Application of Islamic Financial Schemes

Commercial Financing

Financing needs	Islamic Finance Scheme
Bonds Financing	Ijara	In this arrangement, the client essentially doing sale and lease back arrangement with the financier
	Mudaraba	The financier provides financing and the client (known as the mudarib) invests the capital according to some pre agreed business plan. The profit of the business is distributed according to a predetermined ratio, but any financial loss is incurred only by the financing providers (worked just like in the Private Equity industry where General Partner provide the Management and Limited Partner who provide them with the capital).
	Musharaka	Essentially a musharaka is a joint-venture. As with the mudaraba, the profit of the business is distributed according to a pre-determined ratio, however, in a musharaka the loss is distributed in proportion to each partner’s share of the capital.
Working capital financing	Musharaka	The financier acts as the buyers for the projects. When the project reached a certain completion, the financier pays the money according to the pre-arranged agreement
	Salam	The financier pays for goods that are supposed to be delivered in the future. The main difference between Salam and Musharaka is that in Musharaka is more like a long term financing while salam is more of like short-term financing.
Financial/Capital Lease	Ijara	The financier bought the asset in which the client needs and then rent them to the client. The client paid installment + rent to the financier
	Murabaha	The financier buys the asset from the provider and then sells it to the client. The client pays fixed installment to reduce the debt

Consumer Financing

Financing needs	Islamic Finance Scheme
House Mortgage, Car Leasing, appliances and electronics Leasing	Murabaha	In this scenario, the financier acts as if the house was bought by the financier and then the financier sells it to the client with a certain amount of margin.
	Ijara	In this scenario, the financier leases the house to the client. Hence, the client paid rent + installment of the debt.