Interest free banking

1.    Mudaraba Fixed Time Deposit Account

The Interest-free Deposit Account based on Mudaraba structure opened & maintained by the Customer with the Bank for a specified term;

2.    Wadi’ah Saving Accounts

  The Bank shall apply Wadi‟ah Yad Dhamanah Shari‟ah Concept for this saving account. The Bank shall, however, reserves the right to use any other Concept at any time or from time to time with prior notice.  The Bank shall reserve the right to utilize or invest the funds in any way it deems fit. Such investment avenue shall however be in line with the Shari‟ah requirements.

Under the Wadi‟ah Yad Dhamanah Savings Concept, the Customer(s) shall give his/her consent to the Bank to deal with the whole or any part of any monies standing to the credit of his/her Account(s) in the manner that the Bank shall deem fit, but subject to all regulatory and Shari‟ah requirements.

 The Bank shall guarantee principal payment of the whole or a part thereof standing to the credit of the Customer(s)‟ account(s) when demanded.

  No benefit is attached to this Account. All profits generated from the use of the funds belong to the Bank. However, the Bank, at its discretion, can provide gift (monetary or in kind) to holders of such account as token of appreciation taking into account, among others, the amount and period for which the deposit remain with the Bank.

 Such Hibah is decided on voluntary basis, if declared, will be declared at the Bank‟s prevailing declared rate and calculated on a minimum monthly balance basis. The Bank may use other method of calculation as may be determined by the Bank at its absolute discretion from time to time with prior notice.

2.1           Special Wadi’ah Accounts

Youth Wadi’ah saving account   It is a type of Wadi‟ah saving account in which a guardian/ tutor opens an account for a minor (a person less than 18 years of age) by fulfilling the necessary documents.

 Key features of Youth Wadi’ah Saving Account

  1. a) The minimum balance to open this Account is Birr 25;
  2. b) Whenever the youth reaches 18 years of age the account may be changed to the normal Wadi‟ah saving account; and
  3. c) All profits generated from the use of the funds belong to the Bank.However, the Bank, at its discretion, can provide gift (monetary or in kind) to holders of such account as token of appreciation taking into account, among others, the amount and period for which the deposit remain with the Bank.

2.2            Al-Nissa Wadi’ah Saving account

This is a unique type of Wadi‟ah saving account designed specifically to meet the financial needs of women & Tailored to help them achieve their savings goals and financial independence.

  It is a customized Wadi‟ah saving account that suits women of all walks of life who choose to save for a long period of time and earn the benefits attached to this product.

 This account has been specially designed in recognition of the outstanding contribution made by women in family and society & 17 contains exclusive benefits only for women.

 Key features of Al Nissa account

  1. The minimum balance to open this Account is Birr 100; b) Free service charge for fund Transfers With in the Bank or Low Transaction Fee; and c) It contains special visa/ATM card so that women can get various services like shopping with a discount.

2.3           Hajj Wadi’ah Saving Account

 The Hajj Account is a special type of Wadi‟ah Saving Account designed specifically to help customers realize their desire of performing Hajj.

 As many people cannot arrange the required amount of money at a time to perform Hajj due to various prevailing socio-economic situations, this account, therefore, introduced “Hajj Savings Scheme” so that customer may build-up savings through “Wadi‟ah Hajj Savings Account”

 Key Features of Hajj Wadi’ah Saving Account

 Hajj Wadi‟ah Savings Account can be opened in the name of the individual/s only; the minimum balance to open this account is Birr 500; c) Withdrawals from this account is not encouraged in order to be eligible to attached benefits from the product;

 A customer, for some reasons, is unable to perform Hajj and wants to withdraw the deposited money; he shall be allowed to do so without any limit;

 A customer, to be fully eligible to any benefits outlined in this procedure manual or from other benefits the Bank sets at its discretion from time to time, he/she shall have at least 50% of the total amount required to perform Hajj in that specific year in his/her account for the past one year; and

 The Bank may at its own discretion may give Hibah (monetary or in kind) for the customers.

3.    Mudaraba Saving Account

The Bank shall apply the Mudaraba Shari‟ah Concept for this savings account.

