World’s first standard Islamic finance contract taking shape

By NNN-Bernama

Dubai : Islamic financial institutions worldwide can look forward to using the first-ever standardized master agreement that will facilitate the Islamic banking industry’s commodity Murabaha transactions.


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The Bahrain-based International Islamic Financial Market (IIFM) is in the final stages of developing the benchmark document called the Master Agreement for Treasury Placement (MATP).

“Once it comes to market shortly, the MATP will be the first Islamic finance contract to be harmonized across the different geographic regions where Islamic banking is practised,” IIFM chief executive officer Ijlal Alvi said in a statement here.

Alvi said commodity Murabaha transactions form the bulk of Islamic market transactions.

The MATP is currently undergoing a final review by leading Islamic financial institutions and conventional financial institutions offering Islamic finance and is expected to be given a final review by prominent syariah scholars.

According to IIFM Chairman Khalid Hamad, the usage of a standardized agreement would make Islamic financial transactions more transparent and consistent.

The IIFM was founded by the central banks of Bahrain, Indonesia, Malaysia, Pakistan, Sudan, the Brunei Finance Ministry and Saudi Arabia-based Islamic Development Bank to develop the Islamic capital and money markets.

The statement said a leading global legal firm and accounting and auditing firm had also been involved in the development of the master agreement.

It also said that because of a shortage of other syariah compliant instruments, commodity Murabaha was the main and most widely used Islamic money market product for liquidity management purposes by Islamic financial institutions.

The IIFM is working on several other initiatives to develop a truly globalized Islamic finance industry and Islamic capital markets, added the statement.

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