INTEREST - FREE VENTURE

INTRODUCTION

Islam puts major emphasis on achieving social justice among the members of a society. Any kind of exploitation of the weaker by the stronger will be detrimental in brigning about a society as envisaged by the Holy Quran. Economic exploitation defenitely is the most serious of any such social evil.

Interest - ridden economy has always been a major source of exploitation for many centuries. Whether it is a poor individual or an under developed nation, the misery created by interest - ridden financial system worldwide is devastating. Many idividuals, business entities and nations have gone bankrupt by becoming the victim of undue interest burden. We can draw many examples of such tragedies from our own neighborhood, both personal and national.

In contrast to such an exploitative situation, the economic system of Islam offers an equitable, yet viable alternative. This alternative system has been tried successfully in various forms in different parts of the world - both Muslim as well as non-Muslim countries - for the last several years. According to a recent report, the interest free banking system has grown at an annual rate of 15% compared to a 6% growth achieved by the conventional banking system, during the last decade.

 

OBJECTIVE

The objective of this proposed venture is, therefore, to introduce interest - free non-exploitative financial system as per Islamic principles. Accordingly, the venture will open a venue for people, who want to invest thier savings for a return other than interest. Secondly it will function also as a source of fund for businessmen to be availed on a profit-sharing basis.

As a secondary objective, the venture will also mobilise fund for the needy on an interest free basis, meant for personal rather than business requirements.

 

ENTITIES

The venture envisages setting up a public limited company for achieving the primary objectives of mobilising the savings and providing fund for business based on Islamic principles.

The secondary objective of meeting the requirements of the under-privlieged for personal needs, other than business, will be met through a Charitable Trust, to be formated and managed separately.

CONCEPT

The concept that will be followed by the Company will be:

The lender-borrower relationship will be replaced by the concept of profit and loss sharing between enterprenuer and capital provider.

PREMISES

The company will strive to function under the following premises:

- Full transparency and compliance with tax and other government regulations.

- Special approval system and guidelines will be established for investing in the business of any Directors or in employing any relatives of the Directors.

 

LOCATION

The area of operations of the Company initially, will cover the state of Kerala. The registered office will be situated in Cochin and branches in Calicut and/or Malappuram.

MANAGEMENT

The company will be managed by a Board of Directors.

A committee of 'ULAMAS' will approve all the 'products' offered by the company on its sanction under 'Sharia'

 

SOURCES OF FUND

The major source of fund for the public limited company is identified as follows:

- Share Capital

- Deposits for Safe-keeping

- Short term investment for specific business.

The Charitable Trust will draw its corpus from the following:

- Zakath payable by the public limited company.

- Any other Zakat/Sadaka contributions from philanthropic individuals or institutions, on a voluantary basis.

SIZE

The initial size of the fund of the company is targeted to be Rs. 5 crores

 

DEPLOYMENT OF FUNDS

The funds of the Company will be deployed in profitable ventures, mainly in the following manner:

- Direct investment in business

- Participation in Venture Capital fund, with a dis-investment plan of 5 to 10 years.

- Working capital

- Leasing

- Mutual Fund

 

INVESTMENT CRITERIA

The following criterea and priorities will be used in deploying the funds of the company.

- Low risk, low return - Target return 5% to 7%

- Small and medium enterprises

- A certain portion in prime, income yielding properties.

- Objective appraisal of the business as well as the investee will be done prior to participation.

- Close montioring and participation in the management of the investee entities.

- Initially, all final approvals will be done at the Board/Chief Executive level.

 

OTHER ACTIVITIES

The company will also undertake at appropriate time, non-fund based activities, including the following:

- Management Consultancy and investment advisory services.

- Foreign Echange dealings

- Research and development works, to identify new 'products' and new area of opeations

 

 

 

THE CHARITABLE TRUST

The Charitable Trust will also be managed by the Board of Directos of the company. Atleast 50% of the fund distributed by the Trust will be under re-payment (without any interest or profit) scheme, so that the fund available can be recycled.

 

OTHER INFORMATION

The concept and the nature of the venture has been discussed, reviewed and finalised through meetings and interactive sessions conducted during the last 20 months. The services of the capable individual including experienced businessmen, Chartered Accountants and bankers were obtained for this purpose.

A formal project report is prepared by Dr. M I Bagsiraj, MA Phd, Bangalore who has been associated with many Islamic banking institutions in India for several years.

The proposed public limeted company is under final stage of registration. An amount of Rs 4.5 lacs has already been spent towards the venture as company Registration (Rs 2.5 lacs), Fee for Projects reports (Rs 1 lac), printing and stationary, travel, salary and other administrative expenses (Rs 1 lac).

June 25, 2000

The Board of Directors

Alternative Investment and Credits Limited.

Madhyamam Building

Arangath Road, Pullepady

Cochin - 682018

 

Dear Sirs,

I am interested in becoming a promoter/share holder of the company. I wish to take _______________________ shares of Rs. 10/- each with a total share value of Rs _______________ (Rupees)

Enclosed is Cheque No./DD No _______________ dt. ___________ for

Rs __________ (Rupees _________________________________) drawn on _______________ Bank, Cochin towards my participation in the share capital.

Kindly acknowledge receipt.

 

Yours sincerely,

( )

 

 

PARTICULARS

Name :

Permanent Address :

 

Address for Communication :

 

 

Telephone No. (Home) ____________________, Office _______________________

Fax No ________________________________, Email _______________________

Income Tax Permanent Account No. _______________________________________

Resident or Non-Resident _______________________________________________