The customer will enter into a Mudaraba agreement with the Bank 18 serving as his Mudarib (entrepreneur) to allow the utilization of his deposit to be invested in Shari‟ah-compliant transactions whereby the investment decisions will be at the full discretion of the bank, but subject to regulatory, Shari‟ah requirements and SAC rulings. The customer and the bank will then share the profit (if any) from the investments made by the bank based on a pre-agreed Profit Sharing Ratio.

Mudaraba saving accounts will be considered as Unrestricted Investment Accounts (URIA). In case of URIA, the account holders authorize the Bank to invest the funds in a manner which the Bank deems appropriate without laying down any restrictions as to where, how and for what purpose the funds shall be invested.

The Bank shall use Profit Equalization Reserve (PER) for all Mudaraba based products under this account.

The profit calculation is based on the lowest monthly balance in the account provided that the balance of the account does not fall below the minimum balance, as agreed between the parties, at any day of the month.

Account that short fall of the minimum deposit requirement, on Profit Payment period, shall not be eligible for profit sharing.

All the funds for investment are collected in a pool of funds which will be used to invest in profit oriented Shari‟ah-compliant financing and investments. Both the Rab al Mal and the Mudarib will agree to a PSR prior to the start of the savings.

4.    Qard Current Account

 The Bank shall accept the sum of money deposited and any sums of moneys to be subsequently deposited into the account, which shall be operated on the Qard Concept. The Bank shall reserve the right to use any other Concept at any time or from time to time with prior notice.

 A Qard is the transfer of ownership in tangible wealth (money), from the customer to the Bank, and it is binding on the Bank to return equal wealth (money) to the customer on demand. It shall allow account holders ready access to their money placed with the Bank.

 The account holder shall authorize the Bank to use his/ her funds at the Bank’s own risk, in any Shari‟ah compliant investment or financing transaction, without expecting a share in the resulting profit. The Bank, on its part, will guarantee to the account holder that his/her funds will be available on demand and in full mount, Irrespective of the results of the Bank’s investing or financing activities.

  The Customer(s), thus, shall be deemed to have given his/her/their consent to the Bank to deal with the whole or any part of any monies standing to the credit of the Account(s).

 Transaction charges shall be applicable, as to be determined from time to time, in relation to the operation of this account.  Customer can give standing instructions.

5.    Un-Restricted Mudaraba Fixed (Time) Deposit

 The Bank shall accept the sum of money invested in this General Investment Account based on the Mudaraba Concept and the Customer(s) shall give his/her consent to the Bank to deal with the whole or any part of the monies standing to the credit of the Account(s) in the Shari‟ah compliant manner that the Bank deems fit, but subject to regulatory and Shari‟ah requirements.

The customer shall sign on the fixed time deposit contract which shall be signed and approved by the Branch Manager/The Customer Service Manager on behalf of the Bank. With regard to deposit duration there are three options:

  1. a) Short-Term Mudaraba Fixed time deposit The Short-Term Mudaraba Fixed time deposit shall have investment tenure of up to one year
  2. b) Medium-Term Mudaraba Fixed time deposit The Medium-Term Mudaraba Fixed time deposit shall have investment tenure of between one and three years
  3. c) Long-Term Mudaraba Fixed time deposit account

 The Long-Term Mudaraba Fixed time deposit shall have investment tenure of above three years

6.    Restricted Mudaraba Fixed (Time) Deposit.

The Bank shall apply all the provisions set for Un-Restricted Mudaraba Fixed Deposit except:  The Customer(s) shall specify or intervene as to which particular sector of financing or investment activities that the Bank should concentrate in.

 This account type will be considered as a restricted investment account   which is related to a specified project in which the investor has the choice to invest directly in a preferred project carried out by the bank. This account is usually directed towards larger investors and institutions.

 The minimum amount required to have such investment Account shall be 5,000,000 (Five Million) and Birr 1,000,000 (One Million) for short-term and long-term investments respectively. The Bank shall revise the threshold, as required.

