Resolution No. 38/8 of the National
Bank of the Kyrgyz Republic Board
as of September 23, 2009
On operations carried out under the Principles
of Islamic Banking and Finance
(Amendments and addenda are approved by the Resolutions of the NBKR Board No. 32/8 as of August 28, 2013, No. 7/2 as of February 10, 2016, No. 49/8 as of December 21, 2016, No. 21/10 as of May 31, 2017)
1.1. (Became invalid as per Resolution No. 21/10 of the National Bank of the Kyrgyz Republic Board as of May 31, 2017).
1.2. The purpose of this Regulation is to set the procedure for the commercial banks, including the banks that have an “Islamic window” (hereinafter referred to as the banks) to carry out some types of the operations complying with the Principles of Islamic Banking and Finance.
(As amended by Resolution No. 21/10 of the National Bank of the Kyrgyz Republic Board as of May 31, 2017).
1.3. The bank that carries out the operations under the Principles of Islamic Banking and Finance shall invest the funds only in the business allowed by the Sharia.
1.4. The bank shall create a Sharia Council. All policies and standard agreements of the bank shall be approved by the Sharia Council.
(As amended by Resolution No. 21/10 of the National Bank of the Kyrgyz Republic Board as of May 31, 2017).
1.5. The bank when carrying out the operations under the Principles of Islamic Banking and Finance shall comply with the requirements to identification of a personality and operations for purposes of anti-money legalization (laundering) and counter financing of terrorism or extremism in the manner prescribed by the legislation of the Kyrgyz Republic.
(As amended by Resolution No. 7/2 of the National Bank of the Kyrgyz Republic Board as of February 10, 2016)
TYPES OF TRANSACTIONS COMPLYING WITH THE PRINCIPLES OF ISLAMIC BANKING AND FINANCE
2.1.1. A Mudaraba transaction is a transaction when based on an agreement one party – an investor – provides the capital (the funds) and the other party (a modareb) accepts this capital and manages it in order to receive a profit that is proportionally distributed between the parties in accordance with the terms of the agreement. The debt of the modareb or of the other party to the investor cannot be used as the capital in the Mudaraba transaction.
(As amended by Resolution No. 21/10 of the National Bank of the Kyrgyz Republic Board as of May 31, 2017).
If in the course of the agreement fulfillment the losses have occurred, the investor shall incur the losses equal to the provided capital and the modareb in this event shall not receive remuneration for his labor. This rule of losses distribution shall be effective if the losses occur not through the modareb’s fault.
If the losses in the course of the agreement fulfillment occur due to faulty or illegal actions of the modareb, these losses shall be covered by the modareb. At that, the investor shall be entitled to receive from the modareb the amount provided previously under the agreement at the expense of a security and if it is not sufficient, then at the expense of other property of the modareb.
(As amended by Resolution No. 49/8 of the National Bank of the Kyrgyz Republic Board as of December 21, 2016)
2.1.2. The Mudaraba transactions (agreements) are divided into the following types:
A restricted/special Mudaraba is a Mudaraba transaction under the terms of which the investor shall determine the types of assets or projects for investment by the modareb.
An unrestricted/general Mudaraba is a Mudaraba transaction under the terms of which the modareb shall be entitled to use the funds at his own discretion in any of his activities.
An open Mudaraba is a Mudaraba transaction under the terms of which the investor shall be entitled to receive pre-term (upon the first request) the provided funds from the modareb. In this event, the bank (if it acts as the modareb) shall pay the profit to the investor for the last full period (a month, a year).
The parties can agree the gradual withdrawal of the capital by the investor.
2.1.3. The Mudaraba transaction is used by the bank in two events:
- as an instrument to mobilize the funds;
- as a financing instrument.
The Mudaraba agreement shall be concluded in a written form.
2.1.5. The bank acting as the investor shall assess a business plan, determine the objects for investment, evaluate the activity of a client and consult him in future in the course of the agreement fulfillment.
2.1.6. When providing the funds under the restricted/special Mudaraba transaction, the bank shall include the provisions into the agreement that prohibit the modareb to use the funds not according to the purpose including disbursement of the loans to the third parties and provision of gifts and charitable donations using the financing.
2.1.7. For purposes of proper fulfillment of the liabilities under the Mudaraba transaction, the bank acting as the investor shall receive the security from the client in the form of a pledge, a surety, a guarantee, a down payment and other types of the security envisaged by the legislation or the agreement for the amount that is equal to the amount provided by the bank under the agreement.
2.1.8. The Mudaraba agreement shall stipulate at least the following:
1) the type of the agreement;
2) depending on the type of the agreement – an investment project, a provision that it is impossible to withdraw the paid amount pre-term, a possibility to comingle the funds received from the investor with the funds of the third parties;
3) the provided amount;
4) means of securing the liabilities ;
5) rights and liabilities of the parties;
6) the responsibility of the parties for a failure to fulfill or undue fulfillment of the liability to reimburse the damages occurred in the course of the agreement fulfillment due to faulty or illegal actions;
7) the procedure for distribution of profits and losses between the parties;
8) the provisions of the agreement fulfillment by the parties themselves or involving qualified persons;
9) maintaining the records of the received funds use that enables upon termination of the agreement or as a separate stage to determine the received profit that shall be distributed between the parties;
10) the procedure for dissolution of the agreement.
(As amended by Resolution No. 49/8 of the National Bank of the Kyrgyz Republic Board as of December 21, 2016)
2.1.9. The profit of the parties to the agreement is determined in the manner envisaged by the agreement in the percentage from the received profit. The procedure and the periods for profit distribution from the Mudaraba operations shall be set in accordance with the terms of the agreement.
2.1.10. The Mudaraba agreement cannot be unilaterally terminated if:
- the modareb has started to fulfill the agreement and is already using the funds in the course of a business activity;
- the agreement has not expired.
2.2.1. A Sharika/Musharaka agreement is a partnership agreement between the bank and one or more parties in accordance with which each partner invest a definite amount of money or with consent of all parties – tangible assets and whereby coordinated management of the business is ensured using joint assets under the terms of profit distribution according to the agreement and the losses are incurred by each partner pro rata his contribution to the total capital.
2.2.2. The Sharika/Musharaka agreement is classified according to two main categories:
1) unification of the participants without creating a legal entity;
2) unification of the participants creating a legal entity, including partnerships and/or legal entities created in accordance with the legislation of the Kyrgyz Republic.
Unless otherwise follows from the subject of the agreement, the Sharika/Musharaka agreement shall be applied to both the unifications of the participants without creating the legal entity and the unifications of the participants creating the legal entity.
Sharika/Musharaka Muntahia Bi-Tamleek is a form of the partnership based on the Sharika agreement, where one of the partners gradually buys out the stake of another/other partners in the amount specified by the agreement until the ownership right to this stake is completely transferred to him. This operation starts from creation of the partnership, after this purchase and sale of the stakes between two partners starts.
A purchasing partner is allowed only to promise to buy the shares. This liability shall be independent on the partnership agreement. In addition, a purchase-sale agreement shall be independent on the partnership agreement. It is not allowed to conclude one agreement with a provision that another agreement will be concluded.
2.2.3. The general rules of the Sharika/Musharaka agreement are used in the Sharika/Musharaka Muntahia Bi-Tamleek and it is not allowed to include any provision that grants the right to any party to withdraw its share from the capital of a company into the Sharika-Musharaka agreement.
The Sharika/Musharaka agreement shall be concluded in writing. If the legal entity is created based on the agreement, it shall be registered in the manner prescribed by the legislation of the Kyrgyz Republic. The purpose of the partnership shall be clearly formulated in a document on foundation of the partnership or a charter of the legal entity.
The bank can conclude the partnership agreements, if the financial resources or the properties provided by the parties to carry out the partnership activity are from the permitted sources. When creating the legal entity that is based on the partnership, all required confirmations that the Sharia rules and principles are met when carrying out the operations in the process of the partnership activity including management complying with the Sharia rules shall be received.
2.2.5. When introducing the amendments into the partnership agreement, if the shares of profit distribution are reconsidered, each partner shall incur the losses pro rata his contributed share into the capital.
2.2.6 If the tangible assets (goods) are contributed to the capital of the legal entity founded based on the Sharika/Musharaka partnership agreement, the monetary value of these assets shall be determined based on an independent appraisal.
If the partners have made investments in the capital in different currencies, they shall be converted into the currency of the Sharika/Musharaka agreement at the current exchange rates.
2.2.7. Debt liabilities (accounts receivable) cannot be invested as a contribution to the capital of the legal entity founded based on the Sharika/Musharaka agreement. The debt liabilities can be invested in the capital of the partnership founded based on the Sharika/Musharaka partnership agreement only if they are inseparable from other assets provided as a contribution to the capital. In addition, the value of the net assets shall be confirmed by independent auditors.
2.2.8. The agreement for creation of the legal entity that is based on the partnership shall stipulate the liability of each partner to act within the frameworks of the agreement and in the interests of the company as well as full compliance with the Sharia rules and principles.
2.2.9. The agreement can envisage the provision that definite partners or one partner will manage the legal entity. In this event, other partners are obliged to adhere to this decision and not to take the actions on behalf of the company.
2.2.10. The Sharika/Musharaka agreement can stipulate appointment of a manager not out of the partners for a fixed remuneration that is included into the expenses of the company or both payments in the form of the part of the investment profit and the fixed remuneration are envisaged to stimulate the manager. If from the very beginning the management is performed based on the percentage from the received profit, then this action classifies the manager as the modareb and in this event he shall be entitled only to the percentage in the profit, if any, and any other remuneration is not paid to him for the services of the manager.
