Multiple Use of Modalities
A number of the mentioned modalities can be used concurrently to finance one single operation. Thus an oil mill’s seasonal needs can be financed on a Musharaka basis. If during the season the mill was able to fulfil its projected capacity, and the partner wanted to crush more seeds, the bank may avail the additional produce on a Murabaha sale (so as not to upset the accounts of the original operation). It may also extend some beneficial loan to cover one item that might be essential for the operation in a general way but cannot be incorporated conveniently into the seasonal accounts e.g. it may wish to provide a generator set or a storage facility on the basis of Ijara for the on-going operation without necessarily matching the time span of the seasonal Musharaka operations.
The two contracts of decreasing participation and Ijara (leasing) form the basis of long-term home buyer finance adopted by AIBL in the UK.
Source: Islamic Banking, Abdur Rahim Hamdi. Republished with permission.
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