Kingdom by Al Baraka Bank in London. However, the model has been
modified and expanded to include in it the two basic foundations of the
true spirit of removing riba from financing transactions: thecommodity
indexation ruleand themark-to-market rule.
The process consists of three major stages:
A.Formulating the riba-free Shari’aa-based agreement
B.Documenting the RF financing for compliance with U.S. laws and bank-
ing regulations by transforming the agreement into a U.S. government–
sanctioned and standardized financing (mortgage) note and contract
C.Signing theLARIBA Agreement, which explains the prohibition of riba,
the terms in the standard U.S. contract, and the process used to mark the
property to the market so the transaction is Shari’aa based
A. Formulating the Financing According to Shari’aa
Fatwa There are a number of edicts (fatwa) issued by some of the highest-
placed scholars in RF banking and financing (detailed in Chapter 9). The
edict used by the LARIBA model is based on that developed for use by Al
Baraka Bank of London. In this model, the scholars divided the property
rights of an item into two rights: The first is the right to own title of the prop-
erty (milk ul raqabah), and the second is the right to use/operate the prop-
erty—such as the use of a home, a car, or a business (haq al manfa’aa,
meaning usufruct).
The procedure used by the model goes through the following
stipulations:
1.The model allowed the RF finance institution or the RF bank to assign
the buyer to act as an agent (wakeel) of the bank and to proceed to
negotiate the purchase price and other conditions on behalf of the RF
bank.
2.The RF bank agrees to form a conceptual partnership with client to buy
the property together, with the following stipulations: Registering the
title of the item to be financed (home title, for example) in the partner’s
name, based on trust, from the inception of the contract is permissible
under Shari’aa. Registering the property’s title in this manner does not
contradict the agreed-upon partnership, especially as the partner’s abil-
ity to sell the home is restricted until full ownership of the property is
established. In this regard, the scholars took into consideration the fact
that this registration of title is a form of documentation insured by the
officially established lien on the property, according to the conditions
agreed upon with the partner.260 THE ART OF ISLAMIC BANKING AND FINANCE