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Services / Islamic Tools

Providing an appropriate answer to the demand in the Palestinian rural areas, Reef Finance is planning to provide its services according to the Islamic Tools and Principles.

Islamic finance refers to a system of finance based on Islamic law (commonly referred to as Sharia). Islamic financial principles are premised on the general principle of providing for the welfare of the population by prohibiting practices considered unfair or exploitative. The most widely known characteristic of the Islamic financial system is the strict prohibition on giving or receiving any fixed, predetermined rate of return on financial transactions.
From CGAP Focus note 49



Reef Finance will provide the following Islamic tools:

Murabaha Sale (cost plus markup sale contract Financing)
Murabaha was originally an exchange transaction in which a buyer purchased items from a seller at a specified profit margin payable to the seller. In a Murahaba sale it is assumed that the seller will disclose his costs accurately, such that the profit-margin can be agreed accurately. Hence this type of sale is a form of trust sale since the buyer must trust that the seller is disclosing his true costs. The profit margin may be agreed as a percentage of cost or as a fixed amount in money terms. Murabaha is typically used to facilitate short-term trade transactions and has been adopted in recent times as a financing mechanism under which an Islamic institutions replace the trader of old times in order to finance the end users requirements.

Reef Finance offers the required financing (partially or fully) of a certain commercial operation upon the clients request. A contract sale between Reef Finance and its client for the sale of goods at a price which includes a profit margin pre-agreed by both parties. The goods are sold to the client with a mark-up. Repayment, usually in installments, is specified in the contract (the price of the commodity is repaid in cash or within the installments over an agreed period of time).

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