Underlying Contract


DBH Islamic offers Islamic Home Financing (IHF) and Islamic Car Financing (ICF) within the Shari’ah purview of Hire Purchase under Shirkatul Meelk (HPSM) as approved by the Shari’ah Supervisory Committee and Bangladesh Bank. HPSM, a Shari’ah compliant Hybrid mode, is a combination of three independent contracts. Such as:

 

  • Shirkatul Meelk (Co-ownership/Partnership)
  • Ijarah (Hire/Rent)
  • Bai’ (Sale contract)

 

In the first step, DBH and the client purchase or construct an asset jointly by providing equal or unequal equity as per the Shirkatul Meelk agreement.

 

In the second step, DBH rents out its share in the asset to the client and the client utilizes the asset and enjoys the usufruct and pays the rental to DBH. The Client also makes payment of DBH’s equity/principal amount in the form of Equated Monthly Installment (EMI). Since EMI consists of a portion of DBH’s equity/principal amount plus rent, with the payment of every EMI by the client, DBH’s equity reduces, while client’s equity increases, and therefore, share in the ownership of the asset of DBH and the client gets changed accordingly. With the payment of the last EMI, DBH’s equity becomes ‘zero/nil’ while the client’s equity becomes 100%.

 

In the third and final step, DBH transfers its ownership of the asset to the client under a separate sale contract.

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