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Useful Financial Information & Articles section keeps consumers up-to-date on topics related to financial literacy and safer banking practices. The topics covered under CEA should enhance public’s level of knowledge related to financial activities which will in turn escalate level of utility and level of trust among consumers over financial products and services.

Habib Bank AG Zurich encourages its customers to be well-informed consumers. Below listed topics offer information that will help you in managing and protecting your funds in a better manner.

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Islamic Banking is a banking system that functions in accordance with the rules and principles of Islamic Shariah. In a practical sense, Islamic Banking offers Shariah-compliant banking and financial products and services as an alternative to the offerings of the conventional banking system. Islamic Banking transactions are based on or backed by tangible assets and real services.

Islamic Banking is a fast-growing phenomenon in the global financial markets. There has always been a demand for financial products and services that conform to the rules and principles of Shariah (Islamic Law). Based on this demand, a number of banks around the world have started offering Shariah-compliant products and services.

Shariah is the set of revealed principles represented in the Quran and Sunnah (the traditions of Prophet Muhammad (PBUH)) that govern all aspects of life for Muslims. Shariah encompasses all elements of the Islamic faith, including beliefs, worship, economic and business activities, and social practices.

Islamic Banking is different from conventional banking in the sense that Islamic Banks do not deal in Shariah-prohibited elements and activities. Thus, Islamic Banks avoid activities that involve interest (riba), gambling (maysir), and excessive ambiguity (gharar). Unlike conventional banks, Islamic Banks operate on the principles of trade (buy and sell) transactions, leasing, partnerships, and agency. In Islamic Banking, wealth can be generated only through Shariah-compliant trade, investment, and other activities.

‘Sirat’ is Habib Bank AG Zurich’s Global Islamic Banking brand. Sirat offers Shariah-compliant banking products and services through a global network of dedicated Islamic Banking branches and windows. All Sirat products and services are approved by an independent Internal Shariah Supervision Committee (ISSC).

One key difference between Islamic and conventional banking systems lies in the contracts and mechanisms of their products and services. Islamic Banking relies on various contractual structures to operate in, rather than simply engaging in lending and borrowing with its customers. The frequently used modes of contract in Islamic Banking include sale, lease, agency, and profit-and-loss sharing structures. The table below summarises the differences between Islamic and conventional banking systems:

Yes, you can contact our Shariah Department anytime by sending an email to: sirat.ae@habibbank.com. Based on your inquiry, we will respond to you as soon as possible.

Yes, ‘Sirat’ is an integral part of Habib Bank AG Zurich, but its funds and operations are segregated to comply with regulatory and Shariah requirements. Being under the same roof does not imply that the Bank’s Islamic banking and conventional banking operate under the same principles. At Habib Bank AG Zurich, Shariah-compliant funds and accounts are completely segregated from the conventional side.

Habib Bank AG Zurich Sirat’s operations are carried out under the supervision of the Internal Shariah Supervision Committee (ISSC). The ISSC comprises of prominent Shariah scholars well-versed in Islamic Shariah and Fiqh-al-Muamalaat (jurisprudence of transactions). The ISSC serves as an independent advisor to the Bank for its Islamic Banking offerings. Habib Bank AG Zurich Sirat also has an Internal Shariah Control Department and an Internal Shariah Audit Department to monitor and ensure that all transactions and activities performed under Sirat comply with Islamic Shariah principles.

Below are the names and brief profiles of the Internal Shariah Supervision Committee (ISSC) members of Habib Bank AG Zurich UAE:

Professor Jassim Ali Salem Nasser AlShamsi

Jassem Al Shamsi is a national of the United Arab Emirates. He served as Dean of the College of Shariah and Law at UAE University. He also advises several important financial institutions.

Mufti Talha Salim

Mufti Talha Salim is a national of Pakistan. He holds a Degree of Specialisation in Islamic Jurisprudence/Islamic Finance, and has experience advising various Islamic banks and financial institutions.

Dr. Muhammad Ahmed Al-Hashimi

Dr Muhammad Al-Hashimi is a national of the United Arab Emirates and holds a PhD in Contemporary Islamic Jurisprudence. He is a lecturer at the Department of Shariah and Islamic Studies at Emirates University. Dr Al-Hashimi serves on different academic committees of the University and Internal Shariah Supervision Committees of banks.

In a loan contract, any excess amount charged over and above the principal amount is Riba. Similarly, applying charges against deferment of an outstanding debt payment without any due consideration constitutes Riba. Therefore, rent on a lease and profit on a sale, although fixed and pre-decided, do not constitute Riba (interest).

Islamic Banking is inclusive and welcomes customers irrespective of their religious affiliations. However, certain businesses engaged in non-Shariah-compliant business activities are not eligible to open an account with the Islamic Banking window of Habib Bank AG Zurich.

At least six basic principles are taken into consideration when executing any Islamic Banking transaction. These principles differentiate a financial transaction from a Riba (interest-based) transaction to an Islamic Banking transaction.

