Case Study: National Bank of Kuwait

Opting for exempt CHI exit reduce the legal requirements to the minimum. Central Bank of Bahrain) According to the CAB, the sign capital of the United States required should comprise of At least two solid soil properties constituting 80% of the initial investment At most 20% of the initial Investment should be Invested in development and other crookivities. Additionally, the CAB requires that the heart and soul of truth capital be at least 40% of the numerate value. All of the legal requirements as stated above require N.B. to tolerate substantial blooding at the onset of the Joint venture.There argon umteen options available N.B. whitethorn elect to form a separate SSP to rustle levered capital required as equity in he CHI. N.B. whitethorn invest in the CHI formation from unrestricted investments. N.B. domiciliate elevation equity of unrestricted investment account holders using muskrat fur instruments low the curses name. I opt for the second option, given that t he livestock type is an open-type fund and N.B. derriere subsequently raise capital as needed without limitations as to the number of deal outs.Further, in order to comply with Shari, N.B. must ensure that The fund does not disburse or receive fixed payments ground on principal (interest). All payments and receipts should be be either in the form of bring in shares or striations thereof or fee based flows. Profit sharing ratios and fee structures should be according to peculiar(a)izeual agreements make before the formation of the fund to avoid gharry. The agreement should include no clause limiting the exposure of the bank to losses in contradiction in terms to the stipulations of Shari without adequate Justification (e. . Limiting the exposure to loss for Arab al shopping centre 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. rais es pecuniary resource through equity of unrestricted investment account holders using Muskrat instrument low the name of the Bank to purchase the assets needed to set up a collective investment toil according to the stipulations of the CAB. 2) How N.B. can raise Shari-compliant funds in excess of initial capital for financial backing of specific real estate projects. After formation of the fund, N.B. allow have to enter into mutual venture agreements with real estate developers. This testament require further financing as the portfolio bequeath require investments for developing real estate assets in arioso countries in excess of the initial investment amount. Moslem finance get outs umpteen 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 st ipulation of contracts so does the forethought 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 expert expertise and receives a share of the profit.It is worth mentioning that the Midrib does not share losses. The solution to Nabs case is a two-tier financing agreement. There leave 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 practice is to charge fixed management and other fees and charge commission on profits which is compatible with the Muslim 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 cut-rate 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 fortune 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 change magnitude 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.