Question: What is Islamic Banking?

Answer: Islamic banking is a banking system which functions in consonance with the rules and principles of Islamic Shari’ah. In practical sense, Islamic Banking offer Shari’ah-compliant banking and financial products and services as an alternative to the offerings of conventional system of banking. Islamic Banking transactions are based or backed by tangible assets and real services.

Islamic banking is a fast growing phenomenon in the global financial markets. There has always been a demand for financial products and services that conform to the rules and principles of Shari’ah (Islamic law). Based on this demand, number of banks all over the world have started offering Shari’ah-compliant products and services.

Question: What is Shari’ah?

Answer: Shari’ah is the revealed principles represented in Quran & Sunnah (Prophet Mohammed 's (PBUH) traditions) to govern all aspects of life for Muslims. Shari’ah embodies all aspects of Islamic faith, beliefs, worships, economic and business activities and social practices.

Question: How Islamic Banking is different from Conventional Banking?

Answer: Islamic banking is different from conventional banking in the sense that Islamic banks do not deal in Shari’ah-prohibited elements and activities. Thus, Islamic banks avoid activities that involve interest (Riba), gambling (Maysir) and excessive ambiguity (Gharar) etc. Unlike conventional banks, Islamic banks operate on the principles of trade (buy and sell) transactions, lease , partnerships, Agency, etc. In Islamic banking, wealth can be generated only through Shari’ah Compliant trade, investment and other activities.

Question: What is SIRAT?

Answer: SIRAT is Islamic Banking window brand name of Habib Bank AG Zurich. HBZ - SIRAT is prudently segregated Islamic window to offer Shari’ah-compliant banking products and services under the supervision of its Internal Shari’ah Supervision Committee (ISSC).

Question: What are the key differences between Islamic and Conventional Banking system?

Answer: One of the key differences between Islamic and conventional banking system lies in contract and mechanism of their products and services. Islamic banking relies on different contractual structure to operate rather than simply involving into lending and borrowing with its customers. The frequently used mode of contract in Islamic banking include sale, lease, agency and profit-and-loss sharing structures. The below table summarizes the differences between Islamic and Conventional system of banking:

Question: Can I contact Internal Shari’ah Department of the Bank to obtain additional Shari’ah related information?

Answer: YES, you can contact our Shari’ah Department anytime by writing an email to sirat.ae@habibbank.com. Based on your enquiry, we will respond to you as soon as possible.

Question: Habib Bank AG Zurich is a conventional bank then how can “SIRAT” be Islamic while being the part of the same bank?

Answer: Yes, “SIRAT” is an integral part of Habib Bank AG Zurich, but its funds and operations are segregated to comply with regulatory and Shari’ah requirements. The fact that it is under the same roof does not imply that Islamic Banking and conventional side are the same. In Habib Bank AG Zurich, UAE Shari’ah-compliant funds and books are completely segregated from conventional side.

Question: How does HBZ-SIRAT ensure that the banking operations are carried out as per Islamic Shari’ah requirements?

Answer: Islamic Banking operations are carried out under the supervision of Internal Shari’ah Supervision Committee (ISSC). The ISSC of the Bank comprises of prominent Shari’ah scholars conversant with the Islamic Shari’ah and fiqh al-Muamlat (jurisprudence of transactions). The ISSC is an independent advisor to the Bank for its Islamic banking offerings. Furthermore HBZ-SIRAT also have Internal Shari’ah Control Department and Internal Shari’ah Audit Department to monitor and make sure that all transactions and activities performed under SIRAT complies with Islamic Shari’ah Principals.

Question: What are the names of Sharia’ Scholars on Habib Bank AG Zurich, UAE panel?

Answer: Below are the names and brief profiles of the Internal Shari’ah Supervision Committee (ISSC) members of Habib Bank AG Zurich, UAE:

1. Professor Jassim Ali Salem Nasser AlShamsi
   Jassem Al Shamsi is a national of United Arab Emirates. He served as Dean of the College of Sharia and Law, UAE University. He also advises a number of important Financial Institutions.
2. Mufti Talha Salim
   Mufti Talha is a national of Pakistan. He holds a Degree of Specialization in Islamic Jurisprudence / Islamic Finance. He has experience of advising different Islamic Banks and Financial institutions.
3. Dr. Mohammed Ahmed Al-Hashimi
   Dr. Mohammed al-Hashimi is a national of United Arab Emirates and has PhD degree in Contemporary Islamic Jurisprudence. He is a lecturer at department of Shari’ah and Islamic Studies at Emirates University. Dr. Al-Hashimi sits on different academic committees of the University and Internal Shari’ah Supervision Committee of banks.

Question: What does Riba mean ?

