Frequently asked questions by beneficiaries
APIF finances profitable revenue-generating projects including commercial, residential and mixed-use buildings. The commercial buildings may include offices, retail units, medical units, educational units, parking facilities, warehouses or a combination of these. Residential buildings may include unfurnished & furnished apartments and students hostel.
What type of projects does APIF finance?
In case of a construction on a land owned by the applicant or on a Waqf land, APIF can finance the total construction cost excluding taxes and statutory fees. In case of purchase of an existing property and transferring it to Waqf, APIF can finance up to 75% of the sale price. However, the specific percentage of APIF contribution is based on the financial feasibility study where the revenues of the project should cover the repayment installments and leave a balance of around 20% to support the beneficiary activities during the repayment period.
Could APIF finance 100% of the project cost? If not, then how much shall a beneficiary contribute to get APIF financing?
APIF usually finances larger projects with total values of above $5.0 million (including land value). In the case of purchasing an existing building rather than construction of new building, APIF may make exceptions on a case-by-case basis, but it is unlikely to finance projects smaller than $3.00 million.
APIF financing for one project can be up to around $15.00 million, but it can exceed this value only on exceptional cases.
What is the minimum and maximum financing amount APIF can provide?
The maximum repayment period is fifteen years. In case the building is to be constructed, a gestation period of a maximum of three years could be provided, and the remaining twelve years may be for repayment.
What is the maximum repayment period?
The financing extended by APIF is sharia’ compliant, typically using the Murabaha, Leasing (Ijara) or Istisna’a modes of financing. Moreover, APIF charges a markup (profit margin) to cover its administrative cost as well as to pay a dividend to its shareholders. The markup is set on a case-by-case basis for each project.
Is APIF providing soft loans with 0% markup? Are they Sharia’ compliant?
The approval of the financing requires two to three months, and the signing of financing agreement & finalizing the legal requirements requires another one to two additional months. If all required documents are provided by the applicant on time, then it could take four to five months to disburse the money, excluding the time required for the preparation of the project feasibility studies.
How long does it take after a project is submitted to disburse the money?
Unfortunately, APIF cannot finance non-revenue-generating projects, which include HQs, lands, etc. APIF finances only profitable projects that provide revenue to repay the financing, with the surplus going to support the beneficiary’s charitable activities. After the financing is fully repaid, the entirety of the project’s revenues will go to the beneficiary’s social activities.
Does APIF finance the construction of an HQ or purchase of a land for an NGO?
If the project includes a commercial section (such as a complex having educational facilities along with retail units or rentable student accommodation), then APIF may finance the commercial profitable part of the project.
Could the Waqf project be part of a social project such as a school, hospital, or Islamic center?
Usually, the beneficiary provides the Bank with a feasibility study prepared by an independent consultant with experience in the real estate sector. The feasibility study is reviewed and challenged by the APIF team during the appraisal phase. In few cases, APIF may finance the preparation of the feasibility study of the project or may appoint its own consultant to undertake the technical and legal due diligence of the project.
Who will prepare the project’s feasibility study?
If the project is approved, APIF may indeed facilitate beneficiaries’ collecting of donations for the project, although the beneficiary bears the primary responsibility for this.
Will APIF be helping applicant beneficiaries collect donations for projects?
APIF usually finances the purchase of a whole property where the land and building are considered as Waqf. In exceptional circumstances, APIF may study financing the purchase of a section of an existing property.
Is it possible to purchase 1 or 2 floors or apartments of an existing building?
It is possible for the Waqf project to be at more than one site (i.e. two lands registered under the same beneficiary organization name).
Could the Waqf project be at two sites?
The repayments shall be on a semi-annual basis; installments (equal amounts in most cases) shall be paid every six months. Repayments start after the completion of the gestation period.
Will the repayments be on a monthly or an annual basis?
If the beneficiary is ready to repay all or some of the amounts due in advance, it may enter into negotiations with IsDB and a discount might be approved on case-by case basis.
Does APIF give discounts in case all or some installments are repaid early on?
APIF Transactions are calculated in US dollars only. Though the contracts for the project implementation could be in local currencies, the financing amount and all repayments should be in US dollars.
Could we repay the financing in our local currency?
APIF requires mortgages on either the financed property or any other property owned by the beneficiary, valid till the end of the financing period. It can also accept government or commercial bank guarantees on a case-by-case basis.
Does APIF take mortgages or other guarantees for its financing?
Yes, usually repayment installments range between 80% to 85% of a project’s revenue at most, so beneficiaries may utilize the remaining balance for their charitable activities. This depend on the project’s profitability and debt coverage ratio. Thus, APIF prefers high profit-making projects that allow beneficiaries to gain reasonable income during the repayment period while repaying their installments smoothly.
Do beneficiaries benefit from projects during the repayment period?
Yes, the project land must be registered as a Waqf or its equivalent according to the country’s law, such as a Trust or a Foundation. If the land is not a Waqf at the beginning of the construction, or if it is mortgaged as a collateral for APIF financing, it must be registered as such at the end of the repayment period so as to limit its income’s function to only specific charitable activities.
Should the project land be registered as a Waqf?
APIF proportionally provides its financing as the beneficiary pays its share to ensure the smooth and timely completion of the project. For purchase of properties, the beneficiary’s contribution should be available up front as a condition of disbursement.
How do beneficiaries pay their contribution to the project cost?
If the beneficiary owns a piece of land in a prime location, the investment of this land is recommended after undertaking a best-use analysis of this land to achieve highest possible revenues. However, it is generally preferred to purchase existing buildings that are already generating a stable income. This reduces the risks related to time & cost overruns as well as the risk of marketing of the project units. It also allows beneficiaries to distribute their repayment installments over the maximum number of years allowed for repayments (15 years) since there is no construction period.
Is it better to purchase existing properties or construct a new one?
Only after a beneficiary has applied for a project’s financing, and the project has been successfully completed, can the beneficiary apply for a second project. This can be during the repayment period of the first one.
Could we request financing for 2 or 3 projects at the same time?
In the first stage (initial review), beneficiaries must provide the following:
Official request for financing, providing brief details of the Waqf project and the requested amount of financing.
- Copy of the registration certificate and articles of association of the Waqf/ Charitable Organization.
- Copy of the Title Deed of the Property that shows that the Land is in the name of a Waqf/Charitable Organization and is free from all encumbrances, or the Property description in case of Purchase of an existing property.
- Copy of the Waqf deed/Trust deed, if any.
- Detailed information about the organization, including scope of activities, operations and investments.
- Brief profile of the trustees and members of management.
- Audited financial statements for the last three years.
In the second stage (appraisal stage), beneficiaries would need to provide the following:
- Feasibility study as per APIF guidelines.
- Copy of the building permit, if issued.
- Recommendation/no objection letter from relevant Authorities.