2.2.11. The fixed remuneration to the partner that makes his contribution to the management of the company’s funds founded based on the Sharika/Musharaka agreement or that provides his services in any other form, for example, provides the services in the area of accounting cannot be determined in the Sharika/Musharaka agreement. At that, it is permitted to give him the profit larger than the profit that he would earn pro rata his share in the partnership capital. If one of the partners is appointed as a manager of the assets/the funds based on a separate agreement (other than the Sharika/Musharaka agreement), he shall be entitled to receive a definite remuneration.
2.2.12. The Sharika/Musharaka agreement shall envisage the responsibility of the partners in the form of the security provision to cover the losses in the event of illegal actions, complacency, negligent attitude or violation of the agreement by the partners/the partner.
2.2.13. If the guarantee to reimburse the losses incurred by some or all partners is provided by the third party, this guarantee shall meet the following requirements:
1) legal capacity and financial liability of this third party acting as a guarantor shall be independent on the Sharika/Musharaka agreement;
2) the guarantee cannot be provided for definite compensation and cannot be related to the Sharika/Musharaka agreement;
3) the third party acting as a guarantor shall not possess more than the half of the capital in the company to which it provides the guarantee;
4) the company that has received the guarantee shall not possess more than the half of the capital in the company providing this guarantee;
5) the partner in whose favor, the guarantee is provided by the third party shall not be entitled to refuse from fulfillment of his liabilities under the agreement, if the guarantor does not fulfill the terms of the guarantee.
2.2.14. The Sharika/Musharaka agreement shall envisage the procedure for profit distribution between the parties in the form of the percentage from the received profit pro rata the contribution of each partner to the company’s capital. The profit cannot be set in the form of the flat amount.
2.2.15. The Sharika/Musharaka agreement shall envisage the change in the percentage of the partners in the profit split as of the date of its distribution or the right of the partner to remise the part of the profit due to him in favor of another partner at the day of profit distribution. The parties can agree to distribute the profit not pro rata to the contributions of the partners to the capital. At that, the coefficient of the passive partner’s percentage (if any according to the terms of the agreement) in the profit cannot be higher than the coefficient of its contribution to the capital.
2.2.16. The bank shall not be entitled to accept voluntarily the losses of other partners. However, in the Sharika agreement the bank can stipulate the right of other partners to assume voluntarily without any preliminary provision the responsibility for the losses when they occur.
2.2.17. The partners are allowed to agree to use any method of profit distribution irrespective of the fact whether it is constant or not, for example, to agree that the size of the profit at the first stage of the agreement fulfillment is one and at the second stage is another, depending on mismatch of two periods or the amount of the received profit. It is allowed, if the use of this method does not lead to the situation when one of the partners is excluded from participation in the profit.
2.2.18. The profit shall be distributed according to the actual results, without accounting the expected profit in the future from the activity of the company.
2.2.19. It is prohibited to include any provision or a term that can lead to violation of the profit distribution principle into the terms or the method of profit distribution under the Sharika/Musharaka agreement. Any term or method of profit distribution that can lead to this result will make the agreement invalid.
2.2.20. The partners are not allowed to envisage the provision in the agreement according to which one or several partners can receive the flat amount from the profit or the amount calculated in the percentage terms from the capital of the company created based on the Sharika/Musharaka agreement.
2.2.21. It is allowed to negotiate that if the amount of the received profit is higher than the definite maximum threshold that the parties can set in advance, the excess profit can be provided to a definite partner. The parties can also negotiate that if the profit does not exceed the maximum amount or is lower than this amount, the profit is distributed in accordance with their agreement.
2.2.22. Upon termination of the partnership period or its liquidation, the profit can be finally distributed according to the proceeds from sale of all existing assets of the company created based on the Sharika/Musharaka agreement at the market value.
2.2.23. It is allowed to distribute some funds to any party as an advance payment, i.e. prior to an actual or constructive assessment if the final actual settlements take place at the later stage. In this event, the parties are obliged to compensate any amount to the company that they have received over the due amount of the profit after the actual or constructive assessment.
2.2.24. If the subject of the Sharika/Musharaka agreement is the assets purchased for rent (leasing) that will bring the profit or the subject of the agreement is the services that will bring revenues, the amount shall be distributed annually to the partners as an advance payment and shall be regulated and compensated in the end of the Sharika/Musharaka agreement life.
2.2.25. It is allowed, based on the charter or the decision of the parties, to distribute the profit of the company or periodically reserve the definite amount of the profit as a solvency provision or a provision to cover the capital losses (an investment risk provision).
2.2.26. It is allowed to agree and to keep some part of the profit for charitable contributions.
2.2.27. The parties can enter into the Sharika/Musharaka agreement both for a definite period and without specifying the period, or set the terms that are the ground to terminate the agreement or to cancel the agreement.
Each partner shall be entitled to terminate the Sharika/Musharaka agreement (i.e. retire from the company) after he provides a proper notice about it to his partner (partners). In this event, he is entitled to his share contributed to the capital/the assets of the company and his retirement does not lead to termination of the partnership of other partners.
In the event of the fixed-term agreement, the parties are allowed to negotiate termination of the partnership pre-term. In all these events, the liabilities and the actions that the partners fulfill prior to termination of the agreement remain unchanged and continue existing.
2.2.28. The partner is allowed to promise to purchase all assets of the company created based on the Sharika/Musharaka agreement at their market value or under the agreement as of the purchase date either within the period of the company or at the moment of its liquidation. It is prohibited to promise to purchase the assets of the company created based on the Sharika/Musharaka agreement at the face value determined in advance.
2.2.29. An enterprise created based on the Sharika/Musharaka agreement shall terminate its activity upon expiration of the agreement or prior to this date, if the partners have decided to terminate it pre-term or in the event of the enterprise created for some definite business, after the actual liquidation of the assets that constitute the subject of the partnership agreement. The Sharika/Musharaka agreement can be terminated in the event of the expected liquidation. In this event, the Sharika/Musharaka agreement shall be considered as terminated and the parties if they wish start a new partnership through which the assets unsold in the course of the actual liquidation but appraised based on the expected liquidation shall be considered as the capital of a new enterprise.
If the liquidation relates to the expiration of the agreement, all existing assets shall be sold in accordance with the current market values and the proceeds from their sale shall be used for the following purposes:
a) for liquidation costs;
b) for payment on the financial liabilities out of the net assets of the enterprise;
c) for distribution of the remaining assets among the partners pro rata their share in the capital/the assets of the company. If there are no enough assets and the parties cannot return their all invested capital, the assets shall be distributed pro rata their share in the capital of the company.
2.2.30. The company founded to provide the services shall be created based on the agreement between two or more partners to render the services related to a definite occupation or skilled labor or to render definite services or professional services as well as to produce the goods. The partners shall distribute the profit pro rata the agreed ratio.
2.2.31. The company created based on the partnership to provide the services does not have the monetary capital. The partners can distribute different types of the provided services between each other and can assign several services or any definite service to some or all partners in a way through which they can achieve interaction in order to render the whole scope of the services.
2.2.32. The profit shall be distributed between the partners in accordance with the agreed ratio; however, it is prohibited to stipulate the provision in the agreement according to which any flat amount from the received profit is paid to a definite partner.
2.2.33. If the company founded based on the partnership needs the means of production to provide the services, each party is allowed to provide the required means of production that are required to render the services. In this event, each partner shall have the ownership right to the means of production that he has provided. The partners can invest the funds to purchase the required equipment or tools based on the joint ownership right. It is also allowed for the party taking part in the Sharika/Musharaka agreement to provide the means of production required to the company for a fee that will be charged to the current expenses of the company.
2.3.1. A Murabaha transaction is a transaction that envisages the installment sale of the goods purchased by the bank upon the request of the client or possessed by the bank when the client approaches the bank. The selling price of the goods by the bank shall be determined by the parties as the amount of the purchase price and the markup agreed by the parties to the agreement. The markup can be set in the form of:
- a flat lump sum;
- a percentage of the cost of the goods.
When selling the goods to the client under the Murabaha agreement, the bank shall be an owner of the goods.
The Murabaha agreement shall be concluded in a written, simple or notarized form. The ownership right to the goods shall pass after full payment of the price (at its discretion the bank can take a decision to transfer the ownership right to the goods prior to full payment of the goods price). If the ownership right is subject to the state registration, the registration shall be made upon transfer of the ownership right (prior to or after full payment). If the agreement for alienation of the property is subject to the state registration, the transferee obtains the ownership right from the moment of its registration.
The payments for the goods purchased by the client under the Murabaha agreement can be made in regular installments on a short-term or long-term basis. After conclusion of the agreement, the bank cannot demand additional payments due to overdue or prolongation of the payment occurred for any grounds or without a ground.
2.3.2. The significant term of the Murabaha transaction is that the size of the markup must be specified and outlined in the selling price.
2.3.3. The Murabaha transaction shall be carried out based on a written application to the bank of a potential client willing to purchase definite goods from the bank.
The client shall specify the name of the goods, the approximate price at which he is ready to purchase them and the terms of purchase and as a rule the payment by installments in the application. The client can also specify the seller where the bank can purchase these goods. The bank shall be entitled to choose the seller itself if there are other more acceptable offers of other sellers.
2.3.4. The bank shall enter into the purchase-sale agreement of the goods with a definite seller, at that, the agreement shall specify that the bank purchases the goods for further sale to the client under the Murabaha agreement.
2.3.5. It is prohibited to enter into the purchase-sale agreement, if the client has been connected with the seller by some previous contract liabilities with regard to the goods that are the object of purchase and subsequent sale under the Murabaha agreement.
The seller shall be the third party with regard to the client and the bank. It is prohibited that the client or its agent act both as the seller in the purchase-sale transaction and as the client under the Murabaha agreement with the bank.
