The Maxidaya Shariah provided that related projects, equipment, goods and commodities financed are permissible by Islamic Law (Shari’ah). Such as:
A mode of financing whereby IDB purchases machinery and equipment, then sells them to the beneficiary at higher price, repayment being in installments. The ownership of the asset is transferred to the purchaser on delivery.
Ijara Muntahia Bitamleek A lease that concludes with the legal title in leased asset passing to lessee.
Istisna’a A medium-term mode of financing. It is a contract for manufacturing (or construction) whereby the manufacturer (sellers) agrees to provide the buyer with goods identified by description after they have been manufactured/ constructed in conformity with that description within a pre-determined time-frame and price.
Musharaka Mutanaqisa (or Diminishing /Declining Participation) An “equity sharing” Islamic financing technique used for financing projects. It uses different types of profit and loss sharing partnerships. The partners (entrepreneurs, bankers, etc.) share both the capital and the management of a project while the profits are distributed between them according to pre-determined ratios based on their equity participation.
Equity A mode of financing used by the IDB whereby the IDB whereby the Bank participates in the share capital of enterprises on a long-term basis.
Mudaraba A Form of partnership where one party provides the funds and the other provides the expertise and management. Any profits accruing are shared between the two parties on a pre-agreed ratio, while the capital loss is borne by fund provider.