1. Sanctity of Contract

Before executing any Islamic Banking transaction, the counterparties must confirm whether the transaction is valid in the eyes of Islamic Shariah. This means that the Islamic window’s transaction must not be invalid or voidable according to Shariah. An invalid contract is one that, by virtue of its nature, is considered invalid according to Shariah rulings. A voidable contract is one that, by nature, is valid, but contains some invalid components. Unless these invalid components are eliminated from the valid contract, the contract will remain voidable.

2. Risk Sharing

From the sayings of Prophet Muhammad (PBUH), Islamic jurists have inferred that no profit can be earned from an asset or a capital unless the earner of that profit has taken the relevant ownership risks. Thus, in every Islamic Banking transaction, the Islamic financial institution and/or its deposit holder must take the risk of ownership of the tangible asset, real services or capital before being entitled to earn any profit from them.

3. No Riba/Interest

Islamic Banks cannot engage in Riba (interest-related) transactions or lend money to earn an additional amount on it. However, as stated in point No. 2 above, they earn profit by taking the risk of tangible assets, real services, or capital and passing on this profit or loss to their deposit-holders, who also take the risk of their capital.

4. Economic Purpose/Activity

Every Islamic Banking transaction has a specific economic purpose or activity. Furthermore, Islamic Banking transactions are backed by tangible assets or real services.

5. Fairness

Islamic Banking inculcates fairness through its operations. Transactions based on dubious terms and conditions cannot be part of Islamic Banking. All terms and conditions embedded in the transactions are properly disclosed in the contract/agreement.

6. No Invalid Subject Matter

While executing an Islamic Banking transaction, it is ensured that no invalid subject matter or activity is financed by the Islamic financial transaction. Some subject matter or activities may be allowed by the law of the land, but if they are not permissible under Shariah, they cannot be financed by an Islamic bank.

The validity of a transaction does not depend on the end result but rather on the mechanism, process, and activities executed, and their sequence in reaching the end. If a transaction is conducted according to the rules of Islamic Shariah, it is Shariah-compliant, even if the end result of the product may appear similar to conventional banking products. For example, a regular McDonald’s burger in the USA and the UAE may look, smell, and taste similar, but the former is not permissible according to Shariah due to its non-compliance with Islamic guidelines on animal slaughter, whereas the latter is allowed. The same principle applies to Islamic and conventional banking. The contracts and product structures used by Islamic Banks are significantly different from those of conventional banks.

At Habib Bank AG Zurich Sirat, we constantly strive to provide financial solutions that meet the requirements of our customers in a Shariah-compliant manner. Sirat offers Islamic Banking products and services which combine our financial expertise with your values.

The following products are offered to consumer and corporate segments:

• Bank Accounts: Islamic Current Accounts and Islamic Savings Accounts
• Term Deposits: Islamic Term Deposit (Wakala Investment) Accounts
• Personal & Business Banking: Auto Murabaha Finance and Ijarah Home Finance
• Trade Finance: Issuance of Islamic Letters of Credit, Import Murabaha Financing, and Export Musawamah Financing products

Yes, the Bank’s ISSC issues Fatwa Certificates for all the products approved by the ISSC. You can find the Fatwas of all products approved by the ISSC on our About Sirat page.

Habib Bank AG Zurich Sirat offers Islamic Current and Savings Accounts, as well as Term Deposit (Wakala Investment) Accounts, in AED and USD only.

You can apply for our Sirat Islamic Banking Accounts through any of the Habib Bank AG Zurich UAE branches.

You can find the Schedule of Charges here.

No, Habib Bank AG Zurich Sirat Islamic Savings Accounts are based on the concept of Qard, which does not earn any profit or return for depositors. Thus, Sirat Islamic Current and Savings Accounts do not generate income, as they are considered as Qard from depositors to the Bank and can be withdrawn on demand without advance notice.

In Islamic window operations, we will not open an account for any entity which is involved in Shariah non-compliant business activities such as:

• Trading or sale of alcohol, liquor, wine, and beer
• Trading or sale of cigarettes, tobacco, paan, dokha, khat, and hookah
• Trading or sale of meats considered prohibited such as pork, dogs, cats, monkeys, or any other prohibited animals
• Trading or sale of any items prohibited under Islamic Shariah
• Cinemas and music centres
• Gambling
• Tattoos
• Hoarding
• Usury-based lending

In Islamic finance, Qard refers to a contract of lending money by a lender to a borrower, where the borrower is obligated to return an equivalent replacement amount to the lender. Since the Quran forbids paying or receiving interest, interest-free Qard is the only permissible loan in Islamic finance.

Habib Bank AG Zurich Sirat offers Islamic Term Deposit products under the concept of Wakala. Wakala is a Shariah-compliant agency contract in which you, as a customer, can authorise the Wakil (the Bank) to invest funds in Shariah-approved activities to generate profits. The literal meaning of Wakala is an agency or a delegated authority where the Muwakkil (principal) appoints the Wakil (agent) to carry out a specific job on behalf of the Muwakkil.

Yes, it is mandatory to open an Islamic Current or Savings Account in the same currency in order to open an Islamic Term Deposit Account.

No, Islamic Deposits will only be used by the Bank in Shariah-approved activities.

