Musyarakah - Appendices

Transcription

1. BNM /RH/STD 028-7 Islamic Banking and Takaful Department Musyarakah Page 59/71 APPENDICES Appendix 1 Legitimacy of musyarakah 1. The legitimacy of the musyarakah contract is based on the Qur’an, the Sunnah of the Prophet Muhammad (peace be upon him) and the consensus of Muslim jurists. The Quran 2. The following verses from the Qur’an generally indicate the validity of Musyarakah. (a) ُّ ‫ش َر َكا ُء فِي‬ ُ ‫َفإِنْ َكا ُنوا أَ ْك َث َر ِمنْ َذل َِك َف ُه ْم‬ ‫ث ِمنْ َبعْ ِد َوصِ َّي ٍة‬ ِ ُ ‫الثل‬ ٍّ‫ُضار‬ َ ‫ْن َغي َْر م‬ َ ‫ي‬ ٍ ‫ُوصى ِب َها أَ ْو دَ ي‬ “If there be more (brothers and sisters of the same mother), they shall (equally) share the third of the estate, after payment of any bequest that may have been bequeathed or debt (incurred); the bequests made should not harm (the rights of the heirs).”60 The verse specifically underlines the rule of Islamic inheritance. However, in general context, Muslim jurists have regarded the text as containing general permissibility of any form of partnership. (b) ‫ِين آَ َم ُنوا‬ ُ ْ‫َوإِنَّ َك ِثيرً ا م َِن ْال ُخلَ َطا ِء لَ َي ْبغِي َبع‬ ٍ ْ‫ض ُه ْم َعلَى َبع‬ َ ‫ض إِال الَّذ‬ ‫ت َو َقلِي ٌل َما ُه ْم‬ ِ ‫َو َع ِملُوا الصَّال َِحا‬ “Truly many partners (in all walks of life) are unjust to one another: but not so those who believe and do good works, and they are few.”61 The verse reminds the partners to bind themselves to ethical value dealing with each other. This indirectly indicates the acknowledgement of the Qur’an in partnership. 60 61 Surah an-Nisaa’, verse 12. Surah as-Sod, verse 24. Issued on: 20 April 2015
2. BNM /RH/STD 028-7 Islamic Banking and Takaful Department Musyarakah Page 60/71 The Sunnah of The Prophet Muhammad (peace be upon him) ‫ " أنا ثالث الشريكين ما لم‬:‫عن أبي هريرة رفعه قال إن هللا يقول‬ 3. ."‫يخن أحدهما صاحبه فإذا خانه خرجت من بينهما‬ Narrated by Abu Hurayrah : The Apostle of Allah (peace be upon him) having said: Allah s.w.t, says: "I make a third [partner] with two partners as long as one of them does not betray the other, but when one of them betrays the other, I depart from them."62 ‫عن عثمان يعني ابن األسود قال أخبرني سليمان بن أبي مسلم قال‬ 4. ‫سألت أبا المنهال عن الصرف يدا بيد فقال اشتريت أنا وشريك لي‬ ‫شيئا يدا بيد ونسيئة فجاءنا البراء بن عازب فسألناه فقال فعلت أنا‬ ‫وشريكي زيد بن أرقم وسألنا النبي صلى هللا عليه وسلم عن ذلك‬ ."‫ "ما كان يدا بيد فخذوه وما كان نسيئة فذروه‬:‫فقال‬ Narrated by Usman who is meant Ibn Al-Aswad said: reported to me Sulaiman bin Abi Muslim said that: “I asked Abu Minhal about money exchange from hand to hand.” He said, “I and a partner of mine bought something partly in cash and partly on credit. Al-Bara' bin 'Azib passed by us and we asked him about it.” He replied, "I and my partner Zaid bin Arqam did the same and asked the Prophet (peace be upon him) about it.” He said: “Take what was from hand to hand and leave what was on credit.”63 5. ‫ أنه كان شريك النبي صلى هللا عليه‬، ‫عن السائب بن أبي السائب‬ : ‫ فلما كان يوم الفتح قال‬، ‫وسلم في أول اإلسالم في التجارة‬ . "‫"مرحبا بأخي وشريكي ال يداري وال يماري‬ Narrated by As-Saaib bin Abi As-Saaib, who had been a business partner of 62 63 Abu Daud, Sunan Abi Daud, hadith no. 2936. Al-Bukhary, Sahih Al-Bukhary, hadith no. 2317. Issued on: 20 April 2015
3. BNM /RH/STD 028-7 Islamic Banking and Takaful Department Musyarakah Page 61/71 Prophet Muhammad (peace be upon him) in the early days of Islam, related that on the Day of the Muslim conquest of Makkah, the Prophet (peace be upon him) said to him, “Welcome to my brother and partner, [who] does not wrangle or dispute.”64 Consensus of The Muslim Jurists (Ijma’) 6. This type of partnership has been practised throughout the history of Muslims without objection from the jurists. 7. Imam Ibn Al-Munzir states in his book al-Ijma`: “And they (Muslim jurists) agree on the validity of partnership where each of the two partners contributes capital in dinar or dirham, and commingles the two capitals to form a single property which is indistinguishable, and they will sell and buy what they see as (beneficial) for the business, and the surplus will be distributed between them whilst the deficit will be borne together by them, and when they really carry out [as prescribed], the partnership is valid.”65 Remainder of this page is intentionally left blank 64 65 Al-Hakim, al-Mustadrak, hadith no. 2317. Ibn al-Munzir, al-Ijma`, Maktabah al-Furqan, 1999, p. 137. Issued on: 20 April 2015
