Two of the most commonly used Islamic financing solutions offered by Islamic banks today are Diminishing Musharaka and Ijarah which are ideal for expansion of businesses, BMR requirements or other medium to long term financing requirements.
Diminishing Musharaka is most commonly used for the financing of fixed assets, plants and machinery, homes and automobiles. Under this structure, Gulf African Bank and the customer participate in the joint ownership of an asset. The asset is divided into a number of units and the customer periodically purchases these units from the bank over a specified period. The customer also pays rent for using the bank's portion of the asset. Over time, the customer purchases all units owned by the bank, making him or her sole owner of the asset or the commercial enterprise.
Ijarah is commonly used for long and medium term fixed asset financing, project financing and for retail products such as homes and automobiles. This mode of financing is based on the bank allowing the customer to use tangible assets, such as property, machinery, etc, on rental for an agreed period of time. The concept is similar to "leasing". However there are some specific prohibitions which render conventional leasing to be forbidden under Shari'ah.