Definition of Credit

Defines credit as the confidence of the bank or financial institution for someone, whether a natural person or a legal person, that gives him a sum of money to be used for a specific purpose, during the agreed period of time between them, and under certain conditions in return for interest agreed upon, (It should be noted here Islamic banks do not support the system of interest when granting credit, but they rely on other forms of Islamic financing away from the usurious interest completely) We'll talk later about the Islamic banking industry in detail.

 Gives financial institutions and banks that loan guarantees, enabling these institutions to recover their loans in the event of client stops payment. Known as bank loans are defined as those services provided to customers, under which you provide individuals, institutions and facilities in the community with the necessary funds, to undertake the debtor to repay the money and benefits, commissions and expenses payable by lump sum, or in installments on specific dates, and are strengthening this relationship to provide a range safeguards that ensure the bank to recover the money if the customer stops making payments without any losses, and this sense involves the so-called credit facilities and has the concept of credit and advances.

Elements of credit

Credit must have the four basic elements to be considered at least credit, even if they are his constituents were not present there would have been a credit, those elements are as follows:

1.    Relationship indebtedness: the existence of a creditor (credit grantor) and the presence of a debtor (the recipients of credit), and the availability of confidence between them.

2.    The presence of religion itself: the existence of the amount of cash given by the creditor to the debtor where the debtor must be based on his response to the creditor, and here shows the link between money and credit.

3.    Term debt schedule: difference is the essential element that differentiates between online transactions and credit transactions futures.

4.    Risk: a reason for the creditor to religion plus interest on the debtor-awaited result, The benefit is the price of risk for the possibility of failure of the debtor to pay the debt.

 

The foundations of the granting of credit

Must be granted credit on the basis of rules and a stable and generally accepted among financial institutions and banks, if it were not present, then not called credit but corrupt bank where the officials of the financial institution corrupt granting credit to those who do not deserve, do not let loose and lost money financial institutions, Event So in Egypt, tens and hundreds of times in cases of many famous over the sixty-year-old black of military rule, which is stifles breaths on the chest of Egypt, dozens of corruption cases and hundreds of billions of dollars wasted not tried one, of course, because of corruption in general, and spoiled the corrupt is the Egyptian judiciary, which lost rights. The most important of these foundations are:

 

First: provide security for bank money, and it means contentment banking institution to the person or entity or facility that you get the credit, and the bank is confident in winning that credit will be able to repay the loans granted to him with their benefits in a timely manner for it.

 Second, make a profit, and does this mean for the bank on the benefits of the loans granted by being able to pay interest on deposits and face various expenses, and achieve a return on invested capital in the form of net profit. Islamic banks do not exist any interest, but there are other formats Islamic define the relationship between the Islamic bank and the customer, such as speculation, participation and other forms of Islamic finance that are consistent with Islamic law.

 Third, liquidity, provide a sufficient amount of liquid funds at the bank to meet withdrawal requests without any delay, it must be a balance between the provision of appropriate liquidity at the bank and the granting of credit to its customers, and remains on the bank's management successful mission alignment between the goals of profitability and liquidity.

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