Islamic Trust Funding

Definition of "Islamic Trust Funding"

A mode of finance for long-term home-buyers offered by some Islamic banks. Under this mode of finance, the bank purchases the asset on participation basis whereby the other party also contributes 15–20 per cent of the capital. The house so purchased is leased out to the borrower who also becomes the tenant. The bank not only receives the share of its profit, but the borrower also gradually purchases the share of the bank by increasing his own participation.