Islamic Banking Solutions
At NCB, we provide a range of Shariah compliant products and services designed to meet the needs of our customers.
Shariah Compliant Business Banking
Islamic banking is a form of modern banking based on Islamic legal concepts. It complies with the principles of Shariah law, and encourages risk-sharing, instead of supporting financing based on a fixed pre-determined return.
NCB Corporate Banking supports the main needs of our corporate customers, with Islamic banking solutions ranging from structured finance and trade services to cash management products.
Murabaha: Shariah Compliant Financing
Murabaha is a sale contract between the bank (as the seller of goods) and the client (as the purchaser), based on the disclosure of the initial price to the customer NCB purchases goods on the spot at the customer’s request, and then sells them back him on credit at a mutually agreed marked-up price.
In a Murabaha, the bank has to:
- Acquire the asset
- Take possession of the asset
- Sell it to the client after disclosing the cost of the purchase and the rate of profit required
Musharaka: Profit-and-Loss Sharing
Musharaka, which literally means ‘sharing’, is a contract of partnership where two or more parties jointly contribute capital to a venture and share the resulting profit and loss. This type of financing could be considered typical equity financing whereby the bank and the customer agree on a partnership and define their roles and contribution up front.
Ijara: Convenient Leasing Options
NCB offers our corporate customers the ability to lease equipment or property. This form of leasing is called Ijara, and it is similar to conventional leasing whereby the contract builds in the option to buy the goods at the end of the Ijara period.
Tawaruq: Buy and Sell Commodities
NCB provides our corporate customers with Shariah compliant financing based on Tarawuq principles. Traditional Tawaruq involves purchasing goods on deferred payment in order to sell them in the market for a lower cash price. The current Tawaruq system employed by Islamic banks is based on the same concept using a different mechanism.
In a Tawaruq deal, the business must know exactly the type, quantity, and the final price of the commodity being purchased. In a Tawaruq transaction, the bank cannot repurchase the commodities sold as that would be considered an ‘Ina sale’, which is prohibited by Shariah Law. Therefore, NCB acts as an agent on behalf of the business and sells the commodities to a third party.