7.    Mudaraba Hybrid Account

Is a type of account which has a combined feature of both Mudaraba saving and Qard current accounts. The account to be transacted using cheques shall be opened to Edir, Equib, cooperatives, trade unions and other communal associations.

Key features of Mudaraba Hybrid Account

  1. a) The minimum balance to open this Account is Birr 10,000;
  2. b) One partner (the customer) provides the funds while the other( the bank) provides expertise and management;
  3. c) Any profit earned is shared between both of them on a pre-agreed ratio, while loss is entirely borne by the provider of the capital ;
  4. d) Cheque book facility is available to provide ease of withdrawal;
  5. e) The total number of cheque withdrawal to be made per month shall not exceed six cheques. In case of its occurrence the customer shall be charged Birr 20 per cheque;
  6. f) No debit card shall be issued against such account; and
  7. g) All other rules and regulations of Qard current account shall also apply to this account.

8.    Non-Resident Foreign Currency Accounts

 All Non-Resident accounts can be operated by check or any other prearranged agreement with the client.

 All cheques to be used by account holders of such accounts should distinctively be marked with the type of the FCY account it 24 represents

  1. Non-Resident-Foreign Currency Account (NRTFCY):

 an account maintained in foreign currency by the debit of which funds can be transferred abroad without the necessity of obtaining foreign exchange permit and paying exchange commission to NBE.

  1. b) Non-Resident-Transferable Birr account (NRT): means an account maintained in Birr by the debit of which funds can be transferred abroad in foreign exchange without the necessity of obtaining foreign exchange permit and paying exchange commission to NBE.
  2. c) Non-Resident-Non-Transferable Birr account (NRNT): means an account maintained in Birr by the debit of which funds cannot be transferred abroad in foreign exchange without obtaining foreign exchange permit. The purpose of this account is only to cover local expenses of the non-resident account holder. 2) Foreign-Exchange-Retention accounts “Foreign Exchange Retention Accounts” is a foreign currency accounts maintained by eligible exporters of goods and service and recipients of inward remittances

9. Diaspora Accounts

It is an account designed specifically for Ethiopians and foreign Nationals of Ethiopian origin who wishes to open foreign-currency accounts. Such accounts can jointly be opened by two or more eligible depositors. Non – Resident Diaspora Accounts may be of the following types.

  1. a) Fixed (Time) Deposit Account;
  2. b) Demand Deposit Account; or
  3. c) Saving Accounts (NonRepatriate)

Types of IFB Foreign Currency Accounts in Omo Bank

The following interest free foreign currency deposit and investment accounts are available for those legal and natural personalities that fulfill the eligibility and documentary requirements, as set in this same procedure manual.

9.1.          Diaspora Wadi’ah Saving Account

All the provisions set for Wadi‟ah Saving Accounts in LCY shall also apply to this Saving Account except:

  1. a) It is a non-repatriate Birr saving account that can be used for local payments only;
  2. b) The minimum balance to open this account is USD 100.00 (One hundred US Dollars only) or its equivalent in any of the eligible currencies;
  3. c) The option of a passbook or statement may be offered to the Customer(s) when a Wadi‟ah Saving Account is opened; and
  4. d) The Branch Manager has the discretion to open a “zero balance” account. However, the Branch shall close the Account, if such minimum deposit requirement is not forthcoming, within one month.

9.2.          Diaspora Mudaraba Saving Account

All the provisions set for Mudaraba Saving Accounts in LCY shall also apply to this Saving Account except:

It is a non-repatriate Birr saving account that can be used for local payments only;

 The minimum balance to open this account is USD 100.00 (One hundred US Dollars only) or its equivalent in any of the eligible currencies;

 The option of a passbook or statement may be offered to the Customer(s) when a Mudaraba Saving Account is opened; and

The Branch Manager has the discretion to open a “zero balance” account. However, the Branch shall close the Account, if such minimum deposit requirement is not forthcoming, within one month.