Answer: In a loan contract, any excess charged over and above the principle amount is Riba. Similarly, applying charges against deferment of an outstanding debt payment without any due consideration constitutes Riba. Therefore, rent on a lease and profit on a sale, although are fixed and pre-decided, do not constitute Riba/Interest.

Question: Are Islamic banking products & services restricted to only Muslims?

Answer: Islamic banking is inclusive and welcomes customers irrespective of religious affiliations. However, certain businesses that are involved in non-Shari’ah compliant business activities cannot open an account with Islamic Banking window of Habib Bank AG Zurich, UAE.

Question: What are the basic principles of Islamic banking?

Answer: There are at least six basic principles, which are taken into consideration while executing any Islamic banking transaction. These principles differentiate a financial transaction from a Riba/interest based transaction to an Islamic banking transaction.

1. I. Sanctity of contract:
   Before executing any Islamic banking transaction, the counter-parties have to confirm on whether the transaction is valid in the eyes of Islamic Shari’ah. This means that Islamic window’s transaction must not be invalid or voidable in the sight of Shari’ah. An invalid contract is a contract, which by virtue of its nature is invalid according to Shari’ah rulings. Whereas a voidable contract is a contract, which by nature is valid, but some invalid components are inserted in the valid contract. Unless these invalid components are eliminated from the valid contract, the contract will remain voidable.
2. II. Risk sharing:
   From the saying of prophet Muhammad (SAW) Islamic jurists have inferred that no profit can be earned from an asset or a capital unless the earner of that profit has taken the relevant ownership risks. Thus, in every Islamic banking transaction, the Islamic financial institution and/or its deposit holder take(s) the risk of ownership of the tangible asset, real services or capital before being entitled to earn any profit there from.
3. III. No Riba/Interest:
   Islamic banks cannot be involved in Riba/Interest-related transactions. They cannot lend money to earn additional amount on it. However as stated in point No. II above, it earns profit by taking risk of tangible assets, real services or capital and passes on this profit/loss to its deposit-holders who also take the risk of their capital.
4. IV. Economic purpose/activity:
   Every Islamic banking transaction has certain economic purpose/activity. Further, Islamic banking transactions are backed by tangible asset or real service.
5. V. Fairness:
   Islamic banking inculcates fairness through its operations. Transactions based on dubious terms and conditions cannot become part of Islamic banking. All the terms and conditions embedded in the transactions are properly disclosed in the contract/agreement.
6. VI. No invalid subject matter:
   While executing an Islamic banking transaction, it is ensured that no invalid subject matter or activity is financed by the Islamic financial transaction. Some subject matter or activities may be allowed by the law of the land but if the same are not allowed by Shari’ah, these cannot be financed by an Islamic bank.

Question: Islamic banking looks the same as conventional banking then how can they claim it to be different?

Answer: The validity of a transaction does not depend on the end result but rather the mechanism, process and activities executed and the sequence thereof in reaching the end. If a transaction is done according to the rules of Islamic Shari’ah it is Shari’ah-compliant even if the end result of the product may appear to be the same as in conventional banking product. For example a normal McDonald’s burger in USA and United Arab Emirates may look similar, smell similar and taste similar but the former is not allowed as per Shari’ah and the latter is allowed due to its compliance of Islamic guidelines of slaughtering animals. The same is also true for Islamic and conventional banking. The contracts and product structures used by Islamic banks are quite different from that of the conventional bank.

Question: What Islamic products does HBZ-SIRAT is offer to its Customers?

Answer: At Habib Bank AG Zurich UAE - SIRAT, we constantly strive to provide financial solutions that meet the requirements of our customers in a Shari’ah-compliant manner. HBZ-SIRAT offers Islamic banking products/services, which combine our financial expertise with your enduring values.

Following products are offered to consumer and corporate segments:

• Banking Accounts: Islamic Current accounts, Islamic savings accounts.
• Term Deposits: Islamic Term Deposit (Wakala Investment) Accounts.
• Personal / Business Banking: Auto Murabaha Finance, Ijarah Home Finance.
• Trade Finance: Issuance of Islamic Letters of Credit, Import Murabaha Financing and Export Musawamah Financing Products.

Question: Does the ISSC of the Bank issue Fatwa Certificates for products approved by its ISSC, if you can I receive copy of the Fatwa Certificates?

Answer: YES, the Bank’s ISSC issue Fatwa Certificates for all the products approved by the ISSC. You can find all products Fatwas approved by the ISSC on our website i.e. https://www.habibbank.com/uae/home/uaeSirat.html.

Question: Which currencies does HBZ Islamic banking deal in for deposit accounts?

Answer: HBZ-SIRAT shall be offering Islamic current/saving account and Term Deposits (Wakala Investment) accounts in AED & USD only.

