There are two ways in which Islamic banking works, and these are very important to understand. The first one is very simple, and this procedure includes the bank to purchase a good or commodity that borrower needs and swap it to the borrower. All of the processes are done on regular installments; in such way, banks earn a profit based on the profit made by the borrower. Thus it ruled out the interest for both parties. The second one is Bai Salam (Post Delivery Sale), this includes an edition step like in the first process. The bank purchases a certain good or commodity in advance and barters it immediately or after a specific time on delayed bases and receive cash immediately.
You need to understand the eligibility for businesses to acquire through Islamic Business Loan schemes. Following are the essential points:
- The business must be registered and actively doing trade over six mounts to a year. The business should not fall under these Islamic sharia prohibited categories e.g., gambling, drugs, weapons, chemical production, pornography, etc. You need to promote Ethical Business practices because Islamic law prohibits any form of transaction based on gambling, banking, and assumption. The Islamic banking also complies with these laws and promote transparency and complete disclosure of the contract so both lender and borrower harbor no misconception about the trade.
- As long as the business fall outside these non-permissible categories, they can apply for a sharia equity fund. The latter one contains ethical financial transactions. It is often possible that some businesses clear the first stage of screening; however, at the second stage, they proved to be unsuitable for equity funds based on their financial transaction. Often those companies pass these two stages of screening tests that sustain their business by depending on their income.
How to quicken the application process for ex-pats?
Keep one thing in your mind that most of the banks in the UAE do not offer loans to ex-pats as they possess high risk. For that, you must have a good credit history because most of the banks can only judge your credibility through this formula. Therefore, the banks require borrowers to provide proof of their creditworthiness, and it contains bank statements for up to 3 years. Besides this, you can also show your salary, employment letter, and tax return history to convince a unique and special lender.
Another important point is to provide complete documentation and proof of legal residence address in Dubai. You can also mention your current residence address to convenience a relationship manager. These requirements are also applied to open a foreign currency account as well.
Three important points regarding UAE banking
The rise of the investment banking in Dubai has made UAE a powerhouse of the economy for local investors as well as for international traders. As we all know, the UAE region has become a trading bridge between Europe and Asia, banking services have played a pivotal role in making UAE into a stable economy. UAE is a big country from a business point of view and includes seven states from which Abu Dhabi and Dubai possessing good business. Besides this, you see an important form of natural resources in the form of oil reserves, which is another important factor in the development of the region. We will focus solely on the list of all the banks in the UAE, which are working in a highly professional manner while providing some useful services. From the overall list of all the banks in UAE, you need to understand the private banking and public sector banking, which are running on parallel lines.
We first categorize the baking system according to their types because this sector is like the backbone of the economy of Dubai. Have a look at the following two major types of banking sector working in UAE:
- First of all, are Commercial banks that are running in other parts of the world. Most of the traditional or we can say that conventional banks are working on the concept of interest rate because this factor is the only reason to generate profit. Banks on the one hand provide services to their account holders and, in return, demands some changes in the form of the interest rate. Although it is pretty tricky sometimes to manage interest rates if it is high, this is a profitable business as we can see numerous private banking solutions.
- Keep one thing in your mind that list of all the banks working in UAE cannot be completed without the counting of Islamic banks, which are working at 180 angles from commercial banks. We see that retailer banks that are the traditional banks are available everywhere in work, but Islamic banks can be found only in specific regions like Dubai. The rest of the world is working with interest rate systems for all kinds of services, while on the other hand, UAE locals can enjoy interest-free banking using sharia-compliant services.
Another point that is common between these two banking systems is the presence of a private banking relationship manager who can guide you with maximum solutions. Keep one thing in mind that your relationship manager can help you to manage a proper deal a settlement for your interest rate on a priority-based service. In case you don’t have any services of a manager, a bank, or any other service provider may charge you with more interest rates. The choice of a bank for the best prices can be evaluated by making a comparison between two different banks.
Keep one thing in mind that most of the banks will demand some additional things like you need to give a written and documented proof of mortgage affordability. For best offers and services I would recommend you approach Mashreq Bank. You can visit the official site of the bank for the latest updates.