Here are some frequently asked questions and our responses including Fatwas upon which we have modeled our Programmes.

1. What is Murabaha?
2. How does the Murabaha Facilitation Programme work?
3. What is Ijara wa Iqtina?
4. is Salic on the title of my property with me?
5. How much do I need to earn to qualify for Murabaha or Ijara Programmes?
6. Do I have to open a deposit account with Salic before I qualify for a Murabaha or Ijara Facility?
7. What is the source of funding?
8. How do you calculate the amount of my monthly commitment to Salic?
9. Are my Murabaha payments or Ijara rentals fixed for the term of the facility?
10. Some claim that it is un-Islamic to charge management fees. They also say it is un-Islamic that investments may be obtained from superannuation funds or, in some cases commercial banks and investment funds?
11. If I take a Murabaha or an Ijara facility, can I increase my monthly payments to shorten the term?
12. Will an interest rate be shown on my account documents and statements?
13. What happens after the first 5 years of a Murabaha Property Facility or on the yearly renegotiation of an Ijara facility?
14. What happens if I don't like the Murabaha Management Fee or the terms of any renewal or if I don’t like the new Ijara rental?
15. Will Salic accept lump sum reductions when it makes its reviews?
16. Will Salic let me repay the facility in full at each review?
17. What happens if I decide to repay my Murabaha or Ijara Facility early?
18. Why is Salic not sourcing its funding directly from the Islamic community?
19. What is Mortgage Insurance?
20. What happens if I am in arrears?
21. Can a non-Muslim obtain the MFP facility?

1. What is Murabaha?

Murabaha is not "finance". It is a contract of sale that establishes a fixed Murabaha Price, including profit mark-up, to be secured by a mortgage and settled over an agreed period of time, up to 30 years.

2. How does the Murabaha Facilitation Programme work?

On Salic's approval of an application for a Murabaha Property Facility, Salic and its customer enter into a deed facilitating sale of a desired property from vendor, through Salic to the customer. The deed specifies the object of the financing (the home), the agreed profit margin, period of settlement and Murabaha payments. Following settlement, the transaction is secured by a mortgage on the property and Salic collects monthly Murabaha payments until the transaction is finalised.

3. What is Ijara wa Iqtina?

Ijara wa Iqtina facility is based on the concept of “leasing to purchase”. On approval of an application, Salic & its customer enter into a memorandum of understanding facilitating sale of a desired property from the vendor through Salic to the customer. The customer rents the property from Salic with an option to purchase. Upon finalisation of the Ijara agreement & payment of an option fee of $1.00 the agreement is extinguished. In the meantime, the transaction is secured by a mortgage on the property and Salic collects monthly Ijara wa Iqtina rental payments.

4. Will Salic be on the title of my property with me?

No. Your liability to Salic will be secured by a mortgage, but at settlement ownership of the property is transferred to you. Therefore you become sole owner and in the event of capital growth as a result of favourable market conditions, or if you experience an increase in the value of your home by renovating or extending it, then you derive the sole benefit.

5. How much do I need to earn to qualify for Murabaha or Ijara Programmes?

As a rule, you should limit your monthly repayment or rental instalment and any of your other commitments to 35% of your gross taxable income.

6. Do I have to open a deposit account with Salic before I qualify for a Murabaha or Ijara Facility?

No. Salic is not a deposit taking business. If you are purchasing a home, you have to show us that you have saved a minimum 10% deposit. The savings record should be over a 6 month period and be with a recognised institution.

7. What is the source of funding?

Perpetual Trustee Australia Limited is custodian of your mortgage. It is Australian owned, was established 118 years ago, has market capitalisation in excess of AUD $1billion and is rated "AAA", the highest possible rating in the world.

Resimac is the Fund Manager for the Salic's Programmes and its programmes are also rated "AAA".

Salic's Programmes fund from sources which do not include "conventional" banks and are based on several Fatwas delivered by leading Shariah Scholars who state that the source of funds and the methods of raising capital will not pollute the Islamic model providing that the relationship between the Muslim client and the funding institution is Halal.

