Financial Products


Islamic Development Bank (IDB) offers various Shariah-compliant financial products to support development projects in its Member Countries. Through these products, IDB finances a variety of projects in the agricultural, industrial, agro-industrial and infrastructural and various other sectors. The financial products are as follows.



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IDB Modes of Finance



Grants
Technical Assistance (TA) Grant
These grants are provided for technical assistance and capacity building activities in IDB's Member Countries, with priority given to Least Developed Member Countries (LDMCs).

Special Assistance (SA) Grant
These grants are provided for social projects (schools, hospitals etc.) for the exclusive benefit of Muslim communities in Non-Member countries. They are also provided for disaster relief in Member countries.


Loans

Definition
Long-term concessional facility that IDB provides for financing development in its Member Countries. IDB charges a service fee to cover its administrative expenses.

How it works at IDB


Leasing
Definition
A contract of letting on lease, under which the owner of an Asset sells a definite usufruct of the Asset in exchange for a periodic definite reward (the rent).

How it works at IDB
IDB operates the 'Lease-to-Own' structure on a medium to long-term basis. IDB (as Lessor), purchases an Asset and subsequently transfers the 'right to use it' (usufruct) to the Client Lessee) for a rental payment for a specific period (the lease period). Throughout this lease period, IDB retains the ownership of the Asset. At the end of the lease period, IDB transfers the title of the Asset to the Client as a gift.


Istisna'a
Definition
A sale where an Asset is transacted before it comes into existence. A purchaser orders a manufacturer to manufacture a specific Asset according to the purchaser's specifications and deliver it at a pre-agreed delivery date for a pre-agreed price, which is payable either in lump sum or instalments at any time as agreed.

How it works at IDB
IDB operates Istisna'a on a medium to long-term basis, wherein IDB appoints the Purchaser (client) as its Agent who gets the Asset constructed/manufactured. When the Asset is constructed/manufactured and accepted by the Purchaser, IDB transfers the title of the Asset to the Purchaser. The Purchaser then pays the Sale price of the Asset in deferred payments.


Instalment Sale
Definition
A credit sale of an Asset, delivered on spot, in which the purchaser can pay the price of the Asset at a future date, either in lump sum or in instalments.

How it works at IDB
IDB operates Instalment Sale on a medium to long-term basis, wherein IDB purchases an Asset and sells it to the Purchaser (client) at an agreed Sale Price (cost plus a mark-up). The Purchaser pays the Sale Price in instalments. The ownership/title of the Asset is transferred to the Purchaser on the date of delivery of the Asset.


Mudarabah/Restricted Mudarabah
Mudarabah
A profit-sharing loss-bearing contract in which one party (Rab al-maal) provides capital and the other party (Mudarib) provides expertise to manage a business enterprise. Any profit earned is shared in a pre-agreed ratio and any loss is borne solely by the capital provider (Rab al-Maal), except in case of negligence and misconduct from the Mudarib.

Restricted Mudarabah
Restricted Mudarabah is a variant of Mudarabah that is used by IDB, wherein the Mudarib (the entity) is bound by certain restrictions on the sectors/areas/projects into which it can invest the Mudarabah capital. These restrictions are agreed upon upfront in the Restricted Mudarabah Agreement (RMA).


Equity Participation
Definition
A mode of financing whereby IDB makes strategic long-term investments with the objective to maximize its developmental objectives. These investments are usually in the equity of Shariah-compliant industrial, agro-industrial projects, Islamic banks and financial institutions of its Member Countries.

How it works at IDB
Step 1 - Deal Sourcing and Screening
Step 2 - In-depth Analysis
Step 3 - Due Diligence and Clearance
Step 4 - Approval and Disbursement
Step 5 - Monitoring
Step 6 - Exit