Understanding Islamic Finance - Doha Academy of Tertiary Studies

xxxxxxxxx xxxxxxx354 Understanding Islamic Finance2. The bank agrees to perform the work after conducting a cost versus benefit analysis, anda Ju‘alah contract is entered into between the bank and the customer.3. The bank finds a worker with the expertise to perform such uncertain work on his behalfand a Parallel Ju‘alah contract is made with him.4. The work is completed by the worker and an agreed wage or reward is paid to him bythe bank.5. The bank collects its reward from the customer with whom the initial Ju‘alah contracthad been entered into.Similarly, banks can take services from others on the basis of Ju‘alah. Recovery ofnonperforming debts is one such example.2Ju´alah contractWorkerCustomer3ParallelJu´alahcontract4Accomplishment ofwork for an agreedentitlement5Receiving ofreward oncompletionof work1Negotiation to perform anuncertain work in specifiedtimeISLAMICBANKFigure 13.1The Ju‘alah process13.4.6 Some Islamic Financial Products Based on Ju‘alahCollection of DebtsJu‘alah contracts can be used for collecting due debts where the entitlement to the reward isrelated to realization of all or part of the debt. For example, a Ju‘alah contract for recoveryof debt is entered into between “A Bank” and “B Ltd”. The contract provides for the reward