finances projects in the following manner :
The bank offers this method of financing in all sectors to promoters
of new projects and to the owners of existing projects already in operation.
Promoters submit technical and financial project studies to the bank
which in turn evaluates them and ensures their feasibility. These projects
are then approved and the equipment and, means of production financed
by the bank which pays the suppliers the purchase price plus related
costs. A contract leasing the equipment for a given period is signed
with the promoter who becomes the owner upon expiration of the period
in question. The bank is paid an annual rental fee representing part
of the capital investment and a share in the profits, as provided in
The bank buys equipment and materials which it advances to promoters
of projects by virtue of a contract in which provision is made for payment
of the capital and profit by installments and stating the collateral
required by the bank.
This is a common form of equity participation. The bank holds shares
in the equity of companies that already exist or are in the process
of being established. It also participates in the management of these
projects through its representative on the Board of Directors. Participation
may be permanent or degressive, in which case the bank is «bought
out» by its partners using their share of the profits.
MURABAHA operations also include export financing providing foreign
importers with the necessary financing for their imports. The financing
period for MURABAHA varies from 6 to 18 months. The profit rate is set
in accordance with the amount and duration of the operation and the
This is specific to BEST Bank and similar institutions. The bank participates
in a given project by supplying the required capital and the promoter
contributes his experience,and labor. The project must prove to be viable
and give sufficient economic and financial returns. Profits are shared
on the basis of preagreed percentages.