THIS AGREEMENT FOR FINANCING ON THE
BASIS OF MUDARABA
is made on the __________day of _________2001
of the Client], _____________________________________,
having its place of business at / resident
hereinafter referred to as the Client (which
expression shall, where the context admits,
mean and include its successors in interest
and assigns) acting as Mudarib of the ONE PART;
of the financial institution], a banking company
incorporated under the laws of Pakistan, having
its Registered Office at ________________________,
hereinafter referred to as the Institution,
(which expression shall, where the context admits,
mean and include its successors in interest
and assigns) acting as Rab Al-Maal of the OTHER
the Client and the Institution wish to enter into
a Modaraba in conformity with the Islamic Shariah
for the purpose of carrying out the Project described
in Exhibit A.
WHEREAS the Client has presented to the
Institution an application to finance the Project
described in Exhibit A and has
satisfied conditions precedent and other formalities
to avail of such financing;
THEREFORE THIS AGREEMENT WITNESSES AND IT IS HEREBY
AGREED BY AND BETWEEN THE PARTIES AS UNDER:
parties agree that the following terms used in
this agreement shall have the following meanings:
means an account opened with the Institution in
the name of the Client
Asset Finance means the sum estimated
by the Client as necessary to acquire the assets
required for the Project as disclosed on the Project
Information Form Exhibit A and as reflected in
the Cash Flow and Revenue Projection.
Revenue Projection means the
financial projections for the project prepared
by the client and annexed as Exhibit B.
Services means the technical management
and supervision services, required to ensure the
success of the Project described in Exhibit
means the amount of gross profit available for
distribution after deduction of permissible expenses
as may be agreed between the client and the Institution
in terms of Schedule of Expenses hereto attached
Form means Exhibit D
prepared by the Client, disclosing certain information
regarding the Client.
Financials means the Balance Sheet and
Profit and Loss Statement of the Client for the
last three years, prepared by the Client and audited
by an independent accountant.
Down Dates means the dates specified
in Exhibit E at which the Institution
is obliged to provide funds by credit to the Account
Assets means all Asset Finance and all
things acquired with such finance and the proceeds
and profits thereof until distributed to the client
and the Institution in accordance with the terms
and conditions of this Agreement
Date is the date on which this Agreement
shall terminate as herein provided.
following exhibits shall form part of this Agreement:
Exhibit A: Project Information Form being a
narrative description of the Project
Exhibit B: Cash Flow and Revenue Projection
for Project, and Management Services
Exhibit C: Schedule of Expenses
Exhibit D: Client Information Form
Exhibit E: Draw Down Dates
Exhibit F: Authorized Signatories.
parties agree that a sum of Rs. 
by way of finance required for the Project as
estimated by the Client in the Project Information
Form shall be supplied by the Institution for
a period of ____________ months hereof and deposited
in the Account.
The authorized signatories on the Account shall
be as specified in Exhibit F.
All funds for the purpose of the project shall
be disbursed only through the Account by cheque
or transfer against proper supporting invoices
maintained by the Client but available for inspection
by the Institution or its agents. .
All receivables from third parties arising from
the Project or the transfer of Project Assets
shall be collected only through the Account.
The Institution shall have the right to refrain
from the payment of any cheque or transfers
from the Account if it reasonably appears to
the Institution that such amounts are not included
in the Cash Flow and Revenue Projections and
do not directly or indirectly relate to the
REPRESENTATIONS OF THE CLIENT
Client represents to the Institution that:
The Client possesses all necessary powers and
licenses to conduct its present business and
The Client Information Form is true and correct.
The Client is experienced and knowledgeable
in all business matters relating to the Project.
The Client has prepared with all due care the
Project Information Form and the Cash Flow and
Revenue Projection based on his experience and
knowledge and has completed all reasonable investigation
to assure that such are true and correct and
disclose all factors relevant to the Institution’s
evaluation of the Project.
The Client Financials are true and correct according
to generally accepted accounting principles
consistently applied accurately representing
the Client’s financial status on the dates
and the profit and loss for the periods indicated,
an no liabilities, fixed or contingent exist
at the indicated dates other than as appear
in the Client Financials.
The Client has suffered no material adverse
change in business operation or financial position
since the date of the most recent Client Financials
supplied to the Institution.
REPRESENTATION OF THE INSTITUTION
Institution represents to the Client that on the
date of this Agreement:
Institution is a corporation organised under the
laws of ……….. and possesses
all necessary powers and licenses to conduct its
business and to finance the Project as provided
by this Agreement.
