Abu Dhabi Islamic Bank: Essay On Products, Services, And Processes. (70 Characters)

Type of Loan

Islamic Process

Conventional Bank Process

Car Finance

This process of ADIB is seen to follow Islamic financing structure which requires the intermediaries to buy the property with free and clear title as per Murabaha mechanism. In case an individual applies for an auto loan under this process, the loan will be non-interest bearing in nature which is considered to be free from any riba (or excess). The bank will buy the automobile from a client for a predetermined profit over the cost item and sells it back to the client based on instalments. Due to this the bank charges a set fees rather than riba or interest. The entire process is followed in two stages. In this case, the purchaser becomes the owner of the commodity and becomes liable for its full price (“Cost plus profit”). An eligible applicant must be 21 years and must have a minimum salary of AED 5000. The length of the confirmed service also needs to be at least 6 months.  The important documents needed includes “?Original and copy of valid passport (with valid residence visa for expatriates)”, “original and copy of valid Emirates ID” and statement of account for the last 3 months. In addition to this, the bank offers a repayment option of up to 60 months, “free ADIB VISA Cashback Card for the first year” and “20% down payment option”. In order to apply for the Murabaha, “murabaha letter of credit is issued for a beneficiary on behalf of the applicant” (Adib.ae, 2018). The bank agrees to the issuing the letter of credit and then agrees to the payment of the amount which follows terms described in the letter of credit. In case of the murabaha agreement ADIB is discerned to sell the contract (Chelhi et al., 2017).

The important difference in the conventional loan process is seen in terms of the contract structure. Murabaha is recognized as a sale contract, the conventional loan process on the other hand is based on interest based lending agreement and transaction (Majd Bakir, 2014).  The conventional process of banking is based on credit score, ratio of debt to income, size of the loan and the down payment. The subject matter in the conventional banking is considered with the amount of money while the Murabaha takes into account the commodity aspect. The collateral is put up before processing of the loan for conventional loan. The collateral in Murabaha may be posted after purchasing of the commodity. The cost transparency is not a concern in case of a conventional loan (DMV.ORG, 2018). In the conventional banking system, the bank is considered to sell the product for profit which discloses both the “original cost and the profit to the buyer.” The “advancing loans” and credit interest is charged on the interest as per the pure interest based transactions.

Home Finance

This process has discussed on benefit of home financing through Istisna. Based on this contract the client will ask the bank for construction of the unit. This will be able to meet the different types of the specifications given by the bank to meet the desire of the client. The client will then pay the price in instalments. In this case the borrower needs to provide a “Valid salary certificate”, income verification, “Passport copy along with valid resident visa for expats”, Khulaset Al Kaid and Bank Statement. The minimum salary requirement for the applicant is identified with AED 10,000 for UAE Nationals and AED 15,000 for Expats. The age criteria requirement is discerned to be 21 years. Some of the other document required is considered with ? “Verified employment, Valid for UAE nationals & residents and Joint applications accepted”. ??? The bank provides financing of up to “AED 20 million for UAE Nationals & AED 15 Million for expatriates?” this process is based on Istisna. In addition to this it provides “Financing of up to 80% of property value” and partial settlement of 30% outstanding annually (Adib.ae, 2018). 

A conventional home loan applicant needs to present proof of income, identity and residence. The borrowing limit will be based on the individual’s income and interest rate will be charged as per the total amount loan borrowed. The conventional borrowing will include tax concessions based on IT returns. The conventional loan will also include the option for instalment payment however, the borrower does not need to produce “Istisna letter of credit is issued for a beneficiary on behalf of the applicant” and Khulaset Al Kaid (Majd Bakir, 2014). 

Boat Finance

The financing of boat is considered to be most ideal with the application of Ijara Finance. This lease contract allows leasing and using the asset for a specific period after it is fully owned. The company provides the financing option “amount up to AED 1 million”. The eligible applicant needs to have a minimum salary of AED 8000, 21 years old and 6 months of confirmed service (Adib.ae, 2018). 

The boat loan needs to be approved and signed with necessary documents for loan.  In conventional banking the applicant is not guaranteed of the full ownership of the asset. The conventional banks do not allow “cash out” refinancing, except for non-conforming loan program. The applicant needs to fill “Boat Loan Application Form”. This includes details such as “Current Income and Current Loan Payments”. The boat information further includes Manufacturer, Model year and purchase price.

Travel Finance

The process of travel finance is considered to be applicable with Mudarabah mechanism. The commercial sectors will be able to provide the provide the finance for customers with required expertise.  The restricted Mudarabah will ensure capital provider imposes certain conditions on the entrepreneurs for securing the capital.  ADIB is able to provide “Finance amount up to AED 250,000” and charging “1% Processing Fees (Min AED 500 and Max AED 2,500)” (Adib.ae, 2018). 

The individuals have the option to exercise the best loan policy as per the type of travel loan applied for. The documents required includes Address proof, Identity proof and Passport size photograph (DMV.ORG, 2018).

Personal Finance

The process of ADIB is depicted with Qard al-hasan, which is an “interest-free loan (fungible, marketable wealth)”. This is considered to be extended by the borrower based on benevolence. This is seen as a “gratuitous loan extension to needy people for a specified period of time”. The bank provides “First instalment payment grace period up to 90 days”, “Two free instalments postponements every year” and “Takaful cover protection with competitive rates?”. The individual must have a minimum salary of AED 8000 per month and UAE or expatriate with a minimum age of 21 years (Adib.ae, 2018).  .

The conventional banking process involves interest on the amount of loan lent by the borrower. The documents requirement includes “bank statements, credit card information and loans records” (Majd Bakir, 2014). 

Debt Settlement

The "Musharkah Financing" ideal as the client will be able to request for finance by anticipating the bank’s shares anticipated with profits and losses of the project as per the client. The borrower needs to present liability certificate, bank account statement for the last 3 months and original valid emirates ID (Adib.ae, 2018).   

Conventional banks offer debt consolidation loans which requires the borrower to pay the applicable rate of interest based on amount of loan borrowed. The document requirement includes bank statements, credit card information and loans records (DMV.ORG, 2018).