TYC Finance Ali

In the tide of global finance, TYC Finance Limited is committed to innovation and pragmatism to meet the financial needs of different cultures and beliefs. After in-depth discussion and meticulous design by our team, we are proud to introduce for the first time in the Greater China region a bilingual (Chinese-English) interest-free loan agreement template, tailored for financing and lending activities that adhere to the principles of Islamic finance. This template is designed to provide support and practical reference for clients seeking financial services in line with religious doctrines.

Please note that this template is for reference only and does not have legal force, nor does it constitute any legal opinion or advice. Before actual application, we recommend that users consult with professional Islamic finance scholars and legal advisors to ensure the compliance, legality, and applicability of the contract.

We hope that this template can help more businesses and individuals to effectively avoid interest mechanisms while adhering to Islamic finance principles, promoting the rational flow and efficient use of funds. We also look forward to providing users with transparent, fair, and Islamic finance principle-compliant financial services and professional information.

How to obtain the template?

If you need to obtain an editable Word document of the contract, please contact us through the following emails: info@tycfinance.com or tyc.hk.ltd@gmail.com.

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We welcome you to follow our Wechat public account and visit our official website to get the latest information on Islamic finance. We look forward to working with you to jointly open a new chapter in financial development and practice.

Islamic Finance Principle Compliant Interest-Free Loan Agreement --- TYC Finance Template

Agreement Number (if any): [Insert Agreement Number]

Date of Execution: [Insert Date of Execution]

Place of Execution: [Insert Place of Execution]

Party A (Lender): [Insert Full Name of the Lending Party]

Party B (Borrower): [Insert Full Name of the Borrowing Party]

Party A's Contact Address: [Insert Address of the Lending Party]

Party B's Contact Address: [Insert Address of the Borrowing Party]

(For corporate lending scenarios) Legal Representative of Party A: [Insert Name of the Legal Representative]

(For corporate lending scenarios) Legal Representative of Party B: [Insert Name of the Legal Representative]

Party A and Party B, through friendly consultation, have reached a consensus on the matter of borrowing in accordance with the principles of Islamic finance (see Annex I). Party A agrees to provide an interest-free loan to Party B for [Insert Purpose of the Loan].

Both parties, based on the principles of equality, voluntariness, and honesty and trustworthiness, have negotiated and agreed to enter into this agreement and to comply with it jointly.

Article 1: Loan Amount

Party A agrees to provide Party B with an interest-free loan not exceeding the amount of RMB [Insert Arabic numerals (lowercase) and Chinese characters (uppercase) amount].

(For corporate scenarios) The borrower may withdraw funds in stages, but must notify the lender in writing before the withdrawal date [Insert Date], and the total withdrawal amount must not exceed the loan amount, and must be withdrawn within [Insert Withdrawal Time] from the date of signing this agreement.

Article 2: Loan Term

The maturity date of this loan is [Insert Maturity Date].

Article 3: Repayment Method

Party B shall repay the loan principal according to the following [Insert applicable clause number and model name]:

3.1 Profit Sharing Model: This loan adopts a profit-sharing model, and Party B agrees to pay Party A a return according to the actual profit situation of the project, at an agreed ratio. The specific ratio and calculation method are as follows:

3.1.1 If the project has generated profits by [Insert Settlement Date], Party B shall pay Party A a profit share of [Insert Percentage]% of the net profit. Profit sharing is settled on a [quarterly/semi-annual/annual] basis, and Party A has the right to review Party B's materials and documents related to the loan and operating conditions (such as accounting books) [Insert Time] before the profit settlement date.

3.1.2 Unless otherwise agreed by both parties, profit calculation under the profit-sharing model shall follow the accounting and auditing standards recognized by Islamic law.

3.1.3 [Insert the agreement between both parties on the profit calculation method under the profit-sharing model. The agreement should include whether Party B pays a fixed return to Party A to compensate for Party A's capital occupation in the absence of profits]

3.2 Cost Plus Model: The borrowing and its purpose are transformed into the sale/purchase of a project or actual product. Party A must own the actual goods intended for sale and disclose to Party B the cost of the goods and the profit margin. Party B shall pay Party A a return based on the project cost plus a profit of [insert percentage]% on a [daily/weekly/monthly/semi-annual/annual] basis to gradually complete the purchase of Party A's goods. The fixed return payment date is [daily/weekly/monthly/semi-annual/annual date].

3.3 Installment Repayment Plan: Party B agrees to repay the loan principal to Party A according to the following installment repayment plan:

First installment: [Insert Date], repay [Insert Percentage]% of the principal.

Second installment: [Insert Date], repay [Insert Percentage]% of the principal.

...

[Insert each repayment date and percentage], until the loan principal is fully repaid. After Party B has fully repaid the loan principal, Party B shall share profits with Party A at [Insert Percentage]%. Party A has the right to review Party B's materials and documents related to the loan and operating conditions (such as accounting books) [Insert Time] after Party B has repaid the loan principal.

3.4 Asset Sale Sharing: If the project involves asset sales, Party B agrees to use [Insert Percentage]% of the net sales profit as a repayment source. The net sales profit calculation date is [Insert Quarterly/Semi-Annual/Annual Date]. Party A has the right to review Party B's materials and documents related to the loan and operating conditions (such as accounting books) [Insert Time] before the net sales profit calculation date. The net sales profit shared by Party B with Party A is not included in the loan principal to be repaid on the maturity date.

3.5 Leasing Model: If the loan is used to purchase fixed assets, the assets will be leased to Party B for use, and Party B shall pay rent to Party A according to the lease agreement. The rent income must be used to repay Party A's loan and provide profits. The lease rent is settled on a [quarterly/semi-annual/annual] basis and must be fully repaid within [Insert Time].