GENERAL COVENANTS OF THE CLIENT
Client undertakes to the Institution that the
promptly give notice to the Institution of any
change in the information disclosed on the Client
render the Management Services with due care
and all reasonable commercial diligence expected
of an experienced businessman to ensure the
success of the Project according to the description
of the Project Information Form and the Cash
Flow and Revenue Projection.
tutilize the Project assets exclusively for
purposes of the Project as specified in the
Cash Flow and Revenue Projection.
disburse all funds for the purpose of the Project
only through the Account by cheque or transfer
against proper supporting invoices maintained
by the Client but available for inspection by
the Institution or its agents.
collect all receivables from third parties arising
from the Project or the transfer of Project
assets or other documents requiring payment
from third parties directly to the Account.
maintain all Project assets in the name of the
Client, but physically segregated from other
assets of the Client and free and clear of all
liens and encumbrances except those in favour
of the Institution.
submit the following to the Institution, prepared
according to the instructions of the Institution:
A cash flow and revenue statement of the Project
for the previous quarter, with a clear explanation
of each variation from the Cash Flow and Revenue
Projection, within 30 days of the close of
A balance sheet and income statement of the
Client prepared in accordance with principles
utilized in the Client Financials consistently
applied. The annual balance sheet and income
statement shall be audited by an independent
firm of accountants approved by the Institution,
and audited documents shall be presented to
the Institution within 120 days of the close
of the Client’s accounting year.
maintain true and correct books of account relating
to the Project together with all invoices, records
contracts and all other documentation.
supply to the Institution any information, material
or document relating to the Project or to Client’s
financial status, and grant access to the Institution
or its agents to all books and relating to the
Project and to the Client’s financial
immediately disclose in writing to the Institution
any business factors of which the Client becomes
aware and which might adversely affect the success
of the Project.
not effect directly or indirectly any transaction
on behalf of the Project in which the Client
or any family member of the Client or any shareholder
of the Client, if a corporation, is interested
directly or indirectly without consent of the
consult with the Institution in any matter,
including but not limited to insurance of the
assets Modaraba with a view to determining the
policy to be followed in order to ensure the
proper implementation of this Agreement, but
without any obligation of the Client to compromise
rights of the Client hereunder.
under its sole responsibility, conduct the Project
in conformity with all applicable civil and
conduct the Project without violation of the
principles of the Islamic Shariah.
it will satisfactorily insure all its insurable
assets of the Project with reputable companies
offering protection under the Islamic concept
of Takaful. Until the Islamic concept of Takaful
is not available the such assets shall be comprehensively
insured (with a reputable insurance company
to the satisfaction of the Institution) against
all insurable risks, which may include fire,
arson, theft, accidents, collision, body and
engine damage, vandalism, riots and acts of
terrorism, and to assign all policies of insurance
in favour of the Institution to the extent of
the amount from time to time due under this
Agreement, and to cause the notice of the interest
of the Institution to be noted on the policies
of insurance, and to punctually pay the premium
due for such insurance’s and to contemporaneously
therewith deliver the premium receipts to the
Institution. Should the Client fail to insure
or keep insured the aforesaid and/or to deliver
such policies and premium receipts to the Institution,
then it shall be lawful for the Institution
but not obligatory to pay such premia and to
keep the Secured Assets so insured and all cost
charges and expenses incurred by it for the
purpose shall be charged to and paid by the
Client as if the same were part of the monies
due. The Client expressly agrees that the Institution
shall be entitled to adjust, settle or compromise
any dispute with the insurance company(ies)
and the insurance arising under or in connection
with the policies of insurance and such adjustments/compromises
or settlements shall be binding on the Client
and the Institution shall be entitled to appropriate
and adjust the amount, if any received, under
the aforesaid policy or policies towards part
or full satisfaction of the Client's indebtedness
arising out of the above arrangements and the
Client shall not raise any question or objection
that larger sums might or should have been received
under the aforesaid policy nor the Client shall
dispute its liability(ies) for the balance remaining
due after such payment/adjustment;
GENERAL COVENANTS OF THE INSTITUTION
Institution undertakes to the Client that it shall:
make all payments of Finance required of the
Institution under this Agreement to the Account
on the Draw-Down Dates.