Question: How can I apply for HBZ, Islamic Banking accounts?

Answer: You can apply for HBZ Islamic Banking accounts through any of the Habib Bank AG Zurich, UAE branches.

Question: How I can obtain fees and charges schedule applicable to products offered by the HBZ - SIRAT?

Answer: You can find Schedule of Charges on our website i.e. https://www.habibbank.com/uae/home/uaeSirat.html.

Question: Whether Islamic Savings Account of HBZ will pay a return/profit to depositors?

Answer: No. Islamic Savings Accounts at Habib Bank AG Zurich-SIRAT, UAE are based on the concept of Qard, which will not earn any profit/return for the depositors. Thus, Islamic Current & Saving accounts do not earn income as they are taken as Qard from depositors to the bank, and because they can be withdrawn on demand by customers without an advance notice.

Question: What businesses are not allowed to open Islamic accounts ?

Answer: In Islamic window operations, we will not open an account for any entity which involves in Shari’ah non-compliant business activities e.g.

1. Trading/Sale of alcohol, liquor, wine, beer etc.
2. Trading/Sale cigarette, Tobacco, Paan, Dokha, Cigarettes, Khat and Hookah
3. Trading/Sale meats that are considered prohibited, such as pork, dog, cat, monkey, or any other prohibited animals
4. Trading/Sale of any other items prohibited under Islamic Shari’ah
5. Cinemas & Music Centers
6. Gambling
7. Tattoos
8. Hoarding
9. Usury based lending

Question: What is Qard?

Answer: In Islamic finance, Qard refers to a contract of lending money by a lender to a borrower where the latter is bound to return an equivalent replacement amount to the lender. Since Quran forbids paying or receiving interest, interest-free Qard is the only permissible loan in Islamic finance.

Question: What is Wakala?

Answer: Habib Bank AG Zurich-SIRAT, UAE offers Islamic Term Deposit product under the concept of Wakala. Wakala is a Shari’ah-compliant agency contract in which you as a customer can authorize the Wakil (the Bank) to invest funds in Shari’ah approved activities for generating profits. The literal meaning of a "Wakala" is an agency or a delegated authority where the Muwakkil (principal) appoints the Wakil (agent) to carry out a specific job on behalf of the Muwakkil.

Question: Is it mandatory to open same currency Islamic current / saving account to open Islamic Term Deposit Account?

Answer: Yes, it is mandatory to open same currency Islamic current/saving account to open Islamic Term Deposit Account.

Question: Can Islamic deposits be used for conventional assets?

Answer: No, Islamic Deposits will only be used by the Bank in Shari’ah-approved activities.

Question: What is Murabaha?

Answer: Murabaha is the sale of goods as ordered by the buyer/ customer with a price consisting of cost plus profit margin. In Islamic Banks’s financing, the sale price under Murabaha is generally paid on deferred installment payment basis. Islamic banks have adopted this as a mode of financing. As a financing technique, it involves a request by the client to the bank to purchase certain goods for him/her. The Bank does that for a definite profit over the cost, which is agreed in advance.

Question: What are the basic rules of a valid Murabaha transaction?

Answer: The following are the rules governing a Murabaha transaction:

• The subject matter of sale must exist at the time of the sale. Thus, anything that may not exist at the time of sale cannot be sold and its non-existence makes the contract void.
• Cost and profit should be known & declared by the seller.
• The subject matter should be in the ownership, either actual or constructive, of the seller at the time of sale. If he/she sells something that he/she has not acquired himself/herself then the sale becomes void. Constructive ownership means, all rights and liabilities of the subject matter are passed on to him/her including the risk of its destruction.
• The sale must be instant and absolute. Thus, a sale attributed to a future date or a sale contingent on a future event is void. For example, 'A' tells 'B' on 1st January 2022 that he will sell his car on 1st February 2022 to 'B', the sale is void because it is attributed to a future date.
• The subject matter should be a property having value. Thus, goods having no value cannot be sold or purchased.
• The subject matter of sale should not be a thing used for an un-Islamic purpose.
• The subject matter of sale must be specifically known and identified to the buyer. For Example, 'A' owner of an apartment says to 'B' that he will sell an apartment to 'B'. Now the sale is void because the apartment to be sold is not specifically mentioned or identified to the buyer.
• The delivery of the sold commodity to the buyer must be certain and should not depend on a contingency or chance.
• The certainty of price is a necessary condition for the validity of the sale. If the price is uncertain, the sale is void.
• The sale must be unconditional. A conditional sale is invalid unless the condition is recognized as a part of the transaction according to the usage of trade.

Question: How can I apply for Murabaha Auto Finance at HBZ-SIRAT UAE?

