FAQ

1.How do I obtain ICFAL finance?

Become a Member of ICFAL

$100 membership fee for Lifetime membership

 Wait 6 months

Hold minimum $500 in account for 6 months. 

Currently the process to obtain finance from ICFAL takes minimum 12-18 months depending on fund availability from application date

Apply for finance

Member needs to have a minimum of 10% of property price in their account after approval to enrol into waiting list.

Wait in Queue

After application has been approved (subject to independent assessment), member is required to wait in queue until the fund is available to finance, which currently takes minimum 12-18 months or more.

At the time of enlisting in the queue after approval, a member needs to have approximately 10% of the value of the estimated purchase price of their property along with a completed application form.

After your application is processed you will be placed in the queue to wait for funding availability. Currently the queue wait time is minimum 12 – 18 months.

Pre-Approval

When ICFAL have the funds available to approve your application, you will be required to provide us with the latest statement and previous year’s Tax documents for final approval upon which we will require you to bring a further 10% of the estimated purchase price to ICFAL account bringing the total minimum deposit to 20% of the property price.

Final approval conference

ICFAL and the member meet to discuss potential monthly payments and our contract process. Upon members understanding, a final approval is given

After the meeting, we will issue you with explanation to you how our contracts work and your potential repayments to ensure that we are clear and transparent with our finance process.

Final approval

Upon your agreement and understanding of our finance process, we will then grant you a final approval where you can then purchase your home in sha Allah

2. How does ICFAL house finance work?

Our finance contracts are based on a diminishing partnership principles (mushaarakah mutanaqisah) المشاركة ). المتنقصة)

We offer house finance to a maximum amount of $700,000 over a maximum period of 30 years if, at the time of application, the member is under the age of 40. The time period allowed is reduced by 1 year for each year the member is above 40 years of age.

The process of our house finance is as follows:

1) The member selects the house to purchase (assuming the member has 20% of estimated purchase price with ICFAL already).

2) We obtain a valuation of the property price and rent.

3) ICFAL and the member will negotiate on a rental price, rental price increase and property price increase over a period of 3, 5 or 10 years. This is a regulatory requirement to ensure ICFAL is clear and transparent to the member about the potential amount of payments they will be making over the entire term of the contract. Please note, ICFAL does take into account significant and fair movements in market prices if required.

4) We purchase the house in partnership with the member.

5) The contribution made by both ICFAL and the member will then be considered the respective mushaarakah shares in the property by each party. For example, if ICFAL contributed $400,000 and the member contributed $100,000 on a $500,000 property, ICFAL will then hold 400,000 mushaarakah shares on a total of 500,000 mushaarakah shares on the property. These will be then used to determine profit or loss sharing, rental contribution and fixed cost contribution on the property.

6) Over time, the member pays rent on ICFALs share of the property. This rent amount will reduce with each additional share purchase the member makes.

7) The member will also purchase ICFALs share over time.

3. Where does ICFAL source its funds?

We are a 100% member funded. 

4. In which states are memberships offered by ICFAL?
  • ICFAL is currently registered to operate within WA, Queensland, NSW, ACT, SA and Victoria.
  • You need to be a resident of Australia and have a residential address in the respective state/s as mentioned when applying for membership.
  • Due to the overwhelming number of enquiries from interstate customers where memberships are not available at present,  we aim to register our co-operative in all other states and territories in Australia in due course. Please stay tuned for updated information.
5. What is the maximum amount of finance ICFAL provides?

Currently $700,000 over 30 years

6. Are there penalty fees associated with purchasing additional shares during the term of the contract?

No. Only a $100 administration fee is charged. Earlier payments are encouraged from our members as this reduces the overall cost for the member in the long term.

7. Can I purchase all the shares on the property and complete the contract early?

Yes. Only a discharge fee of $450 will apply. This is a standard fee that will apply regardless of whether you finalise your contract earlier or on time.

The amount you will need to pay to finalise your contract on any given month is stated on your financial schedule under the heading “ICFA Equity Sell Price (a)” .

8. Will I receive regular (Every 4 months) statements to show me my account balance and payments?

Yes. We currently issue three statements in a year.

