account Opening
After approval of the case, you are required to open an account at Meezan Bank.
Step 9: Signing of House Finance Agreement

After completion of the above steps and approval of your case, you are required to come to Meezan Bank for signing of the Islamic House Finance Agreement and other legal documents

*In Home Construction / Renovation Cases Original Documents will be handed over to the bank at this stage  
Step 10: Transfer of Property and Disbursement

In Home Buying / Replacement Cases
Meezan Bank officer & authorized lawyer will accompany you and the seller of the property to the appropriate bank or registrars office for Property transfer. Original Property Documents will be handed over to the lawyer who, after verification of the documents, will hand over the pay-order to the banker or seller and will then complete the legal formalities on Meezan Bank's behalf.


Schedule of Charges

The Easy Home application process is subject to the following fees

Segment
Salaried
Businessmen



Processing Charges
PKR 5,000
PKR 5,000
FED on Processing [email protected] 16%
PKR 800
PKR 800
Legal Report Charges
At Actual
At Actual
Property Valuation Charges
At Actual
At Actual
Income Estimation Charges
N/A
At Actual


*Documentation charges are exclusive of above-mentioned charges and will be obtained at the time of signing of Musharakah Agreement according to the limits of financing.

Charity / Late Payment Charges

In Easy Home, in the event of any delay in monthly payment without a valid reason, the customer will be required to pay as charity a sum of Rs.500/- (Rupees Five Hundred Only) and an amount @20% per annum on such overdue amount remaining unpaid.
Diminishing Musharkah Schedule:
Total investment = 100000
Bank investment = 50000
Time = n = 6
I = 10 %
Unit cost = 50000/6 = 83333
Months
Units
Profit
Total installment
Remaining units
Investment left
1
8333
833
9166
5
41667
2
8333
417
8749
4
33334
3
8333
333
8666
3
25001
4
8333
250
8580
2
16668
5
8333
167
8500
1
8335
6
8333
84
8419
0
0


Customers' Response to Diminishing Musharkah
Customers are somehow satisfied with the Islamic Banking partnership mode of Diminishing Musharkahh because it is a sight of relief for them that it is HALAL and according to the shariah . and it is their first preferenceaccording to them because
It is Halal based on Shiriah Principles
Convenient
Diminishing Musharkah is not widely accepted by consumer base just because Home Finance is not an easy arrangement to avail. Its terms and conditions must be altered in order to make it more acceptable to customer base.
Contrary to this there were customers who do not even know about Islamic Banking's products. Now question arises that how Islamic Banking should aware all those who are unaware of Islamic Banking?
Suggestions:
Islamic Banking need governmental support in its marketing.
Need to improve image.
Islamic bank should tell customers that we are ISLAMIC 100%.
Proper legalisation by Government
Need to aware Customers
Islamic Banks must market their services on easy accessible media like T.V ads.


Refference:



This post first appeared on Student Oriented, please read the originial post: here

Share the post

Report on Meezan bank ( Islamic modes of financing)

×

Subscribe to Student Oriented

Get updates delivered right to your inbox!

Thank you for your subscription

×