Diversification of Islamic Financial Insturments
17
Product/Process Middle East North Africa Malaysia Indonesia
specific target
customers)
place deposits
into various
funds based on
their risk
preferences
and expected
returns
place deposits
into various
funds based on
their risk
preferences
and expected
returns
institutions (NBFI)
and developmental
banks are using
this capability to
manage
borrowings or
“special allocation”
received from
banks and
government
agencies
customers is
low
Source: Created by Author
Table 8: Financing
Product/ Process Middle East North Africa Malaysia Indonesia
Monetization
Products (Cash
finance based on
Tawarruq and Salam
Salam structure
is preferred as
Tawarruq is
discouraged by
scholars
Salam structure
is preferred
Very popular
scheme based
on Tawarruq
concept
Both Tawarruq
and Salam
structures are
not approved by
scholars
Vehicle Financing
(Murabahah and
Ijarah)
Standard
offering
Standard
offering
Standard
offering
Standard
features, some
are managed by
multi-finance
outfits
House Financing
(Murabahah, Ijarah
and Diminishing
Musharakah)
Only Ijarah and
Diminishing
Musharakah are
popular
Only Ijarah and
Diminishing
Musharakah are
popular
Only
Murabahah and
Diminishing
Musharakah
are popular
Only Ijarah and
Diminishing
Musharakah are
popular
Pawn Broking (Al-
Rahnu)
Prohibited
product
Prohibited
product
Popular, as a
form of
personal
financing with
gold as
collateral
Popular form of
financing with
gold as
collateral
Equipment/Industrial
leasing
(Operating/Financial)
based on Ijarah
concept
Operating and
financial leases
are popular
Operating and
financial leases
are popular
Mostly financial
lease
Mostly financial
lease
Plant/Construction
financing using
Istisnaq and forward
Ijarah
Both structures
used but
forward Ijarah
is popular
Forward Ijarah
is popular
Istisnaq and
forward Ijarah
are prevalent
Istisnaq
structure is
more popular
Project Financing
based on Musharakah
and Dim Musharakah
and Mudharabah
Popular form of
financing
Popular form of
financing
Banks not keen
to offer as
deemed too
risky
Popular form of
financing