The Presidents/Chief Executives of Islamic Banks and
Conventional Banks having Islamic Banking Branches

Dear Sir/Madam,

Instructions and Guidelines for Shariah Compliance in
Islamic Banking Institutions

Please refer to IBD Circular No.2 dated 25th March, 2008 on the above subject.

2.         With a view to facilitate the Islamic Financial Industry, it has been decided to revise clause 1(vi) of Appendix A to Annexure I of IBD Circular # 2 of 2008, regarding the Essentials of Islamic Modes of Financing (Murabaha), as follows:

“vi)  Wherever possible, the invoice issued by the supplier shall be in the name of Bank- Account Client e.g. “1st Islamic Bank – ABC Company” as the commodity would be purchased by an agent on behalf of such financier. In case it is not possible, then specific approval from the Shariah Advisor should be sought for the transactions. It is preferable that the payment for such commodities should be made by the financier directly to the supplier or credited in an Escrow Account. In both the cases, the Murabaha financing account shall be debited only after completion of offer and acceptance between the customer and the IBI. If direct payment to the supplier by the IBI is not feasible for valid reasons, such reasons shall be recorded by the IBI for making payment to the supplier through the agent for purchase of goods. However, in this case proper utilization of funds shall be ensured by the IBI.”

3.         Other instructions on the subject shall remain unchanged.

4. Please acknowledge receipt.