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Submitted to

Pro.Kashif Ali

Hammad, Nazir, Umer
Mubarik, Adnan

Meezan Tijarah is a Finished Goods financing facility for Customers to sell Finished Goods on Credit basis.
The facility will enable the Customers to sell their Finished Goods stock, meet their working capital
requirements and enjoy the benefits of Cash sales.

Under this concept the Bank will purchase the finished goods of the Customers and will appoint the
Customer as its agent to sell the same goods in the market generally on Credit basis.

It is necessary for the validity of Finished Goods transaction that the price is fixed with the consent of the
parties and that the necessary specification of the required items is fully settled between them. The Finished
Goods price is ideally paid on Spot with immediate delivery of Goods.

Finished Goods as a mode of Financing

Finished Goods Agreement can be used for providing financing facility in transactions where final /
transformed goods are available for sale. It is just like a normal sale purchase transaction where a seller (the
Customer) sells a good to a buyer (the Bank) on cash basis. The Bank then appoints the Customer as its
Agent to sell the same goods to a third party.

Finished Goods product can be easily utilized to facilitate payment of wages, overheads etc. in addition to
raw materials. Hence, this product provides flexibility for the benefit of the Customers who deal with ready-
to-sell items and have always demanded some facility to finance overheads, which may constitute a
substantial portion of the production cost. It is also to be clarified that amount paid out as Finished Goods
price to the Customer can be used by him anywhere he deems fit. (source: Meezan Bank website)

Proposed Process Flow

(Some of the items have been added to explain it fully)
1. The Customer will approach first to the bank, for Tijarah financing facility.
2. The bank will conduct an investigation into the evaluation procedure in order satisfy themselves
about the nature of client and related possible risks in the products and market.
3. A Master Finished Goods Agreement or an MOU will then be signed between the bank and
customer upon having understood the process and general terms and conditions of this tijarah
4. The Customer will furnish a written offer to bank to sell a specific stock of finished goods
mentioning complete description of goods, quantity, delivery date and finished goods price etc.
5. Bank will accept the written offer and conduct physical inspection to take physical delivery of
6. Physical inspection will be conducted by Banks representative. The inspecting officer must
ensure that banks goods will be separately identified by separate placement/stacking of bank
goods and as per agreed specification.
7. Bank will accept the delivery and execute a goods receiving note.
8. The Customer must be educated that banks goods must be separately identified till they are sold.
9. Bank will pay the Tijarah price to the customer.
10. The Customer and Bank will enter into an agency agreement.
11. The agent will be required to sell the goods according to the terms agreed between the Bank and
the Customer.
12. The Agent will be entitled to a fixed agency Fee for providing the services.
13. Bank through Notice shall authorize the customer to sell the goods as Banks undisclosed agent
at the price mentioned in the notice.
14. Customer will also give an independent corporate guarantee for the payment obligations of the
buyer of goods.
15. Customer shall provide a confirmation of sale of goods for each transaction along with the copy
of sale evidence.
16. If payment from ultimate buyer is received in parts then Tijarah finance would be adjusted in
parts and applicable proportionate incentive fee will be given to the customer from these
17. Agent will pass-on the proceeds (Net of applicable Agency Fee) to bank.
18. In case the buyer defaults (delays in payment) the Agent shall pay the amount to Bank as per the
independent Corporate Guarantee submitted earlier by the customer.

Case Background
M/s PKN Electroplating Chemicals is a family owned Pvt. Ltd. concern. Companys principal activity is
trading and import of Nickel Concentrated Chemicals, polishing material and industrial chemicals for trading
& industrial use. They act as sole distributor of M/s INCO Europe Ltd., which is worldwide largest producer
of Nickel Metal and its salts. In order to meet high demand, the client imports above-mentioned items from
nearly all parts of the world. They sell their products on cash and credit. Suggest a proper process Flow to
execute Tijarah Transactions for Nickel Plates/Sheets, Nicle Sulphate, Nicle Chloride, Boric Acid, Chromic
Acid, Sodium Cyanide, and other chemicals etc. Following are the details of this transaction:

1. Tijarah Financing Amount: PKR 10 million

2. Profit Rate: 9.5%
3. Tenure: 9 months
4. Payment: at maturity
5. Contract Date: January 01, 2015
6. Disbursement Date: January 10, 2015
7. Total cycle for Tijarah transaction: 270
8. Time period for delivery of goods by customer: 240
9. Credit period: 30 days
10. Agency fees: PKR 10,000

Repayment schedule:
The case requires single payment at Maturity date: of October 10, 2015
The payment by the bank on January 10, 2015 is PKR 10 million
Profit amount is PKR 702,740/- (which makes @ 9.5% p.a. and on 240/365 days)
Net amount payable to the bank comes to 10,702,740 + 10,000 = PKR. 10,712,740/=