Islamic Financing

No, Islamic financing is not exclusive to Muslim-based businesses only. In fact, Islamic financing can be utilized by businesses of all faiths and backgrounds. The key features of Islamic financing is adherence to Islamic principles, which promotes ethical and socially responsible investments and avoiding interest-based transactions, speculation, and excessive risk-taking. As long as a business is willing to work within these guidelines, it can benefit from any Islamic financing solution.

The main differences between Islamic and conventional financing are:

1. Riba: Islamic financing prohibits the payment or receipt of interest (riba), while conventional financing allows for the payment and receipt of interest.

    

2. Profit and Risk Sharing: Islamic financing relies on profit-sharing arrangements, such as mudarabah and musharakah, where the financier and the customer share in the profits and risks of the investment.

    

3. Underlying Assets: Islamic financing requires that transactions be backed by tangible assets, whereas conventional financing may be based on intangible assets or creditworthiness.

    

4. Objective: Islamic financing aims to promote social justice and economic welfare by providing financing for socially responsible and ethical projects. This can include projects related to education, healthcare, and renewable energy, among others.

The Shariah principle used is Commodity Murabahah via Tawarruq arrangement. To put it simply, it involves a sale of an asset by a seller to a purchaser on a murabahah basis on cost-plus profit for a deferred payment.

Any businesses whose principal activities are Shariah-compliant (e.g. not related to tobacco, liquor, gambling etc.) can apply for the financing.

Funding Societies will be conducting Shariah screening to ensure the funds raised are utilised for general working capital requirements and business purposes of the issuer which are Shariah compliant.

Late Payment Charges which consist of Compensation (Ta’widh) and Penalty (Gharamah) is permissible to be charged subject to the following conditions:

For default payment before maturity date: Compensation (Ta’widh) may be imposed and shall not be more than 1% p.a. on the outstanding amount and shall not be compounded.

For default payment after maturity date: Compensation (Ta’widh) may be imposed and shall not be more than 1% p.a. on the outstanding balance (outstanding principal and accrued profit). Funding Societies may charge both Compensation (Ta’widh) and Penalty (Gharamah) as Late Payment Charges at a maximum rate of 10% p.a.. However, only the Compensation (Ta’widh) portion can be recognised as income and the rest shall be channeled to a charity body.

If this is your first time with us, here is a run-through on the application process. 

Step 1: Complete the Application form on our page

Step 2: Submit all the documents required for this application

• Company Registration Forms

• Copy of all Director(s) NRIC/Passport

• Latest 6-months Bank Statement

• Latest Audited Accounts & Management Accounts (if available, not applicable to Micro Financing-i)

Step 3: Wait for your email confirmation for financing approval

Step 4: Accept our financing offer (If you’d like)

We will credit your money into a designated business bank account and begin your repayment cycle in the next following month.

Just like any other financing product, the following fees and charges will be applicable:

1. Micro Financing-i

• Drawdown Fee: 5% of the approved financing amount, deducted upon disbursement.

• Guarantee Fee: 5% of the approved financing amount, deducted upon disbursement.

2. Invoice Financing-i

• Facility fee: One-Off 1% of the limit of line facility  

• Drawdown Fee: Up to 2% of financing amount per transaction based on tenure

3. Business Term Financing-i

• Origination Fee: 4% of the approved financing amount, deducted upon disbursement.

A Shariah-compliant business is one that operates in accordance with Islamic principles, which emphasize ethical and socially responsible practices that align with Islamic values. Specifically, a Shariah-compliant business should avoid engaging in activities that are prohibited by Shariah law, such as dealing with interest-based transactions, gambling, alcohol, and other prohibited activities. Additionally, Shariah-compliant businesses should prioritize fairness, transparency, and accountability in their operations and transactions.