4. BNM /RH/STD 028-7 Islamic Banking and Takaful Department Musyarakah Page 62/71 Appendix 2 Glossary For the purpose of this policy, the following definitions shall have the following meanings. Terms Definition Actual The act of realising the worth or value of the assets or liquidation venture through a liquidation process based on market value. Musyarakah Diminishing partnership. Also known as Musyarakah Mutanaqisah Muntahiyah Bittamlik. Fair value A valuation, in accordance with a standard methodology that is reasonable to all parties involved in a transaction in light of all pre-existing conditions and circumstances. Market value The value of an asset if it was to be sold on the open market at its current market price. Al-tandid al- Actual valuation which is a valuation based on actual value haqiqi of assets. Al-tandid al- Constructive valuation which is a valuation based on the hukmi fair value of assets. Remainder of this page is intentionally left blank Issued on: 20 April 2015
5. BNM /RH/STD 028-7 Islamic Banking and Takaful Department Musyarakah Page 63/71 Appendix 3 Related Shariah rulings and and policy documents 1. Shariah Advisory Council (SAC) rulings published by the Bank66; 2. Shariah Governance Framework for Islamic Financial Institutions; 3. Guidelines on Corporate Governance for Licensed Islamic Bank; 4. Guidelines on Corporate Governance for Development Financial Institutions; 5. Capital Adequacy Framework for Islamic Banks (Capital Components); 6. Investment Account; 7. Guidelines on Property Development and Property Investment Activities by Islamic Banks; 8. Guidelines on Investment in Shares, Interest-in- Shares and Collective Investment Schemes for Islamic Banks; 9. Single Counterparty Exposure Limit for Islamic Banking Institutions; 10. Guidelines on Product Transparency and Disclosure; 11. Guidelines on Ibra’ (Rebate) for Sale-based Financing; 12. Guidelines on Late Payment Charges for Islamic Financial Institutions; 13. Guidelines on Financial Reporting for Islamic Banking Institutions; 14. Guidelines on Financial Reporting for Development Financial Institutions; 15. Capital Adequacy Framework for Islamic Banks – Disclosure Requirements (Pillar 3); and 16. Applicable Malaysian Financial Reporting Standards (MFRS). Remainder of this page is intentionally left blank 66 Including Shariah resolutions in Islamic Finance, standards, circulars or any directive pertaining to Shariah matters issued by the Bank. Issued on: 20 April 2015
6. BNM /RH/STD 028-7 Islamic Banking and Takaful Department Musyarakah Page 64/71 Appendix 4 Structures of musyarakah venture & financing This appendix provides examples of the structures of musyarakah contracts. The examples are non-exhaustive and should not be construed as the only structures available. Musyarakah venture (Provision of capital via acquisition of ordinary shares) Diagram 1: Example of Musyarakah Venture Musyarakah contract IFI Partner/ Customer Holds Holds Private Limited Company/ Equity Special Purpose Vehicle (SPV) Undertake specific investment/ project Remainder of this page is intentionally left blank Issued on: 20 April 2015 Equity
7. BNM /RH/STD 028-7 Islamic Banking and Takaful Department Musyarakah Page 65/71 Musyarakah venture (Provision of capital other than via acquisition of ordinary shares) 1. The structure of the musyarakah venture (by providing capital via cash) are exemplified by the following diagram: Musyarakah Financing 2. One of the prevalent musyarakah financing in the market is through Musyarakah Mutanaqisah67, where the customer and the IFI jointly acquire and own the asset. The customer, as a partner/joint-owner/lessee, promises to gradually acquire the IFI’s ownership in the property. The IFI shall determine the redemption method in determining the price for the other partner/owner to acquire the share owned by IFI. The partnership ends when transfer of the asset ownership has been completed. 67 Also known as diminishing partnership. Issued on: 20 April 2015
8. BNM /RH/STD 028-7 3. Islamic Banking and Takaful Department Musyarakah Page 66/71 In musyarakah mutanaqisah home or property financing, the customer and the IFI jointly acquire and own the property. The IFI then leases its share of the property to the customer on the basis of ijarah (lease). The customer, as an owner-tenant, promises to acquire gradually the IFI’s ownership in the property. The customer pays rental to the IFI under ijarah, which partially contributes towards increasing their share in the property. In other words, the portion of the payment proceeds or monthly instalments rental received from the customer shall be used towards the gradual acquisition of the IFI’s share in the jointly owned property. At the end of the ijarah term and upon payment of all lease rentals, the customer would have acquired all the IFI’s share in the property and the partnership will come to an end with the customer being the sole owner of the house. 4. The following diagram illustrates an example of home or property financing under musyarakah mutanaqisah financing: Diagram 4: Example of Musyarakah Mutanaqisah Financing Islamic banking institutions 4 Transfer ownership of assets 2 Lease back the assets 3 Pays rental lease Provide Capital Provide Capital 1 Musyarakah Mutanaqisah contract House/ Property Issued on: 20 April 2015 Partners/ Customers 1