Here is a sample of such a Fatwas:

Question:
One of my colleagues at work who is a Christian was constantly asking me why don’t I buy a house. I told him that I cannot because I cannot take a mortgage as it involves interest and giving and taking interest is prohibited in Islam. Then he suggested to me that he can buy a house of my choice on mortgage in his name and let me live in that house as a tenant as long as I pay him all the expenses involved in buying the house as rent to him over the years and at the end of the mortgage he will sell the house to me in one dollar as I had paid all the expenses. All this would be written in a contract between us in the beginning. The advantage he highlighted in doing so is that he can write-off the interest on the mortgage and save on his taxes (i.e. pay less taxes) since he would own the house and pay mortgage and I can own the house eventually after buying from him in one dollar which would be a cash transaction. Is this scheme OK ?

Fatwa:
The Christian may buy the house on mortgage, and then sell it to you. The two of you may mutually agree on any price and terms, provided these are all clarified from outset.
He may also rent out the property to you, for any mutually agreed rental. In the case of renting the house, one should bear in mind that he is not obliged to sell it to you. He is at liberty, but not bound to sell it to you after renting it out to you.

and Allah Ta'ala Knows Best

Mufti Ebrahim Desai
Source: http://islam.tc/ask-imam/view.php?q=2452

Question:
Is it Islamically correct to finance in partnership with the interest based institutions by financing a partnership when the venture in itself is quite legitimate according to Shariah?

Fatwa:
The participants exchanged views on financing in partnership with the non Islamic, or interest based institutions when the venture in itself is Islamically lawful, and concluded that there was nothing wrong in doing so from the Islamic standpoint if necessary guarantees to conform to the Islamic Shariah in accomplishing the venture are first secured (from the other party).

As to the partnership with such institutions in guaranteeing fully or partially, even without financing a venture, when the venture itself is un-Islamic, it is not permissible, because guaranteeing or insuring an unlawful activity is not permissible in Shariah.

Sixth Albaraka Bank Seminar, Fatwa No. 13
Source: http://www.albaraka.com/english/FAQs/Fat13-6.html

Question:
Is it right to enter into a partnership to purchase real estate property on a fifty-fifty basis with a partner dealing in interest, when each partner is independent in disposing of his own share?

Fatwa:
The participants of the seminar were of the opinion that there is no harm in joining a partnership to purchase real estate property on a fifty-fifty basis along with a partner dealing with interest, when each partner is independent in disposing of his share, and when the share of Albaraka is free of any element of interest.

Sixth Albaraka Bank Seminar, Fatwa No. 29
Source: http://www.albaraka.com/english/FAQs/Fat13-7.html

Question:
Company A raises funds by selling shares and interest-bearing bonds and invests all funds in predominantly Halal and profitable activities. Is it permissible for an individual to purchase shares of Company A?

Fatwa:
If Company A raises funds by issuing shares and interest bearing bonds and invests all funds in predominantly Halal and profitable activities, the permissibility of purchasing shares of such a company depends on four conditions:

(i) All the business activities of the company are Halal.
(ii) The shares of such a company can only be purchased after it has acquired illiquid assets like machinery, buildings, raw materials or stock in trade.
(iii) If it becomes evident from the income statements of the company that a part of its income consists of interest given by the bank on its deposits, that proportion of the dividend must be given to charity. For example, if the total profit of the company is $100 and 5% of it has accrued through interest received on bank deposits, then that 5% must be given to charity.
(iv) The shareholder should express his disagreement over depositing surplus funds in an interest bearing account and raising funds through interest bearing loans. A preferable method would be to propose a ruling against such interest bearing transactions in the annual general meeting of the company.

If the four conditions are strictly fulfilled, it is hoped that purchasing shares of such a company will be permissible in Shariah.

An objection may be raised against this ruling because the company had raised a considerable amount of its funds by issuing interest bearing bonds, and therefore a substantial part of its funds would be impure according to Shariah. As such it would not be permissible to participate in any business. This objection, however, may be refuted on the grounds that although taking an interest bearing loan is strictly prohibited in Shariah, the prohibition only affects the person responsible for taking the loans. Although the person will be liable to punishment in the Hereafter for committing a sin, the amount borrowed however, is treated by the Shariah on its own. Hence, the money that is borrowed and anything purchased by that money is not in itself Haram under Shariah. Therefore, if the capital raised by the company consists of some amounts borrowed on interest, it will not render the whole capital impure.

Question:
Company B raises all its funds by selling shares and invests all its funds by buying the shares of Company A (above) and other similar companies. Is it permissible for an individual to purchase shares of Company B?

Fatwa:
If the four conditions mentioned above are fulfilled it will also be permissible to purchase the shares of Company B which has invested all its funds in the shares of Company A.

