General Requirements for Murabahah Term Financing by IFB Providers in Ethiopia

Murabahah Term Financing is a financing granted for working capital and/or for acquisition of fixed business assets to be repaid within a specific period of time with profit. The financing is repaid in a lump sum on maturity, or in periodic installments (i.e. monthly, quarterly, semi-annually, or annually), depending on the nature of the business and its cash flow.

The Bank extends Short-Term Murabahah Financing, Medium-Term Murabahah Financing and Long-Term Murabahah Financing. Depending on the nature and cash flow of the business, the Bank may provide a maximum grace period of three months for short-term Murabahah financings, two years for medium term Murabahah financings, and three years for long-term Murabahah financings. Grace period is a period during which the trade partner is relieved from principal and/or profit margin/markup repayments.

Types and Unique Features of Murabahah Term Financing

Short-Term Financing	Is a loan extended by the Bank to financing the working capital needs and/or to address other short-term financial constraints of the trade partner's business. Short-Term Financing could be granted up to a maximum of three years.
Medium-Term Financing	Is a financing which has a maturity period longer than three years, but not exceeding a maximum period of seven years, with periodic installments. The Bank may extend Medium for projects/businesses whose nature justify, or require, such periods of time for implementation and repayment of the financing. This kind of Financing are intended for the financing of the acquisition of fixed business assets (leased land, buildings, machinery, equipment, public transport vehicles, trucks and trailers, etc
Long-Term Financing,	on the other hand, is a financing which has a maturity period longer than seven years but not exceeding a maximum period of 15 years, with periodic installments. This kind of Financing may extended for projects/businesses whose nature justify, or require, such periods of time for implementation and repayment of the financing. This kind of Financing are intended for the financing of the acquisition of fixed business assets (leased land, buildings, machinery, equipment, public transport vehicles, trucks and trailers, etc

Murabahah Financing Eligibility Criteria

Murabahah Financing

Eligibility Criteria

The applicant(s) for short term Murabahah Financing shall present business plan, cash flow statements and other supporting documents which justify the existence of readily available market and the repayment capacity of the business at least for the financing period.
The applicant for a Medium- or a Long-Term Murabahah Financing must be able to submit a detailed study of the capital investment or a business plan made by authorized professionals, which justify the existence of readily available market and the repayment capacity of the business at least for the financing period.
The applicant(s) shall present a pro-forma invoice from known suppliers, and
The applicant(s) may present acceptable collateral to secure the financing.

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Types of Murabaha Mode of Financing:

1. Murabahah Term Financing,
2. Murabahah Revolving financing facility,
3. Murabahah Import Letter of Credit Facility,
4. Murabahah Pre-shipment Export,
5. Murabahah Post-shipment Export Facilities, and
6. Murabahah Import Letter of Credit Settlement facilities

Tuesday, April 23, 2019