Master Murabaha Financing Agreement
Murabaha Documentation & Practical Issues
There are a number of documents involved in a Murabaha financing transaction. The most essential of these documents are: * Master Murabaha Financing Agreement * Agency Agreement * Order Form / Draw Down Notice * Declaration * Purchase Evidences * Demand Promissory Note * Payment Schedule
Master Murabaha Financing Agreement (MMFA) * Its an agreement between the client and the Bank whereby the client agrees to purchase goods from the Bank from time to time as per the terms and conditions of this agreement. * This is an overall facility agreement under which various Sub-Murabahas may be executed from time to time. * Hence it needs to be signed once at the time the facility is sanctioned.
Agency Agreement * Through this agreement, the Bank appoints customer its agent to select and procure specified goods for the Bank. * This agreement needs to be signed once between the client and the bank to cover the specified agency period.The disbursement of funds is done under this agreement. * The customer should define a comprehensive list of assets and commodities that he may procure during the course of business from time to time.
Order Form * This document is executed at the time of each sub-Murabaha request i.e. each time when the customer requires Murabaha for purchase of assets. * Through this document customer requests the bank to purchase the assets from the supplier and undertakes that it will purchase the assets from the bank once the bank acquires them from the market. * The customer also undertakes to compensate for the actual loss the bank may suffer in case that he fails to purchase the assets from the bank.
Declaration
* This is the most important part of the Murabaha process. * Declaration is to be signed by the customer immediately after the purchase of goods as Bank’s agent but before the actual consumption. *
There are a number of documents involved in a Murabaha financing transaction. The most essential of these documents are: * Master Murabaha Financing Agreement * Agency Agreement * Order Form / Draw Down Notice * Declaration * Purchase Evidences * Demand Promissory Note * Payment Schedule
Master Murabaha Financing Agreement (MMFA) * Its an agreement between the client and the Bank whereby the client agrees to purchase goods from the Bank from time to time as per the terms and conditions of this agreement. * This is an overall facility agreement under which various Sub-Murabahas may be executed from time to time. * Hence it needs to be signed once at the time the facility is sanctioned.
Agency Agreement * Through this agreement, the Bank appoints customer its agent to select and procure specified goods for the Bank. * This agreement needs to be signed once between the client and the bank to cover the specified agency period.The disbursement of funds is done under this agreement. * The customer should define a comprehensive list of assets and commodities that he may procure during the course of business from time to time.
Order Form * This document is executed at the time of each sub-Murabaha request i.e. each time when the customer requires Murabaha for purchase of assets. * Through this document customer requests the bank to purchase the assets from the supplier and undertakes that it will purchase the assets from the bank once the bank acquires them from the market. * The customer also undertakes to compensate for the actual loss the bank may suffer in case that he fails to purchase the assets from the bank.
Declaration
* This is the most important part of the Murabaha process. * Declaration is to be signed by the customer immediately after the purchase of goods as Bank’s agent but before the actual consumption. *