concept paper

7/18/2019 Concept Paper

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CONCEPT PAPER OF A PROPOSED PROJECT

I. PROJECT PROFILE

A) TITLE : THE PROPOSED CREATION OF “SAUDI OFW BANK”

B) PROPONENT : PMGRC and MEPHA International

Riyadh, Kingdo o! "a#di Ara$ia

Conta%t &er'on: Engr( Modria M( A$d#llah

E*Mail: 'e%a&++-yahoo(%o(&h

C) CONCERNE. PARTIE" : Thi' &ro&o'al need' the '#&&ort o! the !ollo/ing:

0) The Phili&&ine Go1ernent thr# the Phil E$a''y

2) Organi3ation o! 4ili&ino Co#nitie' in "a#di Ara$ia

5) 6ario#' e&loyer' and $#'ine''en in "a#di Ara$ia

.) BRIE4 .E"CRIPTION : The SAUDI OFW BANK 'hall $e a "hari7a*%o&liant

!inan%ial in'tit#tion that /o#ld %ater the e%onoi% need' o!

O1er'ea' 4ili&ino 8orer' O48'(

It 'hall ha1e a ain o!!i%e in Riyadh Kingdo o! "a#di Ara$ia9 and /ith

$ran%h o!!i%e' in the Phili&&ine' L#3on, 6i'aya', and Mindanao)

E) PRO;ECT CO"T : (To be shown in the detailed feasibility study)

II. RATIONALE:

There are tho#'and' o! O1er'ea' 4ili&ino 8orer' O48') in the Kingdo o! "a#di Ara$ia( They are

%ontri$#ting and %ataly't in e%onoi% de1elo&ent o! $oth %o#ntrie'(

B#t the &ro$le i' that 'oe retired O48' or 'oe o! tho'e /ho %o&leted their %ontra%t are no longer

a%%e''i$le to e&loyent in the Phili&&ine'( "oe o! the #'#ally 'ell their &ro&ertie' to eet the need' o! their!ailie' and <$a% to '=#are one>( 8herea' tho'e $#'ine'' enth#'ia't' need %a&ital $#ild*#&(

Another &ro$le i' that %on1entional !#nding in'tit#tion' in%l#ding #n'%r#&#lo#' $#'ine''en in the Phili&&ine'

#'#ally %harge high intere't rate( In'tead o! $ene!iting, li!e o! e?*O48' e1en $e%oe i'era$le(

"o, thi' &ro&o'al intend' to 'er1e "a#di*$a'ed O48' thro#gh I'lai% 4inan%e or I'lai% Baning(

ne?t &age, &lea'e)

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III. OBJECTIVES:

A) General O$@e%ti1e' *

To %reate SAUDI OFW BANK to %ater e%onoi% need' o! O1er'ea' 4ili&ino 8orer' O48')(

B) "&e%i!i% O$@e%ti1e' *

0( To hel& '#'tain the need' o! O48' &re'ently /oring in the Kingdo o! "a#di Ara$ia and tho'e already in

the Phili&&ine'( Thi' /o#ld in%l#de:

a) Ca'h Reittan%e9

$) A%=#i'ition o! 4i?ed A''et'9 and

%) Ca&ital B#ild*#& !or Li1elihood B#'ine'' Pro@e%t'(

2( To enhan%e I'lai% 4inan%e or I'lai% Baning /orld/ide9

5( To 'er1e a' &lat!or to/ard' %lo'er relation'hi& aong the ain &layer' a' !ollo/':

a) The Phili&&ine Go1ernent,

$) O48', and

%) 6ario#' %o&anie' e&loyer' and indi1id#al "a#di $#'ine''en in the Kingdo o! "a#di Ara$ia(

IV. REVIEW OF LITERATURE

THE PRINCIPLE" O4 I"LAMIC 4INANCE:

The Quran and the Sunnah are the principal sources of Islamic law. Islamic finance signifies financial services,

mechanisms, practices, transactions, and instruments that comply with provisions given in these fundamental

Islamic texts. Thus, Islamic finance not only includes baning, but also capital formation, capital marets and all

types of financial intermediation.