 

9.3.         Diaspora Qard Current Account

All the provisions set for Qard Current Accounts in LCY shall also apply to this FCY Currency Account except: 1) It is a foreign currency current account maintained either in US Dollar, Pound Sterling or Euro only; 2) The minimum balance to open this account is USD 100.00 (One hundred US Dollars only)

9.4.         Diaspora Mudaraba Fixed (Time)

 Deposit Account All the provisions set for Un-Restricted Mudaraba LCY accounts shall also apply to this FCY Currency Account except:

1) It is a foreign currency fixed time deposit account maintained either in US Dollar, Pound Sterling or Euro only;

2) The minimum balance to open this account is USD 5,000.00 (Five thousands US Dollars only) or its equivalent in any of the eligible currencies;

3) If the customer withdraws the whole deposit before the agreed upon maturity date, no profit shall be paid; and

4) Profit shall be calculated only for the duration of the Certificate. In other words, no profit will accrue to the depositors after expiry of the certificate unless it has been replaced by a new one.

10.         Qard Non-Resident Foreign Currency Account

 (Qard NRTFCY) All the provisions set for Qard Current Accounts in LCY shall also apply to this FCY Currency Account except:

1) It is a foreign currency current account maintained either in US Dollar, Pound Sterling or Euro only;

2) The minimum balance to open this account is USD 100.00 (One hundred US Dollars only) or its equivalent in any of the eligible currencies;

3) Funds in this account can be transferred abroad without the necessity of obtaining foreign exchange permit and paying exchange commission to NBE; and

 4) If the Bank decides to give Hibah (monetary), it shall be payable only in Birr;

10.1. Qard Non-Resident Transferable Birr Account (Qard NRT)

 All the provisions set for Qard Current Accounts in LCY shall also apply to this FCY Currency Account except:

 1) It is a current account maintained in Birr;

2) The minimum balance to open this account is USD 100.00 (One hundred US Dollars only) or its equivalent in any of the eligible currencies;

3) Funds in this account can be transferred abroad without the necessity of obtaining foreign exchange permit and paying exchange commission to NBE; and

 4) If the Bank decides to give Hibah (monetary), it shall be payable only in Birr.

10.2. Qard Non-Resident Non-Transferable Birr Account (Qard NRNT)

All the provisions set for Qard Current Accounts in LCY shall also apply to this FCY Currency Account except: 1)

 It is a current account maintained in Birr to only cover local expenses of the customer;

 2) The minimum balance to open this account is USD 100.00 (One hundred US Dollars only) or its equivalent in any of the eligible currencies;

 3) Funds in this account cannot be transferred abroad without obtaining foreign exchange permit and paying exchange commission to NBE; and

4) If the Bank decides to give Hibah (monetary), it shall be payable only in Birr.

 

11.         Qard FX Retention Account –

All the provisions set for Qard Current Accounts in LCY shall also apply to this FCY Currency Account except:

1) It is a foreign exchange retention FCY current account maintained by eligible customers in accordance with NBE Directive No. FXC/11/1998;

2) It will enable customers to retain 10% of their foreign exchange earnings for indefinite time or until they partially or wholly withdraw it;

3) No cheque shall be issued under this account and be used by account holders;

4) No exchange commission shall be levied upon utilization of funds from these accounts. However, is shall not be debited without obtaining the necessary foreign exchange permit except for drawing in Ethiopian Birr;

5) If the Bank decides to give Hibah (monetary), it shall be payable only in Birr;

6) No overdrawing is allowed under such accounts; and

7) Transactions under this account shall be effected through official letters or applications duly signed and sealed, as applicable.

11.1.     Qard FX non- Retention Account –

  It is similar to Qard FX Retention Account and all the provisions set therein and Qard Current Accounts LCY shall also apply to this FCY Currency Account except for customer‟s entitlement to retain 90% of their foreign exchange earnings for 28 days.

After the expiry of 28 days, the balance in this account shall be converted in to birr on the next working day using the prevailing buying rate

 1) The Bank shall distribute profit or share losses with customers on specific deposits or investment accounts kept under Mudaraba principles.

In case of a loss, the customer bears all the losses and the bank (Mudarib) will not get anything for the services rendered, except on account of negligence of the Bank or its staff and Management. The Bank reserves the right to vary the Mudarib’s profit share and/or the weightings from time to time in accordance with the prevailing regulations and/or directives applicable to it.

