Qard Contracts

Interest-Free Export (Qard) Financing Facility Qard (Pre-shipment Export Financing)

An Interest-Free loan is the transfer of ownership in fungible wealth to a person on whom it is binding to return wealth similar to it.  It is a loan and Advances granted to borrowers to be repaid only the availed principal amount within the agreed period and term in which Interest-Free Banks provides it.

Why the product is needed?

This financing facility allows a customer to finance his/her/its need at a varying amount of financing, which can be obtained from Interest-Free Banks. Further, the need for Interest-Free financing is purely on cooperation and mutual help, for instance, to help a customer to release himself from financial hardship or to meet the general working capital need. The financing scheme also concerns the customer welfare by receiving off interest payments on the loan and by providing rebates to reduce the customer payback burden.

Shari’ah Requirement

The financing facility is one of the primary functions of Interest-Free banks. Financing is the activity that contributes to an Interest-free bank’s profit generation. Interest-Free Banks are prohibited from making loans with interest. But customers may need direct financing to get extra liquidity to address their working capital requirements though it is technically or financially difficult for them to share the profit with the financing bank for the use of the fund.  Hence, IFB can provide short term financing in the form of an Interest-Free loan for ECX traded commodity Exporters under the circumstances without any gain from the financing.

It is required by Shari’ah not to collect any more amount than originally availed by the lender.  But penalty may be imposed on the borrower if there will be a delay in payment and/or any default against the contractual terms and conditions to discourage defaults.

Qard (Foreign Employment Agency)

Please contact Coopbank Islamic to get more detailed information and advice