Nov. 7, 2021, midnight

Finance is simply defined as the process through which individuals and corporates obtain cash from authorized sources to be able to achieve their needs. Financing activities of all different types are essential to the success of any business or financial activity that you practice. Financing is the basis on which your investment would be able achieve the results you are aspiring to.

About Islamic Finance

"Islamic Finance" term goes back historically to several centuries ago, as it was originally associated with the emergence of Islam as a religion. It is based on the principles of Islamic Sharia derived from the Holy Qur’an, the Prophet’s Sunnah and scholars of Sharia. Islamic finance considers the sources of funds, exploiting them, and using them with the aim of getting a profit or donation in a way that fulfills the benefits for the individual and the whole society, within the framework of Islamic Sharia, rules and objectives. The Islamic banking business started officially in the seventies of the last century through few financial institutions and in small amounts, but later, it had a great development over the past two decades which led to the increase of the total assets to 2 trillion USD by the end of 2014. The global Islamic finance market is growing very fast, due to significant investments in "Halal" sectors, infrastructure and Sukuk through electronic methods in all products and services. The first development bank in the world using the Sharia principles was established in the year 1975, that is the Islamic Development Bank.

Islamic finance forms:

1- Murabaha

It is a direct financing through which the customer asks the bank to buy a certain commodity or goods on their behalf, provided that the customer undertakes to buy it back from the bank at the first price with a specific profit.

2- Financial leasing (Lease-to-own)

It is a type of direct financing, through which an asset owned by the financing entity is being leased to someone in return of installments of fixed amounts and dates. The ownership of this asset shall be transferred to the lessee by the end of the contract.

3- Istisna'

It is a type of direct financing through which the financing entity makes a specific product or constructs a building upon the customer’s request, whereas the financing entity is called the “manufacturer” and the customer is  “Istisna beneficiary”. It is a binding contract for the two parties when all its conditions are fulfilled.

4- Musharaka (Co-financing)

It is a type of direct financing through which the bank and the customer co-provide part of the funds required to finance a certain project, then the bank and the customer share the profits of this project together according to the agreement concluded between them.

5- Mudarabah

It is an agreement between two parties, through which one party is the financing party that provides the funds, where the other party provides the effort and experience in trading and using such funds, and this party shall represent the Mudarabah customer. The profit shall be distributed among them according to the concluded agreement. In case of loss, the financing party loses the money and the other party lose the exerted effort.

Islamic financing solutions provided by Al-Tayseer Arabian Company

Tawarruq

Through this type of financing, Tayseer Arabian Company sells a specific commodity (ex, shares in investment funds) after buying them from the supplier and having it as a Murabaha, to the customer at feasible payment terms. Then the customer receives the commodity and appoints a third party to sell it at the current rate of the local market and to collect the price.

Murabaha

It is a type of the permissible selling forms, through which Tayseer Arabian Company buys a certain commodity (vehicle -furniture -shares..etc) from the legally permissible commodities upon the request of a customer. Upon possessing the commodity, the company sells it to the customer at a deferred payment (post payment), provided that the purchase price and profit percentage are defined on the contract at feasible payment terms. This method of financing is one of the common forms of Murabaha.

Ijarah

It is a financing method, through which Tayseer Arabian Company purchases the required commodity that the customer wants and then leases it to them in turn of monthly rental payments. By the expiry of the contract term, the ownership of the commodity shall be transferred to the customer by the company, upon settling all contract payments or settling all payments in addition to a specified amount, by the way of gift, or otherwise based on agreed terms and conditions of the contract.

Out of the company’s vision and mission to adhere to the principles of the Islamic Sharia in all transactions, the company got an approval from the Sharia Committee to work on the products through ways of Tawarruq, Murabaha and Ijarah

The Sharia Committee of  Tayseer Arabian Company

The Shariah Committee of Tayseer Arabian Company reviews all financing solutions and products and ensures their compliance with the principles of the Islamic Sharia through effective and independent supervision that entails a detailed revision of for the legal contracts and other documents. The mission of the Committee includes the risk management and the relevant supervisory revision process for products and transactions. Upon conducting a thorough revision and detailed research by the Shariah Committee in terms of Tayseer Arabian Company compliance to Sharia standards, the Committee decided to approve the financing products of Tayseer Arabian Company targeting individuals, institutions and corporates. All our financing services and products are strictly and carefully subject to the principles of Islamic Sharia and are periodically reviewed and approved by the Sharia Committee of Tayseer Arabian Company, in order to ensure that all our financing activities are adhering to and in compliance with Islamic Sharia principles to the last details.

What is the supervisory authority over financing activities KSA?

The financial services sector, in which financing companies play a basic role, represents an important and essential aspect of any economy, especially the considerable advanced ones, as in the case of KSA. Due to the importance of different financing activities, it was necessary to have a supervisory body to control and regulate these activities in a way that serves the national economy and to keep Saudi financial system away from any abuse or damage. The Saudi Central Bank is the controlling and supervising entity over the licensed financial institutions, which are authorized to operate in KSA. The Central Bank aims to protect the interests of customers and to ensure that the financial institutions of all types are dealing with the customer in a professional and fair way, without affecting their long-term financial future.

Sources:

Rowad Alaamal Magazine (Entrepreneurs)

Tayseer website

Mawdoo3 website

Riyadh Newspaper

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