Solution presented by me and my boss Syed Qutub Ahmed.

1. Islamic Shares Financing
[Murabaha]
Asif Hussain
BE Computers, MBA
Project Manager / Senior Business Analyst

2. Financing Mechanism
The customer approaches the Bank with the request for financing
Transfer of Title Transfer of Title
Vendor Bank Customer
Payment of Purchase Price Payment of Marked-up Price
The Bank purchases and receives title of ownership from the vendor.
The Bank makes payment to the vendor
The Bank transfers the title over to the customer upon payment
The customer makes payment up-front or on a deferred basis

3. Murabaha Financing
• Contract between Bank and
Customer to decide profit rate
Buys Shares, for Customer on resale and payback period
• Customer purchases shares
as bank’s agent, bank pays
for them
• Bank sales the shares to the
Purchases Shares on new rate
customer on settlement at
profit
1-Jun Bank Buy 100 OGDC 135.13 3-Jun
3-Jun Bank Sell 100 OGDC 136.21 3-Jun
3-Jun Customer Buy 100 OGDC 136.21 3-Jun

4. Murabaha Financing
Qty Rate Settlement
1-Jun Bank Buy 100 OGDC 135.13 3-Jun
3-Jun Bank Sell 100 OGDC 136.21 3-Jun
3-Jun Customer Buy 100 OGDC 136.21 3-Jun
• The 2nd transactions is done on a rate slightly higher than the
actual buying rate from the market.
• This new rate is determined by an already existing contract
between the bank and the customer.
• This Murabaha Contract has a fixed percentage of profit for
the bank and the customer has to pay the amount within a
fixed period.
• Customer can sell shares with profit/loss, and payback the
bank.
• The profit is not dependent over the time for which the
shares are financed.

5. Collateral Valuation and Hair Cuts
Rate Hair Cut Value
OGDC 136.13 0.8 108.904
NML 49.91 0.7 34.937
AHSL 39 0.65 25.35
HUBC 33.74 0.75 25.305
PTCL 21.55 0.8 17.24
PSO 299.54 0.7 209.678
• Bank determines financing limit on the basis
of collateral value of the customer
• Bank generates margin calls if the collateral
value gets below alert threshold and can sell
collaterals to cover loss

6. The Financing Model

7. Infrastructure

8. Technology Architecture

9. Q&A