Saturday, May 18, 2019
Case Study: National Bank of Kuwait
Opting for exempt chi go away reduce the legal requirements to the minimum. Central Bank of Bahrain) According to the CAB, the initial capital required should follow of At least dickens real estate properties constituting 80% of the initial investment At close to 20% of the initial Investment should be Invested in development and other activities. Additionally, the CAB requires that the amount of fair-mindedness capital be at least 40% of the total value. All of the legal requirements as stated above require N.B. to provide substantial line of descenting at the onset of the Joint venture.There are galore(postnominal) pick outions available N.B. may elect to form a separate SSP to raise levered capital required as equity in he CHI. N.B. may invest in the CHI geological formation from unexclusive investments. N.B. nominate raise equity of unrestricted investment account holders using muskrat fur instruments under the banks name. I opt for the second option, given that the fund type is an open-type fund and N.B. can subsequently raise capital as demand without limitations as to the number of contributions.Further, in order to comply with Shari, N.B. must ensure that The fund does non disburse or receive fixed payments ground on principal (interest). All payments and receipts should be be either in the form of wampum shares or striations thereof or fee based flows. Profit sharing ratios and fee structures should be according to specifyual agreements made before the formation of the fund to avoid gharry. The agreement should include no clause limiting the exposure of the bank to mischiefes in contradiction to the stipulations of Shari without adequate Justification (e. . Limiting the exposure to loss for Arab al mall in a Muhammad contract without a valid justification which may be, for instance, gross misconduct by the midrib in breach of the contract resulting in the loss). To sum up, I suggest that N.B. raises property through equity of unr estricted investment account holders using Muskrat instrument under the name of the Bank to purchase the assets needed to set up a collective investment childbed according to the stipulations of the CAB. 2) How N.B. can raise Shari-compliant funds in extra of initial capital for financing of specific real estate projects. After formation of the fund, N.B. provide have to enter into joint venture agreements with real estate developers. This will require except financing as the portfolio will require investments for developing real estate assets in arioso countries in excess of the initial investment amount. Moslem finance provides many options for raising capital for such purposes, but two option are the most used Muskrat and Muhammad.Muskrat, basically, is a partnership where all parties provide finance and share profits according to predetermined arrangements. Management arrangements may differ according to the stipulation of contracts so does the management fees. Muhammad is a special type of partnership that involves a financier (Arab al mall) and an entrepreneur (midrib) whereby the undertaking is financed by the Arab al mall in turn for a profit or loss share and the midrib provides the actual work and technical expertise and receives a share of the profit.It is worth mentioning that the Midrib does non share losses. The solution to Nabs case is a two-tier financing agreement. There will be a Muhammad contract with the developer whereby the bank is Arab al mall and the developer is the midrib. There will also be a Muhammad contract between the bank and the bank and investors whereby the bank is the midrib and the investors are ABA al mall. The reason why Muskrat was not used is that, in common with investment funds, the manager does not share losses with investors.The common perform is to charge fixed management and other fees and charge commission on profits which is compatible with the Islamic instrument of Muhammad. This strategy better matches the inflows and outflows for N.B. as they will only act as intermediaries between investors and developers and will minimize exposure to loss. The income for the fund will be in the form of Fee income from investors Share of profit from the sale or rent of properties less developers shareThis kind of arrangement is common with Islamic banks when finance is not readily available internally Malden) However, the bank can also limit its risk exposure by taking a deposit from the developer in the form of Muskrat contract whereby the bank will be able to share some of the risk with the developers. This sharing of risk will solve the agency Muskrat partnerships that for their own interest, thus increasing efficiencies in their part of the Job as their net compensation will not contain a fixed minimum but can also extend to loss to a certain extent depending on the amount of the Muskrat contract.