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IB 2001

STRUCTURING FINANCIAL REQUIREMENT


Chartered Islamic Finance Professional (CIFP), INCEIF
September Semester, 2010
Facilitator: Abdul Rashid Abdul Kadir
Assignment: Short Essay (20%)

Maaruf Development Bhd (MDB), is a property development company listed in Stock Exchange. The
company is developing few projects in major cities such as Kuala Lumpur, in the central region , Johor
Bharu in the southern region and Penang in the northern Peninsular of Malaysia. Their projects
comprises of 8,000 units of houses, 2,000 units commercial lots and other facilities and utilities, expecting
to generate RM3.33 billion sales within 5 years period. Currently MDB is also expanding their market
into other Middle East countries through strategic partnership arrangement with their counter parties.
Due to recent development , MDB is planning to make their stock to be classified as Shariah Compliant
Stock in the Kuala Lumpur Stock Index and seeking for Islamic Banking Facilities to replace their
existing conventional banking loan facilities

Currently the company is enjoying conventional banking facilities totaling RM910.0 million with
outstanding balance of RM773.5 million. The facilities comprise of RM150.0 million Fixed Loan to
finance the purchase of fixed assets including lands for future development. Tenor of the loan is 5 years
at 7.0% p.a interest charged, with current outstanding balance of RM125.0 million. As for working
capital, MDB enjoy an Overdraft facility up to the limit of RM250.0 million on yearly review basis and
interest rate charged at BLR + 0.75%p.a, with current outstanding balance amounted to RM240.0 million.
Specifically for development works, MDB obtained RM300.0 million Bridging Financing facility with
outstanding balance of RM250.0 million. Interest charged on Bridging Finance is BLR + 1.0% p.a.

Another banking facilities provided by their existing banker are Bank Guarantee and Trade Financing
Facilities. Limit for Bank Guarantee is RM10.0 million on commission rate at 0.25% per month, with
current outstanding balance of RM8.5 million for various type of guarantees such as Performance, Tender
and Payment Guarantee etc. while limit for Trade Financing facilities such as DC/TR/SG (Documentary
Credit/Trust Receipt/Shipping Guarantee) is RM 200.0 million with current outstanding balance
amounting to RM150.0 million, for purpose of importing machineries and building materials.
Commission rate charged for DC and SG is similar to commission to BG which is at 0.25% per month,
while interest rate charged for TR is BLR + 1.0% p.a. Except for Fixed Loan, all other facilities are on
blanket or revolving basis for 5 years tenor with yearly review.

During your marketing call – visit to MDB’s Financial Director, Mr. Muhammad Khalid, he has
requested you as a Corporate Account Manager of Muttaqin Islamic Bank (MIB) to submit a proposal
on a package of Islamic Banking Facilities for the company’s consideration.

QUESTION
1.Explain necessary steps to be taken in preparing financing assessment to the above customer. What are
the basic factors to be considered.

2.To ensure your proposal will be accepted by MDB, you need to offer a better structure, compatible
products/ facilities with the existing conventional facilities, competitive terms and providing high
customer value to the above company. Prepare your proposal based on the following;

i. List down and discuss types and basic features of your proposed facilities, Shariah principles
applicable and illustration of the products,
ii. Outline pricing and basic terms and conditions of your proposed facilities

iii. Recommend other related banking facilities to be offered to the customer in carrying out their
business.

INSTRUCTION:
1.Please prepare your proposal at minimum 10 pages on one and half
spacing typing.
2.Deadline of submission: Sunday, 21 November 2010.

3.All submission shall be via LMS

4.Contact:rashid@inceif.org mobile: 019 315 7001,office: +603 2781 4194

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