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Monday, 13 October 2008

CIMB Islamic offers Shariah-compliant forex option

KUALA LUMPUR: CIMB Islamic Bank Bhd recently launched its Islamic foreign exchange with Shariah-compliant option features or FXOP-i, which allowed customers to hedge their forex risk.
CIMB Islamic said on Monday FXOP-i enabled customer to lock in a forex rate in advance by engaging in a Shariah-compliant financial transaction with CIMB Islamic.
It added net proceeds from this transaction -- similar to the premium paid for option instruments in conventional finance -- granted customers the right, but not the obligation, to exercise the option at the agreed rate on the maturity date.
CIMB Islamic CEO Badlisyah Abdul Ghani said with this product, customers could protect the value of their future foreign currency proceeds and also fix their hedging cost at the equivalent of the option “premium”.
He said the customers could even earn a profit if the forex rates moved in their favour and with assurance that the transaction adhered to Islamic principles.
FXOP-i is based on several Islamic finance concepts, the tawarruq (trading between more than two parties) by way of commodity murabahah (sale at cost plus), Bai al-Inah (trading between two parties), Waad (promise) and Bai al sarf (contract of exchange, money for money).
CIMB Islamic said customers could choose to undertake the transaction using either the commodity murabah or Bai al-Inah concepts, thus making it an attractive solution to a wider range of customers.
(The Star M'sia/13Oct08)

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