9. BNM /RH/STD 028-7 Islamic Banking and Takaful Department Musyarakah Page 67/71 Appendix 5 Dedicated structure Material Board Investment Risk Committee (BIRC) Board Risk Management Committee (BRMC) Credit Committee (CC) Investment Committee (IC) • Review and ensure the effectiveness of policies and risk management framework • Provide recommendations to the Board on new or changes in investment strategy • Set authorisation limit for investments • Oversight role to Investment Committee • Oversee the progress of investment activities • Approval of investment application • Provide recommendation related to investment proposal & strategy to BIRC • Oversight function & approval of investment within limit /strategy set Remainder of this page is intentionally left blank Issued on: 20 April 2015
10. BNM /RH/STD 028-7 Islamic Banking and Takaful Department Musyarakah Page 68/71 Appendix 6 An example of a complex structure in musyarakah venture IFI Capital SPV 1 SPV 2 SPV 3 SPV 4 Project/ Construction Appoint a representative (board/ management/project) at the entity/entities that: • conducts the actual business activity; and/or • able to control the actual business activity Remainder of this page is intentionally left blank Issued on: 20 April 2015
11. BNM /RH/STD 028-7 Musyarakah Islamic Banking and Takaful Department Page 69/71 Appendix 7 Prudential limits and requirements68 based on sources of funds Policy Guidelines on Property Development and Document Property Investment Activities by Islamic Banks Guidelines on Single Investment in Counterparty Shares, Interest- Exposure Limit in- Shares and (SCEL) for Collective Islamic Banking Investment Institutions Sources of Schemes for Funds Islamic Banks Requirements  Aggregate book  Treatment of Use of Permissible Investment General structure to in each real value of exposures Investment conduct estate investment in funded by RA Account (GIA) musyarakah business shares, interest- and UA as per is limited up venture in shall not in-shares, CIS para 8.5 of the to 15% of Appendix 1 exceed 25% and immovable policy of IFI’s total properties shall document total GIA fund  Must be capital 69 of IFI for <50% funding real ownership of IFI’s total estate of venture capital business or equity not exceed 50% 69  Aggregate book participatio value of n with investment in reputable shares & property interest-in- develop- shares shall not ment exceed 25% of company IFI’s total 69 capital RA 70 Not applicable Exempted Exempted Exempted Excluded from SCEL UA Applicable Applicable Applicable Exempted Excluded from SCEL Shareholders’ Not applicable Applicable Applicable Applicable Included in SCEL fund 68 Subject to changes in respective policy documents. Total capital as per defined in the Capital Adequacy Framework for Islamic Banks (Capital Components). 70 RA funds which are off-balance sheet. 69 Issued on: 20 April 2015
12. BNM /RH/STD 028-7 Islamic Banking and Takaful Department Musyarakah Page 70/71 Appendix 8 Distress assessment process flow Monitoring of Musyarakah venture Performance matches expectation Normal monitoring requirements Performance below expectation (Cut loss limit) Perform distress assessment Exit Retain Musyarakah venture Implement turnaround strategy and more vigorous monitoring requirements Remainder of this page is intentionally left blank Issued on: 20 April 2015 Exit
13. BNM /RH/STD 028-7 Islamic Banking and Takaful Department Appendix 9 Musyarakah Page 71/71 Illustration of additional financial disclosure for musyarakah venture Notes to Account Amount funded by: Unrestricted Investment Accounts (UA) x Restricted Investment Accounts (RA) x Shareholders' Fund x xxx Musyarakah Initial capital Sector (RM’000) Losses/Impairment Amount as at Provisions 31 Dec 20XX (RM’000) (RM’000) Property xxx xxx xxx Manufacturing xxx xxx xxx Total xxx xxx xxx Remainder of this page is intentionally left blank Issued on: 20 April 2015