In the exclusive events, the bank can purchase the goods from the party that is a close relative of the client, if there is the right to sell and to buy back.
The bank is entitled, having purchased the goods from the seller, to set the possibility of their return within a definite period. If the client does not purchase the goods from the bank, the bank can return the goods to the supplier within a definite period upon agreement of two parties. This possibility is effective until the goods are purchased from the bank.
2.3.6. The purchase-sale agreement with the supplier shall specify:
- the name of the parties;
- the subject of the agreement;
- the name of the goods;
- the quantity of goods, the price, the periods and the terms of payment;
- the delivery date;
- rights and liabilities of the parties;
- penalty provisions in the event of default;
- the security;
- other terms.
The bank can conclude the purchase-sale agreement itself or through the agent. The bank can appoint the client as the agent, at that, the client shall act at the expense, on behalf and on instruction of the bank under the terms agreed in an agent agreement, where the following shall be reflected: the subject of the agreement, the name of the parties and the goods, the terms, the periods of payment, the documents confirming the purchase-sale operation, other terms.
When the client acts as the agent on behalf of the bank, it is necessary to comply with the following terms:
a) the bank shall pay to the Seller for the goods without crediting the funds to the client’s account acting as the agent. The bank can provide the funds to the client acting as the agent only in the following events:
- if the seller of the goods is an individual entrepreneur operating in accordance with the current legislation of the Kyrgyz Republic;
- when the goods are purchased outside the Kyrgyz Republic.
In addition, the size of the total funds provided to the clients acting as the agents within the frameworks of the agent agreements shall be set by the National Bank;
b) the bank shall take the documentary sale confirmation from the seller.
All documents and contracts related to purchase and sale of the goods shall be on behalf of the bank, even if the client acts as the bank’s agent.
The bank shall receive the goods from the territory of the supplier or from any other place that has been specified in the delivery terms.
The expenses on the goods delivery shall be incurred by the bank. These expenses shall be included further into the price of the goods.
The bank shall assume the responsibility as the owner of the goods and shall take the subsequent risks that can be insured. The insurance indemnity that arises prior to sale of the goods to the client shall belong completely to the bank.
The expenses on the insurance shall be included into the price of the goods purchased under the Murabaha agreement.
(As amended by Resolution No. 32/8 of the National Bank of the Kyrgyz Republic Board as of August 28, 2013)
2.3.7. The bank in order to secure proper fulfillment of the liability by the client on conclusion and fulfillment of the Murabaha agreement shall enter into the agreement for the funds pledge or for acceptance of another type of the pledge with the client. The amount of money provided as the pledge cannot be invested by the bank if the client has not given his consent to it.
The bank shall be obliged to return the pledge after fulfillment of the Murabaha agreement by the client. The amount of the pledge can be deposited towards payment in accordance with the Murabaha agreement upon the client’s application.
The bank shall carry the risks related to the damage of the goods during transportation or storage until they pass into possession of the client and they cannot be covered at the expense of the pledge.
If the client violates the liability, the bank shall be entitled to sell the purchased goods to the third parties. If the price of the actual sale is lower than the price at which the bank has purchased the goods, the bank shall be entitled to deduct the specified difference from the amount of the pledge and return the remaining amount to the client.
The bank can accept an advance payment after conclusion of the Murabaha agreement for the purchase orderer. However, the bank shall not be entitled to take the advance payment during preparation of the contracts at the stage when the client promises to purchase the goods.
If the client has chosen the seller of the goods, the bank shall include the terms into the agreement:
a) that the client provides the security of proper fulfillment of the goods purchase-sale agreement by the seller;
b) that the client reimburses all losses of the bank occurred due to the seller’s failure to fulfill the agreement, including possible court costs also through the security if the seller does not fulfill the purchase-sale agreement. This provision shall be effective also if the Murabaha agreement has not been made.
When entering into the Murabaha agreement, all terms for carrying out the trading operation shall be envisaged, including:
1) the markup – the fee that the bank will receive from this transaction;
2) the price of sale;
3) the provision that the bank includes all expenses into the selling price including the payments to the third party, save for the expenses on payment of the salary to the employees of the bank.
At that, the selling price and the markup cannot be set in an indefinite way, for example, the selling price and the markup shall not depend on any indicators that will be known in future. It is allowed to set the selling price and the markup depending on the indicators at the stage of the agreement so that the client knows the markup of the bank in advance prior to signing the Murabaha agreement. The size of the markup cannot depend on time factors.
The bank can include the following terms into the Murabaha agreement:
a) that the bank is not responsible for any or all defects of the goods, after the goods pass into possession of the client. If required, the client shall be entitled to address immediately to the supplier for compensation;
b) that the bank is entitled to sell the goods to the third party if the client refuses to accept the goods after the Murabaha agreement comes into effect and the client shall reimburse the amount required to cover the bank’s expenses.
The bank is not entitled to carry out the Murabaha transactions:
а) on the deferred liabilities related to precious metals (gold, silver, etc.) and any currency;
b) with the working capital, where the assets are secured by accounts receivable;
c) when refinancing the transaction.
The parties of the Murabaha transaction are not allowed to participate in the Sharika/Musharaka agreement or in the transaction containing the liability of one of the parties to buy out the stake of another party in the Sharika/Musharaka agreement using the Murabaha transaction for cash or deferred liabilities.
2.3.8. The payment under the Murabaha agreement shall be made by the client in accordance with the terms of the agreement.
The bank can demand pre-term repayment from the client in the event of the unreasonable delay of the next installment if the client is preliminary notified about the periods of payment.
If the client does not make full payment of the price, the bank shall not register the ownership right to the goods in the name of the client until the installments are completely made.
The bank can sell the goods, if the client delays the payments over the period specified in the agreement. If the bank sells the goods to the third party, the payments that have already been received from the client shall be compensated to him.
If the security is provided to the bank by the client, the bank on the instruction of the client can sell the pledge to cover the debt under the Murabaha agreement without going to a court.
If the payments are not made at the fixed period, the client shall be obliged according to the Murabaha agreement to channel the amount set by the agreement to charity.
2.3.9. The commission fee and the payment for the possibility to provide the financing shall not be charged by the bank from the client.
The bank and the client shall share the expenses on preparation of the documents under the agreement, if they have not agreed that one of the parties will pay for the expenses. The provision shall be met that all expenses are specified fairly and reflect the executed scope of works.
If the Murabaha agreement is implemented through the syndicated financing, the bank that acts as an organizer of the syndicated financing shall be entitled to announce the due fee that shall be paid to the participants of the syndicated financing.
The bank can charge the payment for preparation of the feasibility study, if it is prepared upon the request of the client and for his benefit, and the client has agreed to pay to the bank.
2.3.10. The initial direct expenses of the bank (the commission fee to a mediator, the payment for legal services, etc.) related to conclusion of the agreement for purchase of the subject of the Murabaha agreement from the supplier shall be recognized as the expenses of the current period.
2.3.11. The subsequent expenses of the bank related to purchase of the goods as well as the expenses on transportation, duties and other expenses shall be included into the purchase price of the goods.
2.3.12. In accordance with the terms of the concluded agreement for sale of the goods to the client, the bank shall recognize a loan disbursed to the client in the amount that the client is obliged to pay to the bank according to the agreement.
When carrying out this transaction, the bank shall pay special attention to the country and transfer risks, the issues of safety of the supplier and the insurer of the goods as well as safety of the goods delivery.
Ijara and Ijara Muntahia Bi-Tamleek Transaction
2.4.1. An Ijara transaction is a transaction on special purchase of movable and immovable property by the bank into ownership according to the client’s application, or movable and immovable property possessed by the bank when the client approaches the bank and its provision to the client as a property lease for temporary possession and use for an agreed period on a paid basis.
2.4.2. A lessee is an individual or a legal entity that in accordance with the Ijara agreement accepts the subject of the agreement for a definite payment for a definite period and under the definite terms for temporary possession and use.
A lessor is the bank that for its own and/or the borrowed funds purchases the property into its ownership in the course of the Ijara agreement implementation and provides it as the subject of Ijara to the lessee for a definite payment, for a definite period and under the definite terms for temporary possession/use with transfer or without transfer of the ownership right to the subject of the agreement to the lessee.
A seller is an individual or a legal entity that according to the purchase-sale agreement concluded with the lessor sells the property to him within the set period that is the subject of the Ijara. The seller can simultaneously act as the lessee under the same Ijara agreement.
The lease payments are the payments for possession and use of the subject of the Ijara agreement. These payments include reimbursement of the lessor’s expenses related to purchase and transfer of the Ijara subject to the lessee, reimbursement of the expenses related to other services envisaged by the service agreement as well as the income of the lessor.
2.4.3. The Ijara transaction shall be concluded by the bank based on the client’s application and financial and legal documents required to take a decision on conclusion of the agreement.
In order to take a decision on conclusion of the Ijara transaction, the bank shall assess the capacity of the lessee to pay the lease payments as well as assess the liquidity of the property to reveal the possibility of the repeated lease of the property or its sale.
(As amended by Resolution No. 49/8 of the National Bank of the Kyrgyz Republic Board as of December 21, 2016)
2.4.4. In the event of a positive decision of the bank, the lessee shall provide the liability in writing to take the property on lease.
The lessee shall pay a definite amount upon agreement of the parties as the guarantee for execution of the liabilities – to take the property on lease. The paid amount shall be used only to reimburse the damage, should the orderer violate the liability.
Upon agreement with the orderer, the bank can use it for investments based on the Mudaraba agreement concluded between the bank and the lessee. This amount can be accepted towards next payment of the lease.
