How is the financing structured?

The Islamic finance structure we use is termed “Commodity Murabaha”, which is based on a deferred sale and purchase of a Sharia-compliant commodity (usually a Metal).

The difference between the sale and purchase price represents the cost of our finance to the borrower.

It works like this: Offa buys a Sharia-compliant commodity from the commodities market via a broker for the amount of financing required.  The customer purchases that commodity from Offa at a fixed mark-up representing Offa’s profit – to be paid at the end of the agreed financing term.  

The customer, who now owns the commodity, then sells that commodity via a different broker to the market (at the same price that Offa bought it for) and receives the proceeds (i.e. the finance amount).

The whole process is managed by Offa. No market risk is taken as the commodity pricing when buying and selling to the market happens in immediate succession and at pricing agreed with the brokers.