Justice Maulana Muhammad Taqi Usmani
Source: www.albalagh.net

8. How do you calculate the amount of my monthly commitment to Salic?

As part of the approval process, Salic will provide you with either a Murabaha payment or an Ijara rental and Salic is committed to fairness with its customers in order that they can make informed decisions.

When deciding on the Murabaha profit/payment or on an Ijara rental, Salic has to compete with the wider Australian market and the profit margin/rental will be in line with the market. If Salic's profit is too low it may not attract investors and if its profit were too high, it might not attract clients.

9. Are my Murabaha payments or Ijara rentals fixed for the term of the facility?

Murabaha and Ijara different.

Monthly Murabaha payments are fixed for the term of the facility, but because Salic may encounter administration or other costs in providing the service potentially spanning 30 years, it reserves the right to impose a Murabaha Management Fee to meet such costs. The total of the Murabaha Payment and Murabaha Management Fee equals the monthly Murabaha Installment.

In the first 5 years, providing payments are received on their due date and the facility is not in default, Salic will not charge any Murabaha Management Fee but will review the position each subsequent 5 years. In the event Salic is able to arrange further savings in administering the facility or in providing service to you, you will receive the benefit by means of a credit in your Murabaha Management Fee.

Ijara rentals may be made either fortnightly or monthly and we agree these with you each year on the anniversary of settlement. Providing the rentals are received on the due date and providing the facility is not otherwise in default, there are no management fees payable.

10. Some claim that it is un-Islamic to charge management fees. They also say it is un-Islamic that investments may be obtained from superannuation funds or, in some cases commercial banks and investment funds?

Salic does not enter into debates with its competitors about our products or us. We are a business committed to both providing a better alternative within the constraints of Australian and Shariah law and to full disclosure enabling our customers to make well informed decisions.

As an issue of clarification, Salic has sought and been provided with advice from Azhar University that “using the above mentioned sources is allowable from the Islamic point of view, as well as the added probably variable management and accounting costs, as well as the Islamic resale with specification of gain (Murabaha) transactions that the company carries out”.
“ We ask Allah to enable those in charge of the company to serve needy Muslims in Australia”
“ And Allah knows best”.
(Registered under No 750/162 dated 21 December 2002).

Finally, our Murabaha Facilitation Programme must comply with the Shariah as well the Australian Uniform Consumer Credit Code, a code which the Government designed to protect Australian consumers.

11. If I take a Murabaha or an Ijara facility, can I increase my monthly payments to shorten the term?

As part of the application process, you are required to demonstrate to Salic's satisfaction that you can to service a given payment amount.

If you take a Murabaha facility you can increase the minimum amount of your Murabaha payment at any time prior to settlement, but it then remains fixed for the next five years.
With Ijara, rentals are renegotiated each year. At any renegotiation Salic is happy to consider a rental that will shorten the term of the facility.

12. Will an interest rate be shown on my account documents and statements?

The Murabaha and Ijara Programmes comply with relevant Australian Laws, in particular, the Australian Uniform Consumer Credit Code (UCCC).

As part of the application process and prior to settlement, transaction documents containing comparison interest rates must be provided to you so that you can ensure that you are being treated fairly. Twice each year statements containing comparison interest rates & calculations must be provided to you.

If the transaction involves a claim for tax deductibility, such documents are essential.

UCCC format statement will be dispatched to you under separate cover to your Murabaha/Ijara Account Statements each half year for you to deal with as you see fit.

If you have any concerns about these aspects of the transaction then Salic respects that position and understands that your decision not to proceed with an application.

Relevant Fatwas

Question:
Is it permissible to use the word 'interest' in place of the world 'profit' without intending its essence in order to gain certain financial advantages granted by the governments concerned in the West for interest on deposits and financing ?

Fatwa:
The participating scholars noted some of the legal advantages offered by the British Inland Revenue department to those working in the banks for interest paid or collected by those dealing with the banks.

Considering the principle that in financial dealings it is the meaning behind the contracts regarding their objectives and purpose that are of prime importance rather than their wording and structure, there was consensus that there is no harm in using the word 'interest' as a substitute for the word 'profit' or 'return' for (in essence) it does not mean the same as the forbidden interest. After discussion it was agreed that:

Not withstanding the fact that in the world of banking the word 'interest' is technically used for what is forbidden in the Islamic law, whether it be paid or collected, and whether it be on productive loans or consumer loans.

There is nothing wrong, however, in using the term 'interest' in circumstances where those dealing with Albaraka Bank in London require it (in place of the word 'profit') to obtain financial advantages granted for interest on deposits and financing.