Answer: You can apply for HBZ-SIRAT Murabaha Auto Finance products through any of the Habib Bank AG Zurich-UAE branches.

Question: Are the Goods purchased by me insured by the Bank?

Answer: No, the goods are not insured by the bank. The original warranty or guarantee provided by the Supplier remains valid.

Question: Is it mandatory for the seller in Murabaha to disclose profit?

Answer: Yes, in Murabaha-sale, the seller must disclose cost & profit to the buyer.

Question: How Murabaha profit can be calculated?

Answer: Murabaha profit can be calculated using any method but once agreed and agreement signed, it cannot be changed.

Question: What is Ijara?

Answer: Ijara is a contract of lease. Ijara is executed in an identified or proposed usufruct or service against a specified rental as consideration.. In other words, Ijara or leasing is the transfer of usufruct for a consideration which is rent in case of hiring of assets or things, and a wage in case of hiring of persons.

Question: How can I apply for Ijarah Home Finance?

Answer: You can apply for HBZ Ijarah Home Finance products through any of the Habib Bank AG Zurich-UAE branches.

Question: Under Ijara Home Finance, who will be the owner of the property?

Answer: Under Ijarah Home Finance, Bank will be the owner of the property, however the Bank’s undertaking to sell will give the right to the customer to buy the property any time by giving Sale/Exercise Notice.

Question: What is Musawamah?

Answer: Musawamah is a general and regular kind of sale in which price of the commodity to be traded is bargained between seller and the buyer without any reference to the price paid or cost incurred by the former. Thus, it is different from Murabaha in respect of pricing formula. Unlike Murabaha, seller in Musawamah is not obliged to reveal his cost. Both the parties negotiate on the price. All other conditions relevant to Murabaha are valid for Musawamah as well. Musawamah can be used where the seller is not in a position to ascertain precisely the costs of goods/commodities that he is offering to sell.

Question: Islamic banks use interest base system (EIBOR/LIBOR) as a benchmark while determining profit; how Islamic banking can be said to be Islamic?

Answer: Using Interest Rate benchmark for determining the profit in Islamic transactions does not render the transaction as invalid. The nature of transactions determines the validity of the transaction. Taking an example of two individuals Mr. A is selling Wine on a 10% profit while Mr. B is selling Juice and benchmark the same profit rate. This does not render Mr. B’s profit Haram.

Question: Are not Islamic banks just paying interest and dressing it as profit on trade and investments?

Answer: No, Islamic banks accept the deposits either on profit and loss sharing basis or on Qard basis. These deposits are deployed in financing, trading or investment activities by using the Shari’ah-compliant modes of finance. The profit so earned by the Bank is passed on to the depositors according to respective agreements, which, therefore, are not Interest/Riba.

Question: Is it permissible for an Islamic bank to impose penalty in case receivables are delayed?

Answer: Islamic banks charge late payment fee under customers’ commitment to donate in case of delay in instalment payments. Any such proceeds would be used for charity, as late payment fee cannot become source of income for the Bank in any manner.

Question: Can HBZ-SIRAT, UAE charge me extra profit in case of late payment?

Answer: No, HBZ-SIRAT, UAE will not charge you any extra profit in case of delay in payment, however a late payment fee may be charged, which will be paid to charity.

Question: Where do Habib Bank AG Zurich-SIRAT, UAE invest?

Answer: Habib Bank AG Zurich-SIRAT, UAE makes investment in different Shari’ah compliant avenues that include Islamic lease generally known as Ijarah, sale and purchase activities like Murabaha, Musawamah, Shari’ah-Compliant Sukuk, and Shari’ah-Compliant Treasury Deposits/Certificates, etc. For example, HBZ-SIRAT, UAE offers Islamic Home Finance on Ijarah basis and earns rental from it, or buys vehicles on customers’ requirement basis from the dealer/vender and sells it to the customer and earns selling profit under Murabaha transaction.

Question: Habib Bank AG Zurich-SIRAT, UAE opens Islamic Letter of Credit under which Sharia’ principles?

Answer: Islamic Letter of credits are opened by Habib Bank AG Zurich-SIRAT, UAE upon the request of customer under the Shari’ah contracts of either Wakala or Kafala.

Question: What is Kafala?

Answer: Kafala contract is contract of guarantee, which is used to provide assurance as to performance or liabilities. In other words, Kafala is instrumental to terminate any adverse change that may lead to uncertain or unpredictable outcomes with respect to the object or underlying of a transaction. With reference to Letter of Credit, in case customer is not requiring Murabaha import financing from Habib Bank AG Zurich-SIRAT, UAE, the Letters of Credit will be issued under Kafala contract.