In the midst of a Global Economic Crisis, both governments and investors are pondering the following question. What is the solution to the Global Financial Market Meltdown ? The think tank at The KIN Consulting and Research Services Company have spanned the globe searching for potential solutions. We have found one model that seems to be working in The Second Holiest City in Islam Al Medina.

Wadiah (Safekeeping)

In Wadiah, a bank is deemed as a keeper and trustee of funds. A person deposits funds in the bank and the bank guarantees refund of the entire amount of the deposit, or any part of the outstanding amount, when the depositor demands it. The depositor, at the bank's discretion, may be rewarded with a 'hibah' (gift) as a form of appreciation for the use of funds by the bank. In this case, the bank compensates depositors for the time-value of their money (i.e. pays interest) but refers to it as a "gift" because it does not officially guarantee payment of the gift.

Mudarabah (Profit Loss Sharing)

Mudarabah is an arrangement or agreement between a capital provider and an entrepreneur, whereby the entrepreneur can mobilise funds for its business activity. Any profits made will be shared between the capital provider and the entrepreneur according to an agreed ratio, where both parties share in profits and only capital provider bears all the losses if occurred. The profit-sharing continues until the loan is repaid. The bank is compensated for the time value of its money in the form of a floating interest rate that is pegged to the debtor's profits.


The Bank’s "Akar product" gives customers the opportunity to invest in property. Repayment to the bank can be in the form of installments structured over a certain period of time.


Murabaha contracts allow customers to purchase raw materials, capital goods and other consumables from local and international markets. These goods are first bought by the Bank for its account on orders of the customers by paying cash or through Letter of Credit (LCs) and then sold to the customers with a profit margin on a deferred payment basis. Deferred payments can be made to the bank in installments or in one lump sum.

Musharakah (Joint Venture)

Musharaka functions like a limited partnership between the Bank and customers who need to import certain goods and equipment, but do not possess sufficient funds to do so. In this type of transaction, the customer provides a portion of the funds and the Bank provides the remaining funds. The Bank then issues LCs to import the goods. When the goods arrive, there are three options available:
    * The Bank sells its share in Musharaka to the customer in return for a cash payment or deferred basis at an agreed margin
    * The customer sells his share to the Bank in return for a cash payment or deferred basis
    * Both parties sell their shares in the market together


This product is suitable for financing large real estate projects. Under Istisnaa, the Bank arranges to build an asset or plant (the project) in accordance with the specifications requested by the customer. Upon completion, the asset will be delivered to the customer against deferred payment of the sale price.

Ijara (Fixed or Floating)

Ijara is a type of financial lease where the Bank would acquire certain assets or equipment and then lease the equipment back to customers for payment of rentals (fixed or floating) on monthly or half-yearly basis. At the end of the lease period, the ownership of the asset will be transferred to the customer upon payment of all dues.

Wakalah (Agency)

This occurs when a person appoints a representative to undertake transactions on his/their behalf, similar to a power of attorney.

Bai Al Ajel

Bai Al Ajel is a financing facility that provides cash to customers. The process involves selling the goods or commodities to customers, who later appoint the bank as the agent to sell the same goods in the market. The sale proceeds are then transferred to the customer. Payment for this facility is on a deferred basis and they can be made to the bank in installments or in one lump sum.

Takaful (Islamic Insurance)

In modern business, one of the ways to reduce the risk of loss due to misfortunes is through insurance. The basic idea behind insurance is the sharing of risk. The concept of insurance where resources are pooled to help the needy does not contradict Shariah. Conventional insurance involves the elements of uncertainty (Al-gharar) in the contract of insurance, gambling (Al-maisir) as the consequences of the presence of uncertainty and interest (Al-riba) in the investment activities of the conventional insurance companies which contravene the rules of Shariah. It is generally accepted by Muslim Jurists that the operation of conventional insurance does not conform to the rules and requirements of Shariah. Takaful is an alternative form of cover which a Muslim can avail himself against the risk of loss due to misfortunes. The concept of takaful is not a new concept, in fact it had been practised by the Muhajrin of Mecca and the Ansar of Medina following the hijra of the Prophet over 1400 years ago. Takaful is based on the idea that what is uncertain with respect to an individual may cease to be uncertain with respect to a very large number of similar individuals. Insurance by combining the risks of many people enables each individual to enjoy the advantage provided by the law of large numbers.

Sukuk (Islamic Bonds)

In keeping with the prohibition of riba, a conventional bond is not permitted. A Sukuk bond, however, is asset-backed and the returns on it are not fixed, but are linked to the return on the assets purchased with the proceeds of the issue. These asset-based bonds of medium-term maturity have been issued internationally by sovereign and corporate entities. Sukuk paper has the advantage of competitive pricing as a risk-mitigation structure. In 2001, the BMA was among the first central banks to issue this paper, in its case in three- and five-year maturities, with most issues oversubscribed. Qatar issued Qatar Global Sukuk with a seven-year maturity (the largest issue ever at $700 million). The German State of Saxony-Anhalt became the first non-Muslim issuer to tap the global Islamic debt market in 2004, raising some 100 million euros via a Sukuk issue in an innovative effort to appeal to a broader range of investors. More recently, the Islamic Development Bank created the first program for repeat issues of Sukuk. Widespread Sukuk paper issuance could lay the groundwork for the emergence of Islamic capital markets. But while the Sukuk market is developing rapidly, it remains primarily a market where holders keep bonds to maturity with limited secondary market trading.

     Islamic Financing seems to have the most potential in the Current Global Economy. They have designed a SELF SUSTAINING GROWTH STRATEGY that entails excelling in real estate development. Specifically in terms:

A. Industrial Development = Economic Cities full of manufacturing plants, universities, medical research laboratories, entertainment centers, etc,
B. Commercial Development = Shopping malls that serve as distribution outlets.
C. Residential Development = Both luxurious homes and apartment buildings.

   The aforementioned formula will spurr growth in both jobs and innovation. The Economic Cities are running an aggressive marketing campaign inviting Fortune 500 Companies to set up manufacturing plants in the region. Thus vitalizing both the local and international economy.

   The local economy distinguishes itself from the global community with at least two features:
A. Consumer Spending that isn't reliant on Credit Card debt.
B. Islamic Tourism for both Ramadan and Hajj seasons.
An annual stimulant to the local economies as millions of pilgrims arrive every year.

   The combination of the two aforementioned features of the economy provide the basis for our thesis. The GCC region has huge growth potential that is fuelled by real estate development and an ingenious economic master plan. The GCC Economic Model is truly visionary. Please take a look at our interactive maps and explore the Architectural Masterpieces.

The Action Plan:

     Approach S&P, MOODYs,& FITCH for a more accurate credit rating of GCC BANKS. In an effort to ease the liquidity of the banks. The fact is the local lenders and borrowers have developed the region with a meticulous master plan. The results of implementing this strategy are available on satellite. Thus the creditworthiness of the region is obvious and it should be reflected in the ratings of S&P, Moodys, and Fitch.

     We are simply applying the principles of economics found in Adam Smith's book "The Wealth of Nations". Specifically to the chapters refferring to the principles of FREEDOM OF CASHFLOW. Which basically states that cash should flow to investments with the highest possible return on investment, with the appropriate risk valuation.


Khalid I Natto
Chairman & CEO
The KIN Consortium
Email: Khalid@kinconsortium.com
Website: http://www.kinconsortium.com

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Islamic Financing Model

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Khalid I. Natto
Chairman of The Board
The KIN Consortium
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