whenever the circumstances so require consult
with the Client in any matter with a view to
determining the policy to be followed in order
to ensure the proper implementation of this
Agreement, but without any obligation of the
Institution to compromise its right, hereunder.
perform its obligations under this Agreement
without violation of the principles of Islamic
PARTICIPATION IN PROFIT
The participation in profit will be in accordance
with the following ratio:
of the profit will be for the Management Services
and payable to the Client.
of the profit will be payable to the Institution.
b) On Termination Date, the
accounts of the Modaraba shall be drawn up in
accordance with accepted accounting principles,
and the profit if any due to the Client and
the Institution shall be worked out and paid
in the proportion specified above, subject to
adjustment of any provisional payments made,
(plus the amount paid by the Institution after
deducting loss if any).
At the sole discretion of the Institution, the
Client may become entitled to receive a Good
Performance Bonus at a rate to be determined
by the Institution.
(i) 100% of the loss in the
Project will be borne by the Institution
The client will receive no compensation for
his Management Services, and will be liable
for the loss if it is proven that he has breached
his obligations or is proven to be failing
in the discharge of his obligations under
In the event of the Project showing losses during
the currency of this Agreement the client shall
forthwith give notice of such losses to the
Institution together with all accounts and details
pertaining thereto and such other information
and records as may be required by the Institution.
Notwithstanding the above, the Institution shall
only be liable for the losses in the manner
specified if the said losses have not been caused
due to misconduct on the part of the Client
in out the Project’s business and operations
or as a result of his negligence or inefficiency,
including non-compliance with the terms and
conditions of this Agreement
behalf of the Project, the Client shall be liable
for and shall punctually and regularly pay all
taxes, duties, cesses and other charges relating
to the Project’s business and operations.
Subject to other provisions of this Agreement,
it is agreed that upon full payment on Termination
Date or earlier, if proceeds have been received,
the Modaraba shall stand redeemed.
While the amount invested by the Institution
must be repaid on the due date, mentioned above,
the accounts of the Modaraba will be drawn up
within 7 days thereof and the agreed share the
Institution’s profit will be promptly
MANAGEMENT AND CONTROL
only to the express terms of this Agreement, complete
management and control of the Project is exclusively
vested in the Client and the Client shall be solely
responsible for the management and control of
ASSUMPTION OF MANAGEMENT OF THE PROJECT BY THE
Institution shall have the right to terminate
by notice the powers of the Client to manage the
Project and assume the same if the Client violates
any obligation hereunder, or if for any cause
the results of the Project depart in a material
adverse manner from those projected by the Client
in the Cash Flow and Revenue Projections. In such
Client shall be entitled to receive his share
of the profit, if any, until the date of termination
stated in the notice. Thereafter, the Institution
shall be entitled to the whole profit.
The assumption of management by the Institution
shall not discharge the Client of any obligation
hereunder other than the obligation to render
the Management Services.
The assumption of management by the Institution
with respect to the Project shall in no event
be deemed to affect the liability of the Client
to the Institution, with respect to any other
facilities granted under any other agreement
between the Client and the Institution whether
or not the proceeds of such were employed in
connection with the Project.
On assumption of management of the Project by
the Institution, the Client will, on the written
demand of the Institution, deliver to it all
Project Asset, all books, records, contracts
and other documents relating to the Project.
CIVIL LAW STRUCTURE AND INTERPRETATION
all relations with third parties and this Agreement
be construed under the laws of Islamic Republic
of Pakistan. This Agreement shall not create a
partnership or company and in no event has the
Client any authority to bind the Institution.
The Client shall contract the Project in the name
of the Client and in no event shall the Institution
be liable for the debts and obligations of the
Client incurred for the Project or other purposes,
except as stipulated in this Agreement and its
Institution may set-off against any obligation
of the Client hereunder, or any other obligation
of the Client, the balances of any account maintained
by the Client with it.
parties agree that:
Any notice or other communication required or
permitted by this Agreement shall be deemed
to have been given to the other party seven
days after the day on which the same is posted
by registered mail, addressed to the address
mentioned in this Agreement or any other address
given in writing to the other party, or one
day after actual delivery at such address, whichever
This Agreement may be amended or any term or
condition waived only in writing, executed by
persons duly authorized.
The Exhibits of this Agreement shall be considered
an integral part thereof.
This Agreement has been executed in two original
counterparts. Each page of this Agreement and
each Exhibit have been initialed for identification.
WITNESS WHEREOF this Agreement is executed
on the date above mentioned by the parties.