Murabaha is the sale of goods as ordered by the buyer/customer, with a price consisting of cost-plus profit margin. In Islamic financing, the sale price under Murabaha is generally paid on a deferred installment payment basis. Islamic Banks have adopted this as a mode of financing which involves a request by the client to the Bank to purchase certain goods on their behalf. The Bank does this for a definite profit over the cost, which is agreed upon in advance.

The following are the rules governing a Murabaha transaction:

• The subject matter of the sale must exist at the time of the sale, therefore, anything that does not exist at the time of sale cannot be sold, and its non-existence renders the contract void
• The cost and profit should be known and declared by the seller
• The subject matter should be in the ownership, either actual or constructive, of the seller at the time of sale, and if the seller sells something that they have not acquired themselves, then the sale becomes void. Constructive ownership means that all rights and liabilities of the subject matter are transferred to the seller, including the risk of its destruction
• The sale must be instant and absolute and therefore, a sale attributed to a future date or contingent on a future event is void. For example, if ‘A’ tells ‘B’ on 1 January 2022 that he will sell his car on 1 February 2022 to ‘B’, the sale is void because it is scheduled for a future date
• The subject matter should be a property of value. Therefore, goods having no value cannot be sold or purchased
• The subject matter of the sale should not be intended for an un-Islamic purpose
• The subject matter of the sale must be specifically known and identified to the buyer. For example, if ‘A’, the owner of an apartment, tells ‘B’ that he will sell an apartment to ‘B’, the sale is void because the specific apartment to be sold is not identified to the buyer
• The delivery of the sold commodity to the buyer must be certain and should not depend on contingency or chance
• The certainty of the price is a necessary condition for the validity of the sale. If the price is uncertain, the sale is void
• The sale must be unconditional. A conditional sale is invalid unless the condition is recognized as part of the transaction according to the usage of trade

You can apply for Habib Bank AG Zurich Sirat Murabaha Auto Finance products through any of our branches in the UAE.

No, the Goods are not insured by the Bank. The original warranty or guarantee provided by the supplier remains valid.

Yes, in the Murabaha sale, the seller must disclose the cost as well as the profit to the buyer.

Murabaha profit can be calculated using any method, but once agreed upon and the agreement is signed, it cannot be changed.

Ijarah is a contract of lease. Ijarah is executed for an identified or proposed usufruct or service against a specified rental as consideration. In other words, Ijarah or leasing is the transfer of usufruct for a consideration, which is rent in the case of hiring assets or things, and a wage in the case of hiring persons.

You can apply for Habib Bank AG Zurich Sirat Ijarah Home Finance products through any of our branches in the UAE.

Under Sirat Ijarah Home Finance, the Bank will be the owner of the property. However, the Bank’s undertaking to sell will give the customer the right to buy the property at any time by giving the Sale/Exercise Notice.

Musawamah is a general and regular kind of sale in which the price of the commodity to be traded is bargained between the seller and the buyer without any reference to the price paid or cost incurred by the seller. Thus, it is different from Murabaha with respect to the pricing formula. Unlike Murabaha, the seller in Musawamah is not obliged to reveal his cost. Both parties negotiate the price. All other conditions relevant to Murabaha are valid for Musawamah as well. Musawamah can be used when the seller is not in a position to ascertain precisely the costs of the goods or commodities he is offering to sell.

Using the interest rate benchmark for determining profit in Islamic transactions does not render the transaction invalid. The nature of the transactions determines their validity. For example, Mr A sells wine at a 10% profit, while Mr B sells juice and uses the same profit rate as a benchmark. This does not render Mr B’s profit haram.

No, Islamic Banks accept deposits either on a profit-and-loss-sharing basis or as Qard (interest-free loan). These deposits are deployed in financing, trading, or investment activities using Shariah-compliant modes of finance. The bank passes on the profit earned from these activities to the depositors according to their respective agreements, which, therefore, is not interest (Riba).

Islamic Banks charge a late payment fee under customers’ commitment to donate in case of delayed instalment payments. Any such proceeds are used for charity, as the late payment fee cannot become a source of income for the Bank in any manner.

No, Habib Bank AG Zurich Sirat will not charge you any extra profit in case of a delay in payment. However, a late payment fee may be charged, which will be directed to charity.

Habib Bank AG Zurich Sirat invests in various Shariah-compliant avenues, including Islamic leases known as Ijarah, sale and purchase activities such as Murabaha and Musawamah, Shariah-compliant Sukuk, and Shariah-compliant Treasury Deposits/Certificates, among others. For example, Sirat offers Islamic Home Finance on an Ijarah basis and earns rental income from it. It also purchases vehicles based on customers’ requirements from dealers and sells them to customers, earning profit through Murabaha transactions.

Islamic Letters of Credit are opened by Habib Bank AG Zurich Sirat, upon the request of the customer, under the Shariah contracts of either Wakala or Kafala.

A Kafala contract is a guarantee used to provide assurance regarding performance or liabilities. In other words, Kafala helps mitigate adverse changes that could lead to uncertain outcomes in the underlying transaction. In the context of a Letter of Credit, if the customer does not require Murabaha import financing from Habib Bank AG Zurich Sirat, the Letters of Credit will be issued under the Kafala contract.