!hile some of these norms are shared by Islamic and western financial systems, certain norms are exclusive to

Islam. In fact, some Islamic financial restrictions are severe enough to render certain western financial practices

and transactions absolutely void. This assertion of religious law in commercial sphere reaffirms the claim that

Islam is an all encompassing system, not "ust a set of prayers, acts of worship, and declarations regarding #od$s

existence and omnipotence.

%oming bac to the topic, derived from the Quran and the Sunnah, some of the main features of Islamic finance,

in brief are&

'. Riba is prohibited in the strongest terms. iba literally means an excess, and most of the present*dayIslamic scholars agree that it includes both usury and interest. The prohibition of riba is generally consideredto be the most important of all Islamic financial principles.

+. Gharar , which signifies ambiguity, uncertainty, or lac of specificity in the terms of a financial contract, isforbidden.

. -s riba is prohibited, suppliers of capital become investors instead of creditors.

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. Investment can only be made in permitted commodities and activities. /or instance, one cannot deal in theimport and export of alcohol. Similarly, it is not allowed to invest in a casino.

0. 1aret prices must be determined by the forces of demand and supply. In other words, Islam envisages a freemaret.

2. Information must be easily and e3ually accessible to all investors.

4ased on the above*mentioned principles, there is a variety of Islamic financial instruments and transactions invogue. Some of them are briefly explained below&

'. Musharaka& It is a business structure in which the investor not only maes a financial contribution to theenterprise, but may also participate in managing the venture. 5rofits are shared between the partiesaccording to a pre*determined ratio and losses are borne by them in proportion to their capital contributions.In terms of classification, this is an e3uity*based transaction.

+. Mudaraba& In this arrangement, the investor provides the re3uisite financial resources, but does not participate in managing the enterprise. It is a form of partnership in which one party provides the funds whilethe other provides expertise and management. 5rofits are divided among the parties according to a mutually

agreed ratio. /inancial losses are borne by the investor alone. This is also an e3uity*based transaction.

. Murabaha& In this transaction, the finance provider, instead of advancing a loan to the party wishing to purchase goods or e3uipment, purchases those items and sells them to that party at cost plus a declared profit.

. Tawarruq& In it the finance provider buys an asset and immediately sells it to the client on a deferred payment basis. The client then sells the same to a third party for immediate delivery and payment.%onse3uently, the client receives a cash amount and has a deferred payment obligation for the mared*up

price to the finance provider. The asset is typically a metal lie copper or platinum.

0. Ijarah& It is the leasing or hiring of a physical asset, and it is one of the fastest growing activities of Islamic

financial institutions.

2. Takaful & It is a form of insurance. It is an arrangement by a group of people to shield each other from loss or damage through the setting up of a defined pool of resources. -ny member of the group who suffers such aloss is compensated in the form of monetary help from the common fund. In other words, it is a mutual self*help scheme between those who wish to support each other in difficult times.

6. Sukuk & -lso called Islamic bond, it signifies, speaing more accurately, an Islamic investment certificate. Itis an asset*based investment as the investor owns an undivided interest in an underlying tangible asset thatis proportionate to investment. The suu certificate is a proof of this ownership interest. The certificateholder is not only entitled to all the benefits that it entails including a share in the revenues generated by that

asset, but is also entitled to share in the proceeds of the reali7ation of the suu asset. Suu structuresemploy techni3ues that are well developed in conventional marets for structured finance, and have becomea significant mechanism for raising finance in the international marets by institutions, corporations, andsovereign and state entities.

It must be mentioned that some of the prevalent transactions and instruments are not considered to be in

conformity with Islamic law by all 1uslim scholars. Those opposing these practices do so by pointing out the

hidden or concealed elements of riba and gharar in them. /or example, actual administrative fee is one thing

and interest in the name of administrative fee is another. 8owever, to most of the scholars, venture capital

finance is closest to the actual Islamic finance. Thus, musharaa and mudaraba structures are favored by the

ma"ority.