Article 3A:

Early Repayment

The borrower must repay all principal and interest under this contract on the maturity date. However, the borrower may repay part of the principal and interest early, but must notify the lender in writing [Insert Number of Days] days in advance and obtain the lender's consent. For the repaid part, Party B cannot withdraw the repaid part again.

Article 3B:

Repayment Security and Repayment Record

Party B shall ensure the legality and stability of the repayment fund source and deposit the required funds into the designated repayment account before the repayment date.

Party B shall keep all repayment records and provide Party A with a repayment voucher after each repayment.

Article 3C:

Late Repayment

If Party B fails to repay all principal on time before the maturity date of the loan, it shall pay a penalty according to the late penalty agreed upon by both parties.

(For installment repayment plans) If Party B fails to pay any installment on time according to the agreed percentage, Party A has the right to require Party B to provide additional security or guarantee for subsequent repayments. If Party B fails to provide security or guarantee satisfactory to Party A in a timely manner, Party A has the right to require Party B to repay all or part of the loan principal before the maturity date.

Article 4: Guarantee and Security

Party B shall provide Party A with the following guarantees or securities: The pledged assets must be identifiable, isolated, valued, or capable of providing predictable cash flows. These assets may include land, cash, stocks, bonds, real estate, accounts receivable, and other valid assets in accordance with Islamic law.

[Insert a specific description of the guarantee or asset pledge, such as: The asset mortgage includes, third-party guarantees include, etc.]

If Party B fails to provide the above guarantees or pledges to Party A before Party A provides the loan, Party A has the right to terminate or rescind this contract.

If Party A has reasonable grounds to believe that Party B will not be able to repay the loan in full on the maturity date, Party A has the right to request documents and materials related to Party B's business activities, financial activities, and significant legal disputes at any time (including but not limited to bank accounts, deposit balances, outstanding debts, and bank statements, etc.).

Article 5: Breach of Contract Liability

If Party B fails to repay the loan according to the terms and methods agreed in this agreement, it shall bear the breach of contract liability and pay a penalty, the specific calculation method is: [Insert Penalty Calculation Method].

Article 6: Applicable Law and Dispute Resolution

The establishment, interpretation, amendment, execution, and dispute resolution of this agreement shall be governed by [Insert Applicable Law]. Any dispute arising from or related to this agreement shall first be resolved through friendly consultation; if consultation fails, either party may file a lawsuit in court according to law.

Article 7: Other Terms

[Insert other terms that need to be clarified, such as: modification and termination of the agreement, notice and delivery, confidentiality clause, etc.]

Article 8: Effectiveness of This Agreement

This agreement shall take effect from the date when both parties/authorized representatives sign and seal.

This agreement is made in two copies, one for each of Party A and Party B, with equal legal farce.

Party A: [Insert Name of Party A]

(Seal)

(Authorized Representative) Signature: ___________

Witness A [Insert Name of Witness A] Signature:             

Party B: [Insert Name of Party B] (Seal)

(Authorized Representative) Signature: ___________

Witness B [Insert Name of Witness B] Signature:             

Date of Execution: ___________                Hijri calendar Date: ___________              

Annex I

The principles of Islamic finance and the suggestions include but not limited to the following:

Understanding the principles of Islamic finance: First, it is necessary to have the understanding of the basic principles of Islamic finance, including the prohibition of interest (Riba), the prohibition of gambling (Maisir), and the transparency and fairness of transactions (Infaq and Gharar).

Seeking professional advice: It is recommended to hire or consult at least one qualified Islamic finance scholar, imam, and registered legal advisor to ensure that the contract terms comply with the requirements of Islamic law (Shariah).

Avoiding interest clauses: Ensure that the contract does not contain any interest or interest-like payment clauses, as interest is explicitly prohibited in Islamic finance.

Risk sharing: Islamic finance emphasizes risk sharing, so the contract should be designed so that both parties share the risks and rewards of the project or investment.

Asset backing: Loans or investments should be associated with specific assets or actual projects, avoiding unsecured or unencumbered loans or investments, ensuring that loans and investments are in line with the basic principles of Islamic finance, which emphasize equality, participation, and actual ownership of assets.

Transparency: The contract terms need to be clear, explicit, and transparent, with no hidden fees or unclear terms, ensuring that both parties have a complete understanding of the contract content.

Ethics and social responsibility: The contract should reflect ethics and social responsibility, ensuring that the purpose and execution of the transaction are in line with social welfare and public interest.

Compliance review: Conduct regular compliance reviews to ensure that all activities and economies during the execution of the contract comply with the principles and standards of Islamic finance.

Dispute resolution methods: The contract should include dispute resolution clauses, with the preferred method of resolution being arbitration or other alternative dispute resolution mechanisms in accordance with Islamic law.

Compliance with local laws: In addition to the principles of Islamic finance, the contract should also comply with the laws and regulations of the relevant jurisdiction.

Disclaimer

This template contract is prepared and provided by TYC Finance Limited (信实金融有限公司hereinafter referred to as "the Company") it is free and for user reference only. The Company aims to provide a contract sample in accordance with the principles of Islamic finance and build the market awareness. It does not make any express or implied warranties regarding the applicability, completeness, or accuracy of this template contract.

This template contract lacks legal force and does not constitute any form of legal opinion or advice. It should be reviewed by a qualified Islamic finance scholar and registered legal advisor before actual use to ensure the legality and compliance of the contract.

The Company does not assume any responsibility for any direct or indirect losses, damages, or expenses arising from the use of this template contract, including but not limited to losses caused by improper interpretation, application, or execution of the contract terms.

Users should bear the risks and assume all responsibilities arising therefrom when using this template. It is recommended that users consult a professional legal advisor before entering into any contract to ensure the legality and applicability of the contract.