2.4.5. The subject of the Ijara transaction can be enterprises and other property complexes, buildings, equipment, vehicles and other movable and immovable property.
2.4.6. The leased property shall be used ensuring its safety and the benefits received from fulfillment of the Ijara agreement shall comply with the legislation of the Kyrgyz Republic and the Sharia requirements.
2.4.7. The subject of the Ijara agreement can be the share in separate assets that are held together with the lessee irrespective of the fact whether the lessee is a partner of the lessor or not. In this event, the lessee can receive the profit from the leased share in the same way that is used by the lessor, i.e. by separating the time or by determining any part of the property.
2.4.8. The lessor shall be responsible for any defects caused to the leased property due to which the quality of the property deteriorates and the responsibility for any deterioration is not excluded that can suffer the leased property as a result of his own actions or as a result of the impact of the events beyond his control but influencing the profits that have been expected under the Ijara agreement.
2.4.9. If the profit from the leased property is reduced completely or partially because of illegal actions of the lessee during the lease of this property, the lessee shall be obliged to eliminate the obstacles so that the lessee can make profit. In this event, the period of the lease is extended for the period within which the lessee cannot make profit from the leased property; the lessee shall not refuse from the lease during the period of the lost profit.
2.4.10. The lessor shall ensure primary maintenance. The lessee shall ensure current or periodical (routine) maintenance.
2.4.11. The lessor shall be responsible for the leased property during the life of the Ijara agreement, if the lessee does not allow any illegal actions or negligence with regard to the leased property.
The lessor shall insure the property. The expenses on insurance shall be included into the lease payment. After signing the agreement, the lessor cannot charge any funds from the lessor over the fixed lease payment.
2.4.12. To fulfill the Ijara agreement the bank shall purchase the property into its ownership. The property can be purchased from a person that will be subsequently a lessee and then leased to this person.
2.4.13. The lessee can enter into the sublease agreement under the terms different from the lease agreement notifying the lessor.
2.4.14. The lessee can lease the property to its owner at the first stage of the lease for the lease payment that is lower, equal or higher that the lease payment that he pays, if both lease payments are paid based on prompt delivery and prompt payment. The counter payments cannot be higher due to the deferred payment.
2.4.15. The lessor can purchase or produce the property described in the specifications upon the application of the lessee.
The lessee shall be entitled to refuse from the property that does not meet the specification.
2.4.16. The lessee together with the bank can purchase the property that he plans to lease. Accordingly, the lessee will pay the lease payment for that share that he does not own.
2.4.17. The bank can appoint the lessee or the third party as the agent to purchase the property under the agreed order and the price for further lend-lease to the lessee.
2.4.18. The Ijara agreement shall be concluded in writing and shall be subject to notarization and state registration in the events envisaged by the legislation of the Kyrgyz Republic.
2.4.19. The significant components of the Ijara agreement are:
a) name and description of the Ijara object sufficient for identification;
b) rights and liabilities of the parties related to purchase and transfer of the Ijara object;
c) size, procedure, terms and periods for making lease payments;
d) specifying the party that chooses the Ijara object and the seller;
e) other terms.
2.4.20. If the Lessor does not grant a lease of the property to the lessee within the period envisaged in the Ijara agreement, the lease payment shall not be paid for the period between the effective date of the agreement and the actual date when the property is provided to the lessee. The lease payment is respectively reduced if the parties have not agreed that the lease period will be extended for the period equivalent to the period of the property non-provision, after the initial termination date of the agreement.
2.4.21. The orderer shall make an advance payment that the lessor can withhold in the event of the failure to fulfill the Ijara agreement through the lessee’s fault in order to reimburse the damage.
2.4.22. The lessor shall be entitled to conclude several Ijara agreements with regard to the same property let on lease for different periods to several lessees if these two agreements are not fulfilled simultaneously with regard to the same property and in the same period.
2.4.23. The Ijara agreement can be concluded with several lessees entitled to the same profit with regard to any property for the lease period without determining any definite period for a definite person. In this event, each lessee can make profit from the property within the period provided to him according to the envisaged rules between the lessees.
2.4.24. The lease payment can be made using the funds, any property (services) or in physical terms (goods). The lease payment shall be set either in the form of the lump sum that includes the validity period of the Ijara agreement or in the form of the partial payments for definite periods of the agreement validity. The lease payment can be determined in the form of the flat amount or can be reconsidered upon agreement of the parties.
2.4.25. The lease payment is binding according to the agreement and the right of the lessor to receive the lease payment occurs when the lessee starts to make profit from the lease of the property or when the lessor provides the lessee with the right to make profit from the leased property.
2.4.26. When the lease payment is subject to reconsideration, it is necessary to envisage the amount of the lease payment for the first period of the Ijara agreement validity. It is allowed to determine the size of the lease payment for the following periods according to the definite basis of comparison. The exact order can be at the heart of this basis of comparison that is not subject to challenge and is a critical factor to determine the size of the lease payment for the remaining periods. This basis for comparison can envisage its definite threshold: both maximum and minimum.
2.4.27. Upon agreement of the parties, the part of the lease payment can be paid to the lessor, the other part can be channeled to cover any expenses approved by the lessor such as: the price of the primary maintenance, insurance and so on.
2.4.28. Two parties can agree to change the size of the lease payment for the future lease periods, i.e. the periods when the lessee does not make any profit from the lease by reconsidering the terms of the Ijara agreement. The lease payment unpaid for any previous periods shall become a debt that the lessee shall pay to the lessor, therefore it cannot be increased.
2.4.29. To secure the lease payments and to exclude the negligent attitude to the leased property, the lessee shall provide the collateral (the pledge) in the form of the liquid assets.
2.4.30. The bank shall be entitled to demand early repayment of the lease payments from the client in the event of the unreasonable delay of the next lease payment, if the client is notified about the payment periods.
2.4.31. Both parties can agree upon immediate lease payment. The lease payment can be paid by installments, in this event the lessor can envisage the provision according to which the lessee shall immediately make the remaining payments, if he after receipt of the relevant notice regarding the necessity to make the payment for a definite period delays the installment without a justified reason. Making the remaining payments prior to the agreed period related to the failure to fulfill the liabilities shall be settled in the end of the Ijara agreement validity or if the Ijara agreement terminates earlier, then at the moment of its termination. Any extension of the contract validity by the lessor after the end of the envisaged period for the immediate payment shall be deemed the consent to the deferred payment during the extended period and not the right of the lessee.
2.4.32. The lessor cannot increase the agreed lease payment if the lessee delays the payment.
2.4.33. The Ijara or Ijara Muntahia Bi-Tamleek agreement can provide for the provision according to which the lessee unreasonably delaying the payment shall pay a definite amount or an additional share from the due amount of the lease payment in the event of the payment delay. Payment of this amount over the due lease payment shall be channeled to charity. If the right to receive the collateral provided by the lessee is lost, the lessor can deduct only the amount that is due to him as the lease payment for the previous periods from these amounts and not all amounts of the partial lease payments including the payments, the liabilities on which have not occurred yet for the periods for which the lessee have not made profit yet from the leased property. The lessor can also deduct the compensation from the amount of the collateral that the lessee shall pay for violation of the agreement.
2.4.34. The lessor can sell the leased property to the third party notifying him about the presence of the Ijara agreement. At that, all rights and liabilities under the agreement will pass to a new owner.
2.4.35. If the leased property is damaged, the Ijara agreement shall terminate and the remaining lease payments shall not be paid.
2.4.36. The lessee shall be responsible for the damage caused to the lessor through the lessee’s fault.
2.4.37. In the event of the partial damage to the property that has led to reduction of the planned income, the lessee shall be entitled to terminate the Ijara agreement. In addition, the parties can agree upon the change in the size of the lease payment, but at that, the lease payments are not charged for the period of the lost profit. The lessor shall provide the similar property for further fulfillment of the Ijara agreement, otherwise the agreement is terminated.
2.4.38. If the lessee stops using the leased property or returns it to the owner without his consent, the lease payment shall remain due to the owner for the remaining period of the Ijara agreement validity and the lessor cannot let it on lease to another lessee within this period of the agreement validity, but shall keep the property at the disposal of the current lessee.
2.4.39. The Ijara agreement can be terminated:
a) upon mutual consent;
b) when the dates are violated or the lease payments are not made;
c) when the leased property is damaged;
d) when the agreement expires;
e) when the property is sold to the lessee.
The Ijara agreement continues to be valid when one of the parties dies. However, the heirs of the lessee can terminate the Ijara agreement if they provide the evidence that it is burdensome to fulfill the Ijara agreement or that there is no need in the Ijara agreement after the death of the ancestor.
2.4.40. The Ijara Muntahia Bi-Tamleek transaction is a transaction that includes the Ijara agreement and in accordance with which the client undertakes to buy out the leased property (the asset) either in the end or gradually during the Ijara period according to the agreement.
2.4.41. In the Ijara Muntahia Bi-Tamleek agreement, transfer of the ownership right to the leased property shall be confirmed by a document other than the Ijara agreement through the liability of the lessor:
a) to sell for a nominal or another agreed payment or using the progressive payment of the remaining part of the lease payment or by paying the market value of the leased property;
b) to present it without specifying the reason (unconditionally);
c) to present it after making the remaining payments.
In all above events, a separate document supporting the liability to present the property, to sell it or to present after occurrence of a definite event shall be prepared separately from the Ijara Muntahia Bi-Tamleek agreement. It cannot be considered as an integral part of the Ijara agreement.
2.4.42. The liability to transfer the ownership right is binding for the lessor under the Ijara Muntahia Bi-Tamleek agreement, at that, a separate bilateral agreement shall not be concluded.
2.4.43. The ownership right shall be transferred based on the gift or sale agreement that shall be concluded separately from the Ijara agreement and the given promise.