Trade Service

  • Documentary Letter of Credit Import-available by sight/negotiation/acceptance Based on Shariah Contract WAKALA and MURABAHA
  • Required Document  for Import under Letter of Credit
  • Foreign exchange for Import application form duly filled signed & stamped appropriate.
  • LC opening application form Pro forma invoices showing clearly full description of goods including quantity, grade, quality, volume, measurement, weight, mode of shipment, terms of payment, unit and total price of the goods at a named place of delivery, the Agreed upon delivery term at a named  port, harmonized system code and country of origin and others as required.
  • Insurance Certificate from licensed local insurance company which clearly shows consignment that are held covered and the ETB sum insured shall not be less than 110% value of the consignment.
  • Copy of valid and relevant foreign trade, investment, industry (manufacturing), agriculture or mining license.
  • Third party original price confirmation for used commodities certified by Chamber of Commerce or equivalent institution.
  • The maximum FOB import value of used goods should not exceed the maximum value declared by NBE associated with the goods’ service year.

Letter of credit (LC)-deferred/acceptance

Key features for (LC)-

  • The maximum allowable time for acceptance is 60 days from date of transport document but shall be coherent to 90 days repatriation time after approved Export    permit date.
  • The L/C should be irrevocable & confirmed.
  • It should also clearly indicate that the opening bank committed to pay on the due date the deferred/acceptance Portion Deferred/Acceptance period should be within validity date of L/C. Others as appropriate as required

Imports under CAD

Import approvals for CAD require;-

  • Purchase Order in two originals.
  • Performa invoices showing clearly full description of goods including quantity, grade, quality, volume, measurement, weight, mode of shipment, terms of payment, unit and total price of the goods at a named place of delivery, the agreed upon delivery term with named port , harmonized system code and country of origin and others as required.
  • Insurance Certificate from licensed local insurance company which clearly shows consignment that are held covered and the ETB sum insured shall not be less than110% value of the consignment.
  • Copy of valid and relevant foreign Trade, investment, industry (Manufacturing), agriculture & mining License.
  • Third party original price confirmation for used commodities certified by Chamber of Commerce  or equivalent         
  • The maximum FOB import value of used goods should not exceed the maximum value declared by NBE associated with the goods service year.
  • Copy of tax identification certificate (TIN certificate).

Upon final documents presentation

Requirements

  • Foreign exchange for Import Application Form duly filled, Signed & Stamped as appropriate.
  • Importers authorization letter to debit its account Shipping Documents, comprising minimum of the following:
  • Commercial Invoices minimum certified by the chamber of commerce of exporter’s country
  • Transportation Document in full set
  • The previously original Approved Purchase Order.
  • Freight invoice stating actual freight paid in case of the agreed upon delivery term is on CFR/CP Tor others as appropriate. The amount of freight claimed on commercial invoice.
  • Shall not exceed the actual freight paid substantiated by the carrier or its agent invoice.
  • Shipping documents must be received through foreign banks only.
  • Direct delivery by foreign partner is inconvenient and against the Exchange Regulation.

For export under CAD

Features

  • Undertaking letter of the Exporter that the sight CAD will be settled within a maximum of 90 days from date of the Foreign Exchange Permit and application of same sort has not been lodged to other commercial banks.
  • The total value of all outstanding items of all CADs, by an applicant, shall not exceed the maximum allowable limit as per the current Exchange Regulation (ER).
  • The maximum allowable time for acceptance is 60 days from date of transport document but shall be coherent to 90 days repatriation time after approved export permit date.
  • Undertaking letter of our customer that deferred/acceptance portion will be settled latest on the due date(s) and that application of same kind has not been lodged to other commercial banks.

