Page 70 - ICD AR21 EN

ICD’s financing and investment products include:
Musharakah (joint venture)
In the context of business and trade, Musharakah refers to a partnership or joint business venture with a view
to making profit. All investors contribute capital towards a business venture and agree to share profits on a pre- agreed ratio, while losses are borne by each investor
in proportion to their respective capital contributions.
Mudarabah (profit-sharing)
This is a form of partnership where one party provides the funds, while the other provides the expertise and management. The former (capital provider) is known
as the rab-al-maal, while the latter is referred to as the mudarib. Profits made through the business are shared between parties according to a pre-agreed ratio. If losses occur, the rab-al-maal will lose his capital, and the mudarib will lose the time and effort he invested into running the business. The mudarib bears the losses if caused by his negligence, misconduct or breach of contractual terms.
Murabahah (cost plus mark-up)
This concept refers to the sale of goods at a price which includes a profit margin agreed by both parties. The purchase and selling price, other costs, and the profit margin must be clearly stated at the time of the sale agreement.
Wakalah (agency)
This is a contract whereby a person (as the principal) asks another party to act on his behalf (as his agent) to undertake a specific task. The agent will be paid a fee for his services. This contract is usually used in conjunction with another Shari’ah compliant product.
ICD’s mandate to
serve the private sector of member countries is carried out through
a variety of different products and services.
Istisna
Istisna is Manufacturing Finance. It is a contract where one party agrees to manufacture/construct an asset based on the order and specifications of the paying party (buyer). In this contract, payments are made in advance, deferred or in stages to facilitate step-by-step progress in the manufacturing/construction works.
Ijarah
This type of contract refers to a lease, rent or wage. Generally, Ijarah is used when selling the benefit of use (usufruct) or service for an agreed rental charge or wage. Under this concept, ICD makes assets available to a client for an agreed period and rental. For example, equipment such as a manufacturing plant, automation equipment, or motor vehicle can be rented to a client, and during the lease period ICD retains ownership of the asset.
B. ADVISORY SERVICES
ICD provides a variety of advisory services to
the governments, public sector and private sector entities of its member countries. These services include assessing the business environment of member countries, along with any required reform actions. It also provides advisory services for project financing, company restructuring/rehabilitation, privatization, Islamic finance and the development of Islamic capital markets, particularly Sukuk.
C. ASSET MANAGEMENT
ICD sponsors, manages (as Mudarib) and participates in private equity funds and other special-purpose investment vehicles which are designed to invest in/finance projects in accordance with its mandate.
68 ICD ANNUAL REPORT 2021