2.4.44. When the agreement with a suspensive condition is concluded, for fulfillment of the terms a new agreement for transfer of the ownership right is not concluded.
If at least one payment is not made, the ownership right to the property is not transferred.
2.4.45. The rules regulating the Ijara agreement shall be applied also to the Ijara Muntahia Bi-Tamleek agreement, i.e. the lessor has promised to transfer the ownership right to the leased property to the lessee.
2.4.46. The ownership right to the leased property cannot be transferred by implementing the sale agreement simultaneously with the Ijara agreement as the sale agreement comes into effect at the definite date in the future.
2.4.47. If the leased property is damaged or if it is impossible to continue the lease agreement until its expiry for the reason to which the lessee is not related, in both these events the lease payment is adjusted based on the prevailing market value.
Qard Hassan Transaction
2.5.1. A Qard Hassan transaction is a transaction under the terms of which one party provides the funds to the other party without an additional profit for the party that has provided the funds.
At that, the party that has accepted the funds shall guarantee return of the funds at the first request of the other party.
The bank can act both as the party that accepts the funds and as the party that provides the funds.
2.5.2. A Qard Hassan agreement shall be concluded in a simple written form.
The Qard Hassan agreement presupposes the absence of any profitability from one party to the agreement and the possibility to use the received funds from the other party to the agreement.
The Qard Hassan agreement shall contain the following significant parameters and terms:
- the provided amount;
- the periods of the agreement validity and the date of return;
- rights and liabilities of the parties;
- the size and the terms of payment for the bank’s services on account maintenance.
2.5.3. In the banking activity, the funds mobilized under the terms of the Qard Hassan agreement shall form the funding base of the bank and are deemed the demand deposits.
Under the terms of the Qard Hassan agreement, the client shall provide the funds to the bank on an interest-free basis with the possibility for the client to use them freely and the bank, in its turn, can use the part of the mobilized resources in accordance with its investment policy.
The bank in order to maintain the required level of the current liquidity and the capacity to fulfill the liabilities in time shall maintain the adequate volume of the resources in the cash desk or on a correspondent account.
Under the terms of the Qard Hassan agreement, the bank can provide the service to an account holder using a checkbook or a plastic card. In this event, the bank can charge the fee from the account holder for provision of the services on account management and maintenance.
In some events, the bank can consider the possibility to disburse a loan to the client under the terms of the Qard Hassan agreement.
2.5.4. When opening an account for the client under the Qard Hassan agreement the bank shall fulfill all requirements related to identification of the client in accordance with the regulatory acts of the National Bank of the Kyrgyz Republic.
Istisna and Parallel Istisna Transaction
2.6.1. An Istisna transaction is a transaction under the terms of which the property produced by a manufacturer or built by a civil contractor based on the order (the project) will be provided to the orderer after completion of works at the previously agreed price.
Payment for the price and delivery can be made in future.
2.6.2. The subject of the Istisna agreement is production of unproduced (unmanufactured) goods or construction that have specific characteristics according to the requirement of the orderer, provided that the manufacturer has agreed to fulfill the order at the negotiated price.
2.6.3. The Parallel Istisna is a transaction that is effective using two separate agreements. In the first agreement, the bank acting as a supplier enters into the agreement with the orderer for payment and delivery. In the second agreement, the bank acts as a buyer and enters into another agreement with a producer, a civil contractor or a supplier in order to fulfill its contract liabilities with regard to the orderer that it has within the frameworks of the first agreement.
In the course of these transactions, the bank receives the profit due to the difference in the price between two agreements. One of the agreements shall be concluded immediately (i.e. the Istisna agreement that the bank concludes with the producer, the civil contractor or the supplier), whereas the second agreement (i.e. the agreement with the orderer) shall be concluded later.
The producer, the civil contractor is a legal entity or an individual carrying out a business activity.
The client is a legal entity or an individual that orders production of the subject of the Istisna agreement according to the definite specification.
2.6.4. When concluding the Istisna agreement, the client shall approach the bank with an application to provide him a ready product after its production within the contract liability assuming that the producer will provide relevant materials and work. The parties to the agreement shall define the specifications of the goods for a definite price that shall be paid immediately or over a definite period.
The bank shall assess the solvency of the property orderer based on the submitted financial documents.
2.6.5. The bank and the client shall conclude the Istisna agreement before the bank obtains the ownership right to the subject of the agreement that shall be sold to the client or the ownership right to the materials from which the subject of the agreement is produced (or built).
2.6.6. The Istisna agreement is binding for the parties to the agreement assuming that definite terms are fulfilled that include specifications, type, quality and quantity of the subject of the agreement that shall be produced.
2.6.7. The Istisna agreement shall be concluded in writing and shall be legally binding. The parties to the agreement are bound by all liabilities and consequences arising out of their agreement.
2.6.8. The producer shall be obliged to produce the goods that are the subject of the agreement according to the specification within the specified period.
2.6.9. The agreement shall contain the price of the subject of the agreement, the delivery date, the used resources (own or involving the goods produced by other persons existing prior to conclusion of the agreement unless otherwise stipulated by the agreement).
2.6.10. Prior to conclusion of the agreement, all offers to determine the price shall be considered.
2.6.11. The price of the subject of the agreement shall be determined when the agreement is concluded and can be paid in the form of monetary or material resources. The price can be paid on a deferred basis or by installments within a definite period or if the delivery of the subject of the agreement is staged, the part of the price can be paid immediately and the remaining part is paid by installments according to the stages of delivery or works execution.
2.6.12. The price on the operations of the Istisna agreement can vary in accordance with the change of the delivery date. The price of the subject of the Istisna agreement cannot be determined on a “cost-plus” basis. The bank uses the information of other dealers and suppliers to estimate the expenses and to determine the projected profit.
2.6.13. The Istisna transaction shall not be a means for simple financing at the interest rate.
2.6.14. The Istisna agreement can be concluded for building the items of the immovable property at a definite land that belongs to an ultimate buyer or a contractor or at a land that brings profit to each of them.
2.6.15. When the producer goes into bankruptcy, the client has the priority right with regard to incomplete production if the client has paid the part of the source materials’ price.
2.6.16. The parties shall set the period within which the producer is responsible for any defects or for maintenance of the constructions that are the subject of the agreement.
2.6.17. After conclusion of the Istisna agreement, it is allowed to introduce the amendments upon agreement of the parties into the previously agreed specifications for production or building as well as to introduce additional requirements if the price is adjusted accordingly and the relevant reasonable period is provided for fulfillment of new requirements.
2.6.18. The additional fee shall not be charged for prolongation of the maturity date. A discount can be made for a preliminary payment if it has not been envisaged when the contract is concluded.
2.6.19. In the event of unforeseen circumstances (the force-majeure), the amendments can be introduced into the price upon agreement of the parties or in a judicial manner.
2.6.20. The bank can replace the contractor and conclude the Istisna agreement with the orderer to complete the project that has been started with the previous contractor. In this event, the project shall be assessed based on the existing status of the project at the expense of the orderer. In addition, the orderer shall take personal responsibility for all outstanding debts, if any result from the uncompleted Istisna agreement. Further, a new Istisna agreement shall be concluded to execute the remaining works.
2.6.21. When buildings or public utilities are built at the land that belongs to the orderer, the Istisna agreement can be implemented at the expense of the producer, if the latter does not fulfill the agreement or cannot complete the works within the set period and this provision comes into effect when the producer suspends the works.
2.6.22. If the contractor is not able to continue fulfillment of his liability, the orderer (the landowner) shall not be entitled to purchase uncompleted building structures or public utilities that are already ready without paying the reimbursement to the contractor. This provision depends on the reason for which the contractor cannot continue the works.
If the agreement is not fulfilled through the contractor’s fault, the client can receive only the paid price of the built structure and the civil contractor shall compensate the amount of the actual losses to the ultimate buyer that he has incurred.
If non-fulfillment of the agreement is related to illegal actions of the orderer, the contractor shall be entitled to receive the amount that is equal to the price of the completed works and the compensation for any losses or damages.
If the agreement is not fulfilled for the reasons to which none of the parties to the agreement has any relation, the ultimate buyer shall be entitled only to the built structure that is already at the site and neither of the parties is responsible for compensation of the losses or the damages incurred by the other party.
2.6.23. When the legislation alters and results in increase in the price of the subject of the agreement, the orderer shall incur additional expenses.
2.6.24. The bank acting as the producer or the ultimate buyer can as the guarantee make advance payments or demand their payment constituting the part of the price, if the terms of the agreement are fulfilled or the penalty is charged if the agreement is terminated. It is preferable that this amount is equal to the actual incurred damage.
2.6.25. In the Istisna agreement, the bank can demand, irrespective of the fact whether it acts as the producer or the orderer, the guarantees that it believes to be adequate to secure exercise of its rights in relations with the orderer or the producer. The bank acting as the orderer can provide the guarantees requested by the producer that can be in the form of the pledge, the personal guarantee, assignment of rights, a current account or the consent to block cash withdrawal from the account.
2.6.26. The bank acting as the orderer can appoint, with the consent of the producer, a consulting company with a technical experience providing the qualified assessment of the agreement fulfillment and the recommendations on payment, delivery, etc.
2.6.27. The bank acting as the producer can conclude a separate agent agreement according to which the orderer shall be appointed by the agent of the bank to supervise production or execution of construction works in order to secure production (construction) of the subject of the agreement in accordance with the specification of the order (the project).
2.6.28. The additional expenses to supervise fulfillment of the Istisna agreement shall be paid upon agreement of the parties.
