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Saturday, 1 August 2009

Bursa Malaysia Inks Commodity Murabahah Agreement With Industry Players Under MIFC Initiative - Multi-Commodity, Multi-Currency Trading Platform

Bursa Malaysia and over 26 palm oil commodity suppliers, financial institutions and trading participants, today signed a Memorandum of Participation to collaborate in the Shariah commodity trading platform, Commodity Murabahah House (CMH), which is aimed at facilitating liquidity management and the financing of Islamic financial and investment instruments.

Commodity Murabahah House (CMH), a Malaysia Islamic International Finance Centre (MIFC) initiative operated by Bursa Malaysia’s fully Shariah compliant wholly-owned subsidiary, Bursa Malaysia Islamic Services Sdn Bhd, is an international spot commodity platform which facilitates commodity-based Islamic financing and investment transactions under the Shari’ah principles of Murabahah, Tawarruq and Musawwamah. Initial trades will use crude palm oil to be followed by other Shari’ah approved commodities covering both soft and hard commodities. At present, trades will be Ringgit-denominated whilst efforts are being undertaken to make it multi currency capable, providing more choice, access and flexibility for international financial institutions to participate in this market. This trading platform, which is fully electronic, is the world’s first end-to-end Shari’ah-compliant commodity trading platform designed with the main purpose of serving the Islamic financial markets.

Dato’ Yusli Mohamed Yusoff, Chief Executive Officer of Bursa Malaysia said, “We are the first in the world to innovate a Commodity Trading Platform infrastructure using crude palm oil as the underlying commodity. We expect the innovation of this web-based and fully automated platform to change the way most Islamic financial institutions transact commodity murabahah going forward.

This infrastructure is set to complement our capital and money market offerings. The players, which range from financial institutions, CPO producers to trading participants, will benefit from additional revenue stream, stemming from the low liquidity risk element that is apparent in the financing structure of CMH.”

Dato’ Yusli added, “The implementation of CMH, planned for August this year, is in line with our efforts to further spur the development of the Islamic market in Malaysia. We are confident that this will give Bursa Malaysia the stature to bring forth its Islamic market’s offerings to the global front.”

Commodity Murabahah is widely used as a money market tool by Islamic banks in the GCC. The concept of Commodity Murabahah involves one party buying commodity at a certain cost and selling it to a customer at a cost-plus-profit basis. The customer will then pay the amount and the profit to the party on deferred-payment basis. The customer then sells back the commodity to the commodity market on spot for cash. The trade involves the sale and purchase of real physical assets.

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Alfalah Consulting - KL: www.alfalahconsulting.com 
Islamic finance consultant: www.ahmad-sanusi-husain.com 
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

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