9. Are my monies/shares secure with ICFAL?
  • ICFAL as a registered co-operative under the Co-operatives Act 1992.
  • All financial matters and other Co-operative activities are being audited periodically including an annual audit conducted by an independent professional and authorised auditor. In fact, our annual financial statements have been independently audited since our founding in 1998.
  • Most of the ICFAL funds are invested in real-estate properties therefore carrying a highly secure portfolio in the market. ICFAL dividend history shows that it has consistently maintained a positive return. Members should however, be aware that like any other investment, past history cannot guarantee future returns.
  • We require our members to have a minimum of 20% of the property price. Although we require this to avoid mortgage insurance to make our contracts even more shariah compliant, this also conveys to us the financial strength and ability of the member receiving finance.
  • We give priority to first home buyers rather than investment properties.
  • Our cash is deposited into a interest free cheque account with a major bank.
  • Members are free to redeem their shares anytime after completing a share redemption form. Though, our co-operative rules state that if a withdrawal is over $5000 we request a 30 day notice period.
  • Members are able to check their financial record at any time by contacting our offices.
10. Does ICFAL offer construction finance?

Yes. It works by ICFAL purchasing the labour and building materials needed to build the property and then re-selling these assets back to the member.

If the member does not currently hold the land, the member must contribute the minimum 20% of the estimated value of the building project.

11. Does ICFAL offer finance for land and house packages?

Yes. ICFAL will assist the member in paying for the various stages of the building project. At the completion of the project, the property will then be valued and the contribution ICFAL made to build the property will then form ICFALs share in the property.

The member will then pay rent for ICFALs share of the property and will purchase ICFALs share in the property over time.

12. Does ICFAL offer finance for the purchase of a land only?

Yes. However, the purpose of the land should be, either to build an income generating project such as home or rentable property, agriculture or for farming. The Mushaarakah process can still be applied by allowing a process of leasing to build or leasing for farming for example. The land will be mortgaged to ICFAL.

13. Does ICFAL offer finance to build a home only on a pre-purchased land?

Yes. The building will be financed under Istisna-Musharaka process. Construction must be supervised by ICFA representative. Project can be broken into few stages. Every stage can be maximum one month long so all expenses for that stage is captured and a stage financial schedule is signed off. Once building is complete a combined full SER will be prepared including all stages. The land must be mortgaged to ICFA. If the land is pre-purchased using ICFA finance under Musharaka SER then the land SER can also be combined with building

14. Can I borrow on my home?

No. We do not have such a facility as this is considered bay al eenah in Islam which is not permissible. Such a transaction is considered a disguise for an interest based transaction.

Bay al eenah occurs where one party (party A) will buy an asset from party B, then immediately, party A will sell the same asset at a high price to party B.

15. Does ICFAL offer re-finance from another organisation?

Yes. We will obtain a valuation of the property. Then the amount ICFAL refinances the member for will become ICFALs share in the property.

The member will then pay rent for ICFALs share of the property and will purchase ICFALs share in the property over time.

16. When are statements issued?

Statements are issued in every 4-month intervals, 3 times a year. In between, members may contract ICFAL to ask for their current share balance.

17. How are the payments made to ICFAL different payment that is made to a Bank?

The payments made to a bank in a conventional finance system is based on a repayment of money with no relationship to the potential rise or fall in rental and house prices. The bank lends a customer a certain amount of money and expects a certain amount of money in return for the money they lent out.

The payments made to ICFAL are based on the concept of trading and reflects the real world return on a property investment. The monthly payments made to ICFAL consists of 3 components:

1) Rent – The rental fees paid to ICFAL are taken from a market valuation at the beginning of the contract. A pre-determined rental increase is negotiated and applied at the beginning of the contract.

2) Share purchase – This is the original contribution ICFAL made to purchase the property. ICFAL then offers these shares for sale to the member on a monthly basis.

3) Profit on share purchase – This is the profit ICFAL makes from selling its shares back to the member on a monthly basis.

Over time, the rent and profit on share purchase that are made to ICFAL can change depending on market forces on the real estate market. These rates are reviewed every 3, 5 or 10 years depending on a member’s request.

18. If there is no interest, why am I paying additional to the amount ICFAL initially invested by the end of the contract?

 Paying more does not mean you are paying interest. The money that ICFAL makes is derived from rental payments and profit made on ICFALs shareholding. Most of the profit that ICFAL derives over the term of its finance contracts is in the form of rental payments.

