The following example illustrates the effect of Murabaha or Qard Al Hassan on the client account: (in case the market is performing well)
Margin trading involves a high degree of risk if the value of the portfolio investment assets goes down, which may require the client to inject more cash or stocks to avoid incurring losses.
A client has SAR 1,000,000 and wants to buy XYZ shares at SAR 100 per share
Without using Murabaha or Qard Al Hassan Finance
If the portfolio is worth SR 1,000,000, the client can buy 10,000 shares at SR 100 per share, if share price increases by 20%, the client’s profit will be SAR 200,000.
With Murabaha or Qard Al Hassan Finance 1:1
With Murabaha or Qard Al Hassan, the purchasing power will double and the value of the investment portfolio will become SR 2,000,000 (1,000,000 SR from client + 1,000,000 SR as Murabaha or Qard Al Hassan facility), the client can buy 20,000 shares and if share price increases by the same value, the clients will double their profit to SAR 400,000 without fees and commissions.
|Without Murabaha or Qard Al Hassan||With Murabaha or Qard Al Hassan||Notes|
|Client Cash or value of Securities||SAR 1,000,000||SAR 1,000,000|
|Purchasing Power||SAR 1,000,000||SAR 2,000,000||SAR 1,000,000 from client + SAR 1,000,000 as Murabaha or Qard Al Hassan facility from Yaqeen Capital|
|Stock Price||SAR 100 per share||SAR 100 per share|
|Number of Stocks that can be bought||10,000 shares||20,000 shares|
|Stock price Increased by 20%||SAR 120 per share||SAR 120 per share|
|Profit||SAR 200,000||SAR 400,000|