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In fact, every financial institution dealing in Islamic finance has a committee of 1uslim scholars, called shariah

committee, that determines whether a product or practice complies with Islamic law. -s there is no set of

binding uniform rules, shariah committees, at times, give conflicting rulings.

There can also be a difference between two countries or regions. /or instance, in 1alaysia, Islamic financial

restrictions are interpreted more liberally than in the #ulf

-nother shortcoming confronting Islamic finance is the shortage of 3ualified professionals. There are not many people who are e3ually silled in conventional finance and Islamic law. - person well ac3uainted with

conventional finance can easily understand any Islamic financial product9 however, one cannot develop or

maret such a product without nowing the rules and logic uni3ue to Islam.

To summari7e, lac of uniformity in laws and procedures, and deficiency of silled professionals are among the

main hurdles faced by Islamic finance. 8owever, the industry is growing : the -rab oil money being one of the

main driving forces. This is evident not only from the number of bans and institutions established specifically for

practicing shariah compliant finance, but also from the increasing number of western or conventional financial

institutions engaging in Islamic finance operations. (Source& http&;;www.nuwireinvestor.com;articles;understanding Islamic*finance)

V. SCHEDULE OF ACTIVITIES / TARGET

4or any '#gge'tion, %oent', &lea'e %onta%t: Engr( Modria M( A$d#llah 'e%a&++-yahoo(%o(&h

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P A R T I C U L A R S TIME FRAME

STEP 1: Cond#%t o! Semi!" # I$%!mi& Fi!&e( Re'o#r%e "&eaer !ro Al Ra@hi Ban 'hall $e in1ited to

di'%#'' the $a'i% &rin%i&le' o! I'lai% 4inan%e ( All intere'ted Chairen o!!i%er' o! 1ario#' 4ili&ino

%o#nity organi3ation' $a'ed in "a#di Ara$ia /ill $e in1ited to attend(

0't /ee o!

Mar%h 200

STEP ': 4ro aong the intere'ted &arti%i&ant', organi3e a !ederation or an #$rella organi3ation to be

temporarily called </! Islamic /inance /ederation)( The &riary &#r&o'e o! the !ederation 'hall $e to !a%ilitatethe %reation o! the &ro&o'ed "a#di O48 Ban( It' a%ti1itie' 'hall $e '#&&orted $y the Phili&&ine E$a''y(

2nd to Dth /ee o!

Mar%h 200

STEP (: The !ederation, in &artner'hi& /ith e?&erien%ed NGO $a'ed in the Phili&&ine' )*i+!!,!

C#mm-i De0e%#me O"2!i3!i#4 I&.5, 'hall &re&are and endor'e a &ro&o'al to %on%erned o!!i%e'

in%l#ding !oreign*$a'ed in'tit#tion' lie "AI., N.P, ;ICA, et%() to !inan%e the &re&aration o! .e1elo&ent

Plan' and E%onoi% 4ea'i$ility !or the %reation o! "A.I O48 BANK(

0't to Dth /ee o!

A&ril 200

STEP 6: E1al#ation o! %on%erned &ro&o'al on &re&aration o! 4", a&&ro1al F relea'e o! !#nd' May*A#g 200

STEP 7: Pre&aration o! .e1elo&ent Plan' and E%onoi% 4ea'i$ility $y the &artner NGO( "e&t*.e% 200

STEP 8: Pre'entation o! the !ea'i$ility 't#dy to: a) Con%erned go1ernent agen%ie', $) O!!i%er' o! 4ili&ino

%o#nity organi3ation' in "a#di Ara$ia, and to %) 6ario#' %o&anie' $#'ine''en in "a#di Ara$ia(;an 202

STEP 9: E1al#ation $y %on%erned &artie' ;an Mar 202

STEP : "tart o! !#nding !ro intere'ted &artie' and %oen%eent o! i&leentation &eriod A&ril 202

http://www.nuwireinvestor.com/articles/understanding

http://www.nuwireinvestor.com/articles/understanding



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