Business loans and bank facilities for SMEs - Islamic Banking - Dubai - UAE
- Category: Consultancy services
- Published: Monday, 18 July 2016 11:28
- Written by Abdelhamid M. (ACPA)
The Islamic Finance built on the fact that money itself has no intrinsic value; it is simply a medium of exchange. Each unit is 100% equal in value to another unit of the same denomination and you are not allowed to make a profit by exchanging cash with another person. A Muslim is not allowed to benefit from lending money or receiving money from someone.
This means that earning interest (riba) is not allowed – whether you are an individual or a bank. To comply with these rules, interest is not paid on Islamic savings or current accounts, or charged on Islamic mortgages.
How do sharia-complaint banking products work?
There are several ways that Islamic banks can structure accounts so that they are sharia-compliant.
Ijarah (Asset Rental): works as a leasing arrangement: the bank buys something for a customer and then leases it back to them. Different forms of leasing are permissible, including those where part of the instalment payment goes toward the final purchase. This might be used to help you buy a car or other item, or to help a business buy equipment.
Murabaha (Pre-agreed Profit): works by the bank supplying goods for resale to the customer at a price that includes a margin above the costs, and allows them to repay in installments. This might be used to provide a mortgage on a property. The property is registered to the buyer from the start.
Musharka (Partnership): is a joint venture in which the customer and bank contribute funding to an investment or purchase and agree to share the returns (as well as the risks) in proportions agreed in advance.
Wakala: is an agreement that the bank will work as the individual's agent. If a saver enters into this type of agreement, the bank can use their cash to invest in sharia-compliant trading activities to generate a target profit for them.
Istisna'a (Contracting): Istisna'a is a sales contract of specified items to be manufactured or constructed with an obligation on the part of the manufacturer or builder (contractor) to deliver them to the customer upon completion.
Letter of Credit: Whether importing for local consumption or for re-export, the bank is geared to handle all requirement for letters of credit to best suit customer needs. Just state your requirements and the bank will customize the most appropriate Letter of Credit for you (transferable, revolving, standby, etc.)
Letter of Guarantee: The bank prepares and issues all kinds of financial instruments, including letters of guarantee drawn up under strict Sharia'a principles. The range requirement covered includes bid bonds, performance bonds, advance payment guarantee, and guarantees for retention monies, maintenance, Labor or Customs duty.
If this is your situation
- You have a cash flow issues, causing a problem when you’re dealing with your customers who don’t pay for services or when you have unsold inventory that needs to be moved to bring in new products.
- You need a money to be used for your regular operational costs, and can help your business stay afloat when profits are low.
- You need to invest in an expansion opportunity for your business.
- You’re planning on needing a large loan in the future for business expansion or upgraded equipment, it may be smart to take out a smaller loan first, especially if your business doesn’t have a credit history.
How we can support you:
It is very common practice that banks will need various requirements to be eligible to finance your business , accordingly, we will be able to support you as follow :
- It is common practice for most of the banks in UAE to ask for 2 or 3 years audited financial statements report and since we are licensed auditors then we will be able to provide the required audit reports to the banks
Conditions to know if your business eligible to get the bank facilities:
Banks usually combine or more conditions from the following
- Average Monthly Credit Balance in Current Account of AED 10,000 or 100,000 or 250,000 and more Or/And
- Any financing facility Or/And
- Minimum Length of Business is 3 years Or/And
- Minimum 2 years of involvement of Managing Partner in business Or/And
- Nil Cheque Return in last six months Or/And
- Minimum Annual Sales of AED 2 Million. Or/And
- Annual sales turnover between AED 1 Million and AED 100 Million
Documents mostly required by the banks
- Company profile and valid legal documents including
- Passport copies of all owners
- Commercial registration
- Business and/or Trade License
- Articles of Association or partnership documents
- Chamber of commerce certificate
- Audited financial statements for at least 2 or 3 years
- Bank statements for 12 months
- Facilities request letter
- Any other documents (as required by the Bank)
List of Islamic banks in UAE:
- ADIB - Abu Dhabi Islamic Bank
- Al Hilal Bank
- Ajman Bank
- Dubai Islamic Bank
- Emirates Islamic Bank
- Noor Bank
- Sharjah Islamic Bank
For any inquiries, you can chat with us using WhatsApp or Telegram or fill the following form and we will get back to you as soon as possible:
Mobile: +971- 050-7948028