For Import under Advance Payment (telegraphic transfer)

Features

  • Foreign exchange for Import application form duly filled, signed & stamped Performa invoices showing clearly full description of goods including quantity, grade, quality, volume, measurement, weight, mode of shipment, terms of payment, unit and total price of the goods at a named place of delivery, the agreed upon delivery term with named port, harmonized system code and country of origin and other as required.
  • Copy of valid and relevant foreign trade, investment, industry (manufacturing), agriculture and Mining license.
  • Insurance Certificate from licensed local insurance company which clearly shows consignment that are held covered and the ETB sum insured shall not be less than 110% value of the consignment.
  • Copy of valid and relevant foreign trade, investment, industry, agriculture or mining license.
  • Letter of undertaking not to ship the goods prior to foreign exchange approval and for importation of goods within 120 days from the date of approval.
  • The maximum value of import in advance shall not exceed USD 5,000- h) Copy
  • Tax identification certificate (TIN certificate)
  • Application letter for the transfer incorporating details of banking details and

For Import under Franco-valuta

·       Requirements

  • Franco – Valuta application form duly filled, Signed & Stamped as appropriate ransportation Document
  • Ethiopian revenue and Customs Authority value estimation.
  • Advice for payment of commission (partly to NBE) on the Ethiopian revenue & Customs Authority value estimation as dictated by NBE from time to time
  • Check that imported commodities fall in the list supplied by N.B.E for the category.
  • Written approval from NBE for exporters who import on Franco-Valuta basis for the purpose of exporting.
  • Written approval from NBE for exporting firms importing inputs from collaborating foreign partners without paying foreign exchange.
  • Letter from pertinent government organs i.e. Ministry of Foreign Affairs, Ministry of Inland Revenue as appropriate.

§  Shari’ah Letter of Credit

How it does work

  • The issuance of letter of credit can be based on the Shariah principles of:Wakalah (Agency) Letter of Credit the bank will act on behalf of its client who will authorize the bank to represent him in issuing the L/C and all its subsequent operations.
  • This includes the terms of the letter of credit that is issued and checking for compliance of documents when a payment claim is made.
  • The bank may require the customer to place a deposit to the full amount of the price of the good to be purchased or imported.
  • The bank issues the LC according to the instructions and the advice of its client and according to the terms and conditions agreed upon as found in documents confirming the sale provided by y the client.
  • After shipment of goods and submission of stipulated documents by the exporter, the Bank makes payment using the client’s deposit.
  • The bank charges the customer fees and commission for its service under the Principle of al-ujra based on the wakalah principle.

Murabaha (cost Plus) Letter of Credit

Features

  • Definition of the Murabaha is a contract between a buyer and a seller under which the seller sells certain specific goods permissible under Shariah and law of the land to the buyer at a price determined by charging agreed profit, margin or mark-up over the cost price.
  • In this case, the buyer either makes cash payment to receive the goods or is allowed to make payment by installments or on a fixed future date.
  • The profit mark-up may be fixed in lump sum or in percentage over the cost price of the goods.

Import of goods under Murabaha mode of Investment

Key features

  • In the import business, the importer provides an irrevocable letter of authority to the Bank to import specific goods on behalf of him (the client) from the foreign seller and promises to buy the same from the Bank.
  • In this case, the Bank is designated as a consignee in the Bill of lading and later on the Bank hands over the same to the Importer through endorsement
  • The ownership of the goods is transferred to the importer.
  • As per uniform customs and practices, the seller lodges his claim or places claim for dues to the buyer’s Bank through the bill of exchange and the buyer’s bank discharges the claim on behalf of the buyer.

Model of Murabaha letter of credit

Main features

  • The client (buyer) requests the bank to purchase particular goods and promises to purchase the same from the bank at a price fixed by charging profit over the cost Price.
  • The Bank appoints the importer as its agent to import the required goods on his behalf.
  • In this step, Agreement to Murabaha and an Agency Agreement will be signed.
  • Under the Murabaha mode of investment there is no scope to increase the Sprice once it is fixed.
  • The Bank establishes the LC and pays proceed to the negotiating bank utilizing its own fund.
  • After buying the goods, the Bank has to bear all the risk until goods are actually delivered to the client.
  • The Bank sells the goods to customer at a sale price comprising its cost and profit margin under the principle of Murabaha  for payment settlement can be prompt or deferred.