2.6.29. The producer shall be exempt from the liability if the subject of the agreement is provided to the ultimate buyer or the person appointed by him, if the ultimate buyer is able to exercise full control over the subject of the agreement.
2.6.30. If the condition of the subject of the agreement does not meet the agreed specific features of the order (the project) as of the delivery date, the orderer shall be entitled to refuse or to accept it and this will mean satisfactory fulfillment of the agreement with the possibility to change the price.
2.6.31. The orderer shall be obliged to accept the delivered subject of the agreement if there is no sufficient ground to reject it. To refuse from acceptance of the subject of the agreement there shall be a good reason for this refusal.
2.6.32. In the event of the unreasonable refusal, the subject of the agreement remains in possession of the producer. In this event, the producer shall take no responsibility for losses and damages that can occur with the subject of the agreement unless such losses and damages are the result of negligent attitude or illegal actions of the producer. The orderer shall bear expenses on safety of the subject of the agreement.
2.6.33. The subject of the agreement shall be deemed delivered when it is provided to the ultimate buyer into actual possession that enables him to obtain control over the subject of the agreement after completion of the production process. At this stage, the liability of the producer with regard to the subject of the agreement terminates and the liability of the ultimate buyer starts. When the ultimate buyer is provided with the opportunity to control the subject of the agreement, the responsibility for any damages or losses that occur subsequently with the subject of the agreement without the evidence of negligent attitude or illegal actions of the producer shall be taken by the ultimate buyer.
2.6.34. The producer can act as the agent of the orderer in the sale operation of the subject of the agreement, if the orderer delays acceptance of the subject of the agreement within the set period. In this event, the producer sells the subject of the agreement on behalf of the orderer and after deducting the agreed contract price shall return the remaining funds, if any, to the orderer. If the received price is lower than the price agreed in the agreement, the producer shall be entitled to approach the orderer to compensate the remaining part.
2.6.35. The orderer shall incur the expenses on sale of the subject of the agreement.
2.6.36. The penalty provisions for violation of the delivery terms of the subject of the agreement shall be applied as the relevant compensation for the occurred losses. This compensation shall be permitted only if the delay is not caused by unforeseen circumstances (the force-majeure).
At that, it is not allowed to envisage a reservation clause on penalty provisions directed against the ultimate orderer for nonpayment.
2.6.37. It is prohibited to sell the subject of the agreement before it passes into the actual possession of the bank.
2.6.38. The bank acting as the orderer, after taking possession of the subject of the agreement can appoint the producer as the agent to sell the subject of the agreement to the orderers of the bank. In this event, the agent agreement shall be concluded separately from the Istisna agreement.
2.6.39. The bank can order the goods that have their own specific features. Further, the bank can conclude an agreement with the other party in order to sell them based on the Parallel Istisna agreement already as the producer or the supplier of the goods, the specific features of which meets the requirements of the other party and fulfill respectively its contract liabilities.
2.6.40. The bank acting as the producer and the supplier is allowed to conclude the Istisna agreement in order to sell these goods to the orderer by installments and to conclude the Parallel Istisna agreement based on the immediate payment with the producer and the civil contractor to purchase the goods envisaged in the first agreement and to sell them to the orderer. It is allowed if the Istisna and Parallel Istisna agreements are concluded separately and the delivery date envisaged in the parallel agreement (Parallel Istisna) shall not precede the date envisaged in the initial purchase (Istisna) agreement.
2.6.41. If the bank concludes the Istisna agreement as the producer or the supplier, it shall assume the liability on the property risk, the expenses on maintenance and insurance until the subject of the agreement is provided to the orderer. The bank cannot pass the responsibility for the risk in the Parallel Istisna agreement concluded with the producer to the latter resulting from its liabilities with regard to the orderer.
2.6.42. The contractual links are not allowed between the liabilities under two agreements (Istisna and Parallel Istisna agreements) when they are concluded. Thus, the party involved into the usual Istisna agreement is not allowed to refuse from its liabilities or to delay the transfer of the subject of the agreement due to the fact that its liability is not fulfilled under the Parallel Istisna agreement or to increase the price for the delivered goods due to increase in the price of the goods under the Parallel Istisna agreement.
At that, the right of the bank to envisage the terms and the requirements is not restricted in concluding the Parallel Istisna agreement, when it acts as the buyer including a reservation clause regarding the penalty provisions different or similar to the reservation clause that the orderer has envisaged in the first Istisna agreement where the bank acts as the supplier.
2.7.1. Timely fulfillment of the liabilities under sale, exchange, lease, rights agreements and other agreements can be secured by the pledge, the guarantee and other means envisaged by this chapter.
2.7.2. Fulfillment of the liability can be secured simultaneously by several ways, for example, a personal guarantee and a pledge.
2.7.3. The transactions to secure fulfillment of the liabilities shall be carried out in writing and in the events, prescribed by the legislation or the agreement of the parties shall be notarized.
2.7.4. Invalidity of the agreement securing the liability shall not entail invalidity of this liability (the primary liability). Invalidity of the primary liability shall entail invalidity of the liability securing it.
2.7.5. The lessee shall provide the security of the damage reimbursement caused to the leased property through the lessee’s fault.
2.7.6. The personal guarantees are divided into two types:
- a debtor has the right to ask a guarantor for help and this guarantee is offered upon the request and with the consent of the debtor;
- a guarantee without providing help that is provided voluntarily by the third party without the request of the debtor or his consent (a voluntary guarantee).
2.7.7. The bank shall provide the guarantees on the financial liabilities of the client for the principal debt amount subject to compensation of the principal debt amount by the client to the bank.
2.7.8. The guarantee shall contain the expiry period and the amount, for which it is provided.
2.7.9. The creditor shall be entitled to claim the amount of the debt from both the debtor and the guarantor.
2.7.10. If the creditor exempts the debtor from payment of the debt, the guarantor is also exempt from the liability to pay the debt. However, if the creditor has exempted the guarantor from the financial responsibility, the debt of the debtor is preserved.
If the guarantor repays the debt, the debtor shall compensate only the repaid amount to it.
2.7.11. If the bank carries out the transactions based on Mudaraba or Musharaka, it is not allowed to guarantee the currency fluctuations.
2.7.12. If the agreement specifies that the debtor shall provide the security in the form of the guarantee from the third party and the debtor has not provided the guarantor, the bank in this event shall be entitled not to fulfill the liability prior to provision of the security or to terminate the agreement.
2.7.13. Fulfillment of a pledge agreement is binding for the pledgegiver, even if the pledged asset is not possessed by the creditor and accordingly, the debtor cannot terminate the pledge agreement. However, acceptance of the pledge is not binding for the creditor as he has the right to refuse from his right to the pledge. Death of the pledgegiver or the pledgeholder or liquidation of the legal entity does not influence the validity of the pledge agreement and the legal successors will replace both the pledgegiver and the pledgeholder for repayment and receipt of the profit from the pledge.
2.7.14. The pledgegiver shall be an owner of the pledged property or a person authorized to use this property. The pledge shall be identified in the agreement. It is allowed to provide the same property as more than one pledge, assuming that the following pledgeholder will be properly notified about the previous pledges. If the pledges have been registered at different days, the priority of their repayment will be set in accordance with the date of their registration.
2.7.15. The pledgegiver shall be entitled to redemption of the pledged property as well as can give his consent to the creditor to sell the property, if the agreement has been achieved regarding the debt repayment.
2.7.16. The seller can obtain from the buyer the right to store the sold property as the pledge in order to secure payment of the outstanding payments by installments. The buyer is also allowed to leave the property in his possession sold on a lump sum basis until he receives the payment for the property.
2.7.17. The creditor is also entitled to specify that the debtor shall pass him the rights to sell the pledged property so that the creditor can receive the required amount (if the debtor cannot repay the debt or refuses to repay the debt) from the amount received from the sale of the pledged property without going to the court.
2.7.18. The pledgegiver (the debtor) shall take full responsibility for payment of all expenses related to documentation, storage and sale of the pledged property.
2.7.19. The creditor (the pledgeholder) shall be entitled to the pledge until full repayment of the debt, save for the events when he has agreed to partial repayment. However, the creditor shall not be entitled to keep the pledge as the security of other unsecured debts after debt repayment, if it has not been stipulated in advance. The creditor and the debtor can agree, after repayment of the debt, to recognize the released pledge as the security of any other debts that can arise between them during the definite subsequent period.
2.7.20. The pledgegiver is allowed to use the pledged property with the consent of the pledgeholder. However, the pledgeholder shall not be entitled to use the pledged property even if the pledgegiver has given his consent to it.
2.7.21. The commission fees for provision of a guarantee letter shall not be charged. The bank shall be entitled to ask an applicant to bear the administrative expenses related to issue of the guarantee letter, assuming that these expenses do not exceed the fees that are usually charged for such services. At that, the structure of the administrative expenses approved in the internal documents of the bank shall be disclosed to the client.
2.7.22. It is prohibited to issue the guarantee letters in favor of the applicant that will use them to obtain the interest loan or to conclude the prohibited transactions.
2.7.23. The expenses on issue of a documentary letter of credit shall be paid by the client; the bank can also charge the fee for rendered services whether it is a flat fee or in the form of a definite amount of the letter of credit, if the duration of the letter of credit is not accounted when calculating the fees. This rule of the rendered services relates to import and export letters of credit. It is allowed to charge the fee only for the incurred expenses (without accounting the time extension) that have occurred because of the contractual amendment and this fee shall be in the form of the fixed rate and not in the interests of the amount.
2.7.24. Charging the fee for the documentary letter of credit, the bank shall take into account the following:
a) the possibility of the guarantee when confirming this letter of credit. Accordingly, the bank is allowed to charge the additional amount to the made expenses, if it confirms the letter of credit issued by another bank;
b) the issue of the letter of credit shall not include the interest or the operation that potentially can include the interest.
