Istijrar

Definition of "Istijrar"

A financial instrument issued by Pakistan’s Muslim Commercial Bank (MCB). It is an Islamic mode of finance, enabling buyers to buy commodities such as cotton, edible oils, pharmaceuticals, etc. conveniently. The sale price payable to the bank is determined by the market forces. The sale price is taken as the average of market prices, during the financing period relating to the particular commodities determined by reliable and undisputed sources. The buyer has an option to fix sale price at any time on or before the due date for repayment provided the market price exceeds the defined upper limit. The price would then be payable by the buyer to the MCB on due date. Similarly, MCB has the option to close the deal under volatile price fluctuations, provided that the market price falls below the defined lower limit. In such cases MCB would declare the pre-determined provisional price to be the sale price, to be paid on due date.