19. How are my monthly payments determined?

The payments made to ICFAL are based on the concept of trading and reflects the real world return on a property investment. The monthly payments made to ICFAL consists of 3 components:

1) Rent – The rental fees paid to ICFAL are taken from a market valuation at the beginning of the contract. A pre-determined rental increase is negotiated and applied at the beginning of the contract.

2) Share purchase – This is the original contribution ICFAL made to purchase the property. ICFAL then offers these shares for sale to the member on a monthly basis.

3) Profit on share purchase – This is the profit ICFAL makes from selling its shares back to the member on a monthly basis.

Over time, the rent and profit on share purchase that are made to ICFAL can change depending on market forces on the real estate market.

Although we can provide approximate monthly payment figures depending on the amount of finance required from ICFAL, exact figures will be determined after a valuation of the property is made and further research is conducted by our staff on the rental and property price growth rates in the particular suburb a member wishes to purchase a property.

These rates are reviewed every 3, 5 or 10 years depending on a member’s request.

20. How are the rental and property price growth rates determined?

At the time of purchase – We obtain an independent valuation of the property and rental price. Along with this, we conduct our own research based on historical property price and rental growth data of the relevant suburb. These growth rates will then be presented to the member for their agreement.

If the member disagrees, they may obtain their own valuation at their own cost to renegotiate an appropriate growth rate.

21. Why do you need to apply a 3, 5 or 10 year growth review period?

In an ideal situation we will like to re-assess the property house price and rental prices on a yearly basis. However, due to resource constraints, this is not practical for us at this stage.

These periodic reviews are opportunities for both ICFAL and the member to re-assess the market situation and make the relevant adjustments to property and rental prices.

22. Do you share in the fixed costs of the property?

Yes. During the term of our mushaarakah agreement, ICFAL shares in the costs for strata rates (if applicable), council rates, fixed water charges and building insurance.

The member is expected to pay for the invoices and submit them to ICFAL in order for us to process their request.

23. If the property was purchased at $400,000 and the property value declines to $350,000, will ICFAL accept a loss for their shares rather than a profit as the shares represent the value of the underlying asset?

Yes, ICFAL will share a loss when an unavoidable loss situation occurs which is out of control of both of the parties. This is the unique aspect of our Mushaarakah financing system.

However it must be noted that over time, although there is short term volatility in the house prices, it is rare to see a long term decline in property prices. ICFAL takes a long term view when it comes to assessing the pricing of its mushaarakah units. ICFAL is will review the pricing on its mushaarakah shares should a significant shift in the market occurs.

If, on the other hand, a sale at loss is driven by the member, then the initiative is carefully investigated by ICFAL and genuine need to sell is established to avoid any unfair passing of member’s interest to a loss to all the general cooperative members.

24. What happens if I wish to sell the property?

ICFAL will share the profit and loss of selling the property net of any costs involved to sell the property.

How ICFAL does with the potential of selling at a loss is answered in the previous question.

25. When does ICFAL declare Dividend?

ICFAL’s annual dividend is declared at Annual General Meeting (AGM) with approval from its members. The AGM is held within 6 months of the beginning of the financial year (usually September/October).

26. How is dividend calculated?

Dividend is calculated on the weekly average balance of member’s account. There are two different dividends calculated, i) General membership account, ii) Self-managed Super Fund account, Children’s Education Fund account and Hajj Fund Account (potentially $1 per share higher than General Membership account)

27. When do I get the dividend posted to my account?

Dividend is posted to all member’s accounts within 1 month of the Annual General Meeting (AGM) and a statement is sent confirming the posting.

28. How do I redeem my shares? What is ICFAL’s share redemption policy?

A member can redeem his/her shares by sending a signed and filled up “Share Redemption” form by email or by post to ICFAL any time. However, due to the nature of the business, ICFAL may not have enough liquidity to pay all members according to their share redemption request. Therefore, any share redemption request for higher than $5,000 will require a minimum 30-day notice and the requests are processed depending on fund availability. For all amount of share redemption request higher than $10,000, the transfer may be made in stages for an extended period after the notice period ends.

29. How can I redeem shares if I need the fund urgently?

Due to the nature of business, ICFAL does not always have enough liquidity to process all or large share redemption requests at one go. Therefore, members are advised to inform ICFAL with a fair amount of time for any urgent payments to be made (e.g. land settlement/Real Estate payments etc). ICFAL always prioritize payments for medical and other compelling reasons (newborn expenses, death in family). Documentary evidence is required for compelling cases where the share redemption requests exceed $10,000.

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