In this regard it was noted that the use of the word 'interest' in the aforementioned sense will be in statement forms not used by the bank, like the tax statement for the depositors or separate certificates for various situations involving financing.

However, if the purpose be to change the nature of the transaction whereby it is transformed into a loan or borrowing on interest, then it is not permissible at all.

Sixth Albaraka Bank Seminar, Fatwa No. 3
Source: http://www.albaraka.com/english/FAQs/Fat13-4.html

13. What happens after the first 5 years of a Murabaha Property Facility or on the yearly renegotiation of an Ijara facility?

With Murabaha, Salic will review administration costs each 5 years and reserves the right to adjust its Murabaha Management Fee (either up or down) and as a result your monthly commitment may change.

With Ijara, Salic will renegotiate rentals each anniversary of the facility.

In either case, 30 days prior to the conclusion of the Murabaha or Ijara period, Salic will notify you of relevant details to apply for the next period. Within 14 days you must advise Salic whether you wish to extend the facility on the revised basis and in such an event automatic renewal will occur.

In the event you do not accept the revised basis, you must repay the facility within 28 days of the anniversary date and your rights are protected by the UCCC.

14. What happens if I don't like the Murabaha Management Fee or the terms of any renewal or if I don’t like the new Ijara rental?

Salic is obliged to treat you fairly and it is in its own commercial interests to do so.
However, at any renewal if you found Salic's terms unacceptable, then you would be at liberty to repay your facility, either from your own resources or by sale of your home.

15. Will Salic accept lump sum reductions when it makes its reviews?

Yes.

16. Will Salic let me repay the facility in full at each review?

Yes.

17. What happens if I decide to repay my Murabaha or Ijara Facility early?

You are free to repay your liability at any time.

If you are a Murabaha customer, you may do so at the conclusion of any 5 year period and in this event Salic has a policy of providing a discount, rebate or gift of profit as it sees fit. If you wish to repay the facility during the currency of any particular 5 year period, you may encounter a fee.

If you are an Ijara customer, you may repay the facility at any rental renegotiation and in this event Salic has a policy of providing a release figure as it sees fit. If you wish to repay the facility during the currency of any particular 1 year period, you may encounter a fee.

Whether you are a Murabaha or Ijara customer, the UCCC protects your rights in this regard.

18. Why is Salic not sourcing its funding directly from the Islamic community?

 The Australian Islamic community is relatively small, its total deposit or saving pool is not sufficient to meet the demand. Salic has sourced funding from other sources to ensure continuity and availability of funds at all times. In doing so Salic seeks to provide a competitive product which complies with the Australian Consumer Credit Code and at the same time provides market return to its investors. This arrangement should ensure limitless supply of funds for our program.
This does not mean that we will not, in the future, structure an Islamic Investment fund for MFP and other lending programs.

19. What is Mortgage Insurance?

All Salic's Facilities are Mortgage Insured. The Lenders Mortgage Insurance protects investors against loss and does not provide you with any additional benefit.
If your Facility represents less than 80% of the price you are paying for your property, then the cost of the Mortgage Insurance will be absorbed in the Facility.
Before you settle, you are required to provide a Householders Insurance policy for the full insurable value of your home and keep the policy current during the term of the facility.

20. What happens if I am in arrears?

You are contracting with Salic to make a certain number of payments over the term of the Facility and approval is based on your substantiation of your ability to afford the facility. Following settlement, payments will be due either fortnightly or monthly and Salic will provide you with a direct debit authority ensuring collection of payments from your nominated account on the day they become due.

However, Salic understands that unforeseen circumstances may arise causing late payment and in such circumstances, or circumstances of other default, will apply a fee to defray the cost in providing the facility to you. You are obliged to rectify any default as soon as you are able and in genuine circumstances, Salic's policy is to assist its customers wherever possible. If you rectify the default, it is deemed never to have occurred.

In the event of a serious or protracted default, Salic may exercise its rights under its mortgage to sell the security property to recover the facility. This requires Salic to take a number of procedural steps and in this period you are entitled to bring your account up to date at any time. If you do so, the default is deemed never to have occurred.

The provisions of the UCCC apply in circumstances of default and Salic is committed to compliance with the UCCC.

21. Can a non-Muslim obtain the MFP facility?

Salic does not discriminate against any applicant and providing the terms of the MFP are met would be pleased to help.