2.7.25. It is allowed to subscribe to the Islamic insurance policy as the security of the debt liabilities and it is not allowed to insure these debts using the traditional insurance.
2.7.26. The third party (save for the modareb or the investment agent) is allowed to take a voluntary liability to compensate the investment losses of the party that has been provided with the liability assuming that the guarantee has no any relation to the financial contract of the modareb or the contract of the investment agency.
2.7.27. The bank shall be entitled to provide bid bond guarantees.
2.7.28. The bank to secure proper fulfillment of the liability by the client on conclusion and fulfillment of the unilateral liability can take the funds as the pledge that guarantee reimbursement of the losses to the bank if the client violates his liability.
2.7.29. The bank shall be entitled to return its tangible assets that have been sold to the client, but for which it has not received the payment yet.
2.7.30. The bank shall be entitled to protect the integrity of the pledged item or another security, including in the judicial manner in the events of its wrong use that can lead to its loss.
2.7.31. The rights of the parties keeping the pledged property as the security of the debt will preemptive to the rights of the parties that have unsecured debts.
2.8.1. A Salam transaction is a transaction to purchase the goods based on the deferred delivery, assuming that the price of the goods is paid when the agreement is concluded.
2.8.2. A Parallel Salam is a transaction that is based on two separate agreements. In the first agreement, the bank acts as the buyer and concludes the agreement with the orderer to purchase definite goods with the subsequent delivery and payment when signing the agreement.
According to the second agreement, the bank sells the same goods in the same quantity and at the date as it is specified in the first agreement to another orderer that pays the price of the goods when the second agreement is signed.
2.8.4. Within the frameworks of Salam and Parallel Salam agreements, the bank can act as both the buyer and the seller.
2.8.5. The bank purchases the goods under Salam and Parallel Salam agreements and sells them on the application of a solvent client.
2.8.6. The bank is a person both purchasing the goods and selling them.
2.8.7. The seller is a legal entity or an individual, where the bank purchases the goods.
2.8.8. The fungible goods are the goods that have common characteristics and not differing significantly from each other. Any fungible goods can be replaced by other goods in the event of their damage, when there is no need to assess the price of damaged or replaced goods in their assessment.
2.8.9. To carry out the Salam transactions, separate agreements or a general agreement for cooperation can be concluded, under which separate agreements can be concluded specifying their validity.
2.8.10. In the general agreement, the parties shall determine frameworks of the agreement and intention of the parties to purchase and to sell and determine the quantity and the specific features of the goods, the way of their delivery, the basis to determine the price and the method of payment. In addition, the guarantees and other terms shall be envisaged.
2.8.11. The Salam agreement shall be concluded in writing and when the legislation requires shall be subject to notarization and state registration. The significant terms of the agreement are:
a) sale of definite goods with the deferred delivery;
b) payment for the price of the goods when the agreement is concluded.
2.8.12. The price under the Salam agreements can be set both in the form of the monetary resources and in the form of the fungible goods (the goods defined by the generic features).
2.8.13. If the price is determined in the monetary resources, then the currency, the size and the method of payment shall be determined. If the price is determined in the form of the fungible goods, it is required to identify clearly their sort, type, specification and quantity.
2.8.14. The price within the frameworks of the Salam agreement shall be paid immediately when it is concluded. In the exclusive events, payment can be deferred for the period of no more than three days and this shall not influence fulfillment of the Salam agreement assuming that the delay period is not equal or does not exceed the delivery period of the fungible goods.
2.8.15. It is not allowed to use the debt as the capital under the Salam agreement.
2.8.16. The Salam agreement shall be concluded for the goods that can be weighted, measured or counted.
2.8.17. Any currency, precious metals (gold, silver, etc.) cannot be the subject of the agreement.
2.8.18. The goods shall have the appearance that enables to describe their specific features excluding any uncertainty, for correspondence to which the seller is responsible.
2.8.19. The goods shall be specifically defined in accordance with the adopted practice and the conclusion of the experts.
2.8.20. The quantity of each unit of the goods shall be determined depending on its condition and the nature of the goods, i.e. their weight, size, volume and number of places shall be specified.
2.8.21. The goods shall be available under usual circumstances in the place, where they shall be located at the moment of the delivery and be available for the seller so that he can fulfill his liability to deliver the goods to the buyer.
2.8.22. The parties shall set the specific delivery date but can set different delivery dates of the goods, delivery of the goods in batches assuming that their price has been paid when the initial agreement is concluded.
2.8.23. The parties can determine the place for goods delivery. If the parties to the agreement do not determine the place for goods delivery, this place shall be the place of the agreement conclusion, if it is not found out that it is impossible to deliver the goods to this place. In this event, the place for goods delivery shall be determined based on the usual practice.
2.8.24. The delivery of the goods can be ensured by any types of the security of the liability to make payments.
2.8.25. The buyer is not allowed to sell the goods until he receives the ownership right to them.
2.8.26. Upon mutual consent of the parties, the Salam agreement can be completely terminated and the liabilities can cease in return to full reimbursement of the agreement price. It is allowed to cancel it partially, i.e. cancel the delivery of some goods in return to the relevant part of the reimbursement of the agreement price.
2.8.27. The seller shall be obliged to deliver the goods to the buyer at the certain day according to the terms of the agreement in line with the agreed specifications and in the agreed quantity. The seller, on the other hand, shall accept the goods if they meet the requirements envisaged by the specifications in the agreement.
2.8.28. If the seller proposes the goods of the higher quality than those that have been required in accordance with the contractual specifications, the buyer shall accept the goods, if the seller does not ask the higher price for the higher quality. It is applied only when the description (with the lower qualitative characteristics) envisaged in the agreement is not deemed a significant term.
2.8.29. If the quality of the delivered goods is lower than the one that is required in accordance with the contractual specifications, the buyer shall be entitled to reject or to accept the goods in this condition. If he accepts them, the parties can agree to accept these goods with reduction of the price.
2.8.30. The seller shall deliver the goods in the form of the products agreed in the agreement.
2.8.31. The goods can be delivered pre-term assuming that the goods meet the agreed specifications and are delivered in the required quantity.
2.8.32. If the seller cannot fulfill his liability or the seller does not have all or the part of the goods at the certain date, the buyer can:
a) wait, when the goods will be available or provide a longer period for goods delivery;
b) terminate the agreement and collect the paid funds.
The parties are also allowed to negotiate replacement of the goods by other goods.
2.8.33. It is not allowed to include a reservation clause that stipulates the penalty provisions for delay of goods delivery.
2.8.34. The seller is allowed to conclude a separate independent Salam agreement with the third party in order to purchase the goods of the same specification as the goods that are envisaged in the first Salam agreement in order to fulfill the liability under the first agreement and deliver these goods. Consequently, the bank acting as the seller in the first Salam agreement becomes the buyer in the second Salam agreement.
2.8.35. The buyer is allowed to conclude a separate Parallel Salam agreement with the third party in order to sell the goods purchased based on the Salam agreement, the goods the description of which coincides with the description of the goods that are expected to be purchased using the first Salam agreement. In this situation, the bank acting as the buyer in the first Salam agreement becomes the seller in the second Salam agreement.
2.8.36. In both events, the parties are not allowed to link the liabilities under two Salam agreements.
Liabilities and rights under two agreements shall be separate in all aspects. If the liabilities under the first Salam agreement are violated, the other party (the affected party) shall not be entitled to connect this damage or losses with the party, with which the first party has concluded the Parallel Salam agreement. Consequently, it is not entitled, based on its losses or damage that it suffers under the first Salam agreement, to terminate the second Salam agreement or to delay its fulfillment.
2.8.37. All rules, which the Salam agreement follows, shall also apply to the Parallel Salam agreement.
2.8.38. It is prohibited to issue commodity bonds for debt liabilities resulting from the Salam agreement.
2.8.39. The bank in the Salam transactions purchases the goods defined by the orderer-client with their subsequent sale to the client at the price that includes the bank’s markup.
2.8.40. (Became invalid as per Resolution No. 49/8 of the National Bank of the Kyrgyz Republic Board as of December 21, 2016).
Documentary Letter of Credit
2.9.1. The bank is allowed to present the actual expenses for payment incurred due to issue of the documentary letter of credit. In addition, the bank is allowed to fix the fees for provision of the required services, irrespective of the fact, whether these fees are paid in the form of the lump sum or they represent a definite percentage from the amount of the letter of credit, provided that in determining the fees, the expiry date of the letter of credit is not accounted. This rule is applied to the services rendered on an import and export credit, save for the events, when the change in the terms entails the change in the schedule of the expiry date of the letter of credit. Thus, the bank is allowed to fix the fees only in the form of the definite amount for actually incurred expenses and not in the percentage terms.
Charging the fee for the documentary letter of credit, the bank shall take into account the following terms:
a) that the documentary letter of credit has the properties of the guarantee, respectively, the bank shall not charge the additional amount to the made expenses, if it confirms the letter of credit issued by another bank;
b) issue of the letter of credit does not suppose the interest profit and is not a means to receive this profit;
c) it is prohibited to use the combination of the agreements in the documentary letter of credit as the justification to include the prohibited operations such as the fee for issue of the guarantee or disbursement of the loan.
2.9.2. The bank can open all types of the documentary letter of credit. The bank is also allowed to take part or to act as a mediator in such operations according to the existing forms of the implemented documentary letter of credit.
2.9.3. The bank is not allowed to carry out the transactions on the documentary letter of credit either for itself or on behalf of another client or organization or by joint work, when this letter of credit relates to the goods prohibited by the Sharia or based on the agreement that is invalid, wrong (according to the Sharia).
2.9.4. The bank is obliged to fulfill the letter of credit, if it meets the instructions, save for the events of forgery.
2.9.5. The bank shall be entitled to demand the security of the liability resulting from the documentary letter of credit or to provide the documentary letter of credit as collateral of payment in favor of the companies and the banks. The bank can act as the mediator to secure the documentary letter of credit using allowable and available security forms, including in the form of the monetary resources on settlement accounts or the monetary resources paid by the client under the Mudaraba agreement.
2.9.6. The bank shall not be entitled to use interest-bearing bonds, shares of the company, involved into the activity prohibited by the Sharia and interest-bearing receivables as the security.
2.9.7. If the client intends to purchase the imported goods from the bank using the financing within the frameworks of the documentary letter of credit under the Murabaha agreement, it is necessary to observe the following terms:
a) opening the documentary letter of credit shall not precede conclusion of the sale agreement between the orderer and the seller.
b) the bank shall be a party that purchases the goods from the supplier and then sells them to the client under the Murabaha agreement according to the Sharia rules concerning the Murabaha agreement for the orderer on delivery.
2.9.8. If the documentary letter of credit includes the provision that complies with the prevailing principles and practices that unify the documentary letter of credit, it is necessary to qualify this application including the reservation clause, that it does not violate the Sharia rules and principles.
2.9.9. The bank shall not be entitled to discount acceptance bills, i.e. to purchase these bills at the price that is lower than their face value.
2.9.10. The bank is not allowed to negotiate the reduction of the face value of the documents based on which the payment shall be made against presentation or after sight.
2.10.1. The bank shall be entitled to carry out purchase-sale transactions of the foreign currency if they comply with the following Sharia rules:
a) both parties shall have the currency subject to exchange for another type of the currency;
b) the units of the currency exchange shall be of an equal amount, even if one of them is a banknote and the other is a coin of the same country;
c) the contract will not include any conditional alternatives or reservation clauses regarding deferral of the delivery of one or both units of exchange;
d) FX operations shall not be aimed to establish the monopoly and shall not lead to the consequences entailing injure and damage to the parties of the transaction and the society;
e) FX operations shall not be carried out for futures-trading and forward operations.
2.10.2. It is prohibited to conclude the currency contracts for future sales. This rule shall be observed irrespective of the fact whether these contracts are exchange of the deferred remittances for debt repayment or fulfillment of the deferred contract, where the parties do not jointly possess both exchange units.
2.10.3. It is prohibited to conclude any transactions at the forward FX market, even if the purpose is the insurance transaction (conclusion of the transactions for a period of sell or purchase of the foreign currency) to prevent losses in definite operations that depend on currency, the price of which can drop in the near future.
2.10.4. The bank shall be entitled to conclude the insurance transactions for future depreciation of the currency in the events, when the bank shall fulfill the liabilities or the terms of the Murabaha transaction in the relevant currency.
2.10.5. The bank and the client are allowed to negotiate that credit repayment and other credit operations can be carried out in another currency in accordance with the exchange rate effective at the day of payment at the internal FX market of the republic.
2.10.6. It is allowed to make remittances in the currency other than the currency provided by an applicant for remittance. The remittance shall be made through actual or expected possession, by delivering the amount of the currency confirmed by a bank account, after this, the amount should be transferred using the currency bought by the applicant of the remittance. The bank can charge the fee for these remittances.
2.10.7. When concluding the contract for sale of the definite amount of the currency, the rights to possess the whole amount shall be recognized at the last day of the transaction.
2.10.8. Possession can be actual and expected. The form of assets possession depends in their type and rules used in carrying out the activity.
2.10.9. Physical (actual) possession of cash shall be passed when the money is provided personally.
2.10.10. Expected possession of the asset is recognized, if the seller has let another person receive and sell this asset on his behalf, even if there is no physical transfer of the asset possession, including:
a) when the bank transfers the funds to the client’s account;
b) when the bank concludes an agreement for exchange of the currency in cash for cashless and vice versa with the client;
c) when the bank (with the client’s consent) withdraws the amount from the client’s account and transfers it to another account in another currency either with the same or another bank for the benefit of the client or another person receiving the payment;
d) receipt of the check suggests the expected possession, only if there is a payable amount on the account of the check issuer in the currency specified in the check and if the bank has blocked this amount for payment.
2.10.11. The bilateral liability to sell and to purchase the currency is prohibited, if this liability is forced, event for purposes of insurance against losses that can occur due to currency depreciation. However, the unilateral liability is allowed.
2.10.12. Parallel purchase and sell of the currency is not allowed as it includes one of the following factors invalidating it:
a) there is no delivery and receipt of two purchased and sold currencies that leads the contract to delay of the currency sale;
b) the agreement for currency sale becomes dependent on another contract for currency sale;
c) it leads to the bilateral forced liability of both parties to exchange the currency, which is not allowed.
2.10.13. One of the partners of Musharaka or Mudaraba transactions is not allowed to be a guarantor of another partner, if the transaction is related to currency exchange. However, the third party can voluntarily act as a guarantor if this guarantee is not specified in the contract.
2.10.14. Exchange of the currency amounts that are determined debts of the debtor is allowed, if it leads to repayment of two debts in the event of bilateral currency exchange as well as to full repayment of the outstanding debt.
2.10.15. One of the prohibited methods to trade the currency is when the client of the bank enters into the commercial currency transaction without possessing the adequate amount, uses the credits disbursed by the bank that operates in the area of the currency trade providing, thus, the client with the opportunity to enter into the transaction exceeding the amount that he could pay.
2.10.16. The bank is not allowed to provide loans to the client with a provision that the currency transactions shall be made only with this bank and no other. If this provision is absent, then the Sharia does not prohibit disbursing loans.
2.11.1. The bank is allowed to issue payment cards under the following terms:
a) a cardholder will not pay the interests in the event of untimely payment of the required amount;
b) the bank can oblige the cardholder to place a deposit as the guarantee and this amount cannot be spent by the cardholder. The bank shall invest this amount in order to receive the profit for the cardholder according to the terms of the Mudaraba transaction and inform that any income received from this amount will be divided between the bank and the cardholder in accordance with the terms of the Mudaraba contract;
c) the bank shall stipulate that the cardholder cannot use the card for purposes prohibited by the Sharia and that the bank can cancel the card if this term is violated.
2.11.2. The bank shall be entitled to charge a flat, unchanged fee for cash withdrawal in accordance with the rendered services. However, the charged fee for cash withdrawal shall not vary. The size of the fee for issuance and maintenance of the card and the size of the commission fees for payments shall be determined by the bank.
2.11.3. The bank shall be entitled to issue a debit card to the client based on the amount that the client has on his account.
The client shall not pay the fee to the bank for use of the card, save for the events when it is used for cash withdrawal or purchase of the currency in the organization other than the issuing bank.
2.11.4. The bank shall be entitled to issue credit cards if the cardholder does not pay the interests in the event of untimely return of the credit amount and the interests for use of the revolving credit limit.
2.11.5. The bank shall be entitled to charge the commission fees from the party accepting the card as a means of payment. The commission fees shall be calculated as the interests of the amount spent on purchase of goods and services.
2.11.6. The bank shall be entitled to charge membership fees, the fee for extension and renewal of the card from the cardholder.
2.11.7. The cardholder is allowed to withdraw cash that does not exceed the limit of the available funds or over it, if it is preliminary agreed with the bank issuing the card provided that the interests are not accrued on this amount.
2.11.8. The bank shall be entitled to grant benefits allowed by the Sharia, such as the preemptive right to the discounts in a hotel, airlines, booking of a restaurant, etc.
The bank shall not be entitled to provide the privileges to the cardholder that are prohibited by the Sharia, such as life insurance on a contingency basis, entering prohibited places or prohibited gifts.
2.11.9. The bank is allowed to join an international organization for card regulation if the bank does not violate the Sharia rules that can be deemed acceptable by these organizations.
The bank is allowed to pay the fee for membership, services and other fees of the international organization for card regulation if they do not include interest payments including indirect ones, as for example, when the fee for services to take into account provision of the credit is increased.
Transactions of trust and guarantee safe custody
1. A Wadiah Yad Amanah transaction
126.96.36.199. A Wadiah Yad Amanah transaction (agreement) is an agreement when the bank provides a safe deposit box to the client to store documents, valuables, funds, etc. The access is provided using 2 keys, one key to each of the parties.
The bank can receive the preliminary agreed fee amount for provision of this service.
2. A Wadiah Yad Dhamanah transaction
188.8.131.52. A Wadiah Yad Dhamanah transaction (agreement) is an agreement of guarantee safe custody, according to which the bank is entitled to use the trusted funds and to receive the profit from their placement.
184.108.40.206. The services under the Wadiah Yad Dhamanah agreement are provided by the bank through opening and maintenance of the saving accounts.
220.127.116.11. The bank at its own discretion can pay the fee to the holders of these accounts out of the profit received from placement of the funds mobilized under the Wadiah Yad Dhamanah agreement. The bank shall be entitled to establish the procedure, the sizes and the rules of fee payment due to its clients. The amount of the fee paid to the clients shall be recognized as the expenses of the period.
18.104.22.168. The bank for purposes of maintaining the required level of the current liquidity and the capacity to fulfill in time the liabilities under the Wadiah Yad Dhamanah agreement shall maintain the adequate volume of the funds in the cash desk or on the correspondent account with the National Bank of the Kyrgyz Republic.
3.1. This provision can be supplemented with the list of operations that comply with the principles of Islamic Banking and Finance and are envisaged by the Sharia standards approved by the Accounting and Auditing Organization for Islamic Financial Institutions by introducing the amendments.