Shariah Requirements for Commodity Value Proposition for CSP Bursa Suq Al-Sila Overview Salient Features Transaction Flow The Agenda 3 Types of Contracts Contract of Guarantee Contract of Gift Contract of Partnership Contract of Exchange Contract of Saving Kafalah Hawalah Rahnu Takaful Hibah Qard Hasan Waqf Wasiyah Wadiah Ijarah Jualah Bai Salam Istina Sarf Murabahah Tawarruq Musharakah Mudharabah Contract of Delegate/ Proxy Wakalah Islamic Markets COMMODITY MURABAHAH -Murabahah is the most globally accepted Shariaah concept used to manage short-term liquidity. -When a commodity (e.g. cpo, rbd olein) is used as an underlying, it is deemed as a Commodity Murabahah transaction -Traded on spot basis (up to T+2 business days) -Murabahah (cost-plus sale) occurs when a Party A purchases the commodity and sells to Party B on a deferred payment terms -Party B with ownership right to the commodity can sell the commodity for cash -The purchase of commodity on deferred payment basis and selling it for cash is made under the Tawarruq contract. Tawarruq is a tripatite arrangement whereby a buyer buys an asset from a seller on deferred payment and subsequently sells the asset to the third party for cash with a price lesser than the deferred price, for the purpose of obtaining cash. This transaction is called tawarruq mainly because when the buyer purchases the asset on deferred terms, it is not the buyer's interest to utilize or benefit from the purchased asset but rather to facilitate him to attain liquidity Bursa Suq Al-Sila Shariah Requirements for Commodity Unencumbered Unencumbered not tagged to any sale at point of offer Specified location during offer Commodity Commodity must be owned by supplier or agent (CSP) Defined specification quantity & quality Commodity must be in existence 6 Value Proposition for CSP Business as usual for suppliers Good profiling by supporting a national effort No membership cost Delivery cost is at the hence better value Delivery cost is at the expense of purchaser, hence better value Minimize holding cost of idle Commodity inventory Extra revenue from Commodity inventory 7 Bursa Suq Al-Sila Fee Sharing Structure: 8 Type of Fee (per million basis)* Trading Fee 1 RM 15.00 * Note: In its equivalent currency value 1 Paid by CTP for using the platform 2 Based on RM 15 paid by CTP Fee Sharing Structure 2 (per million basis)* Supplier RM 9.00 BMIS RM 6.00 Islamic Markets Income Simulation: Example: Location Volume (MT) Price (RM)* Total Value (RM Mil) Kuantan 2,500 4,000 10.0 Tawau 2,500 4,000 10.0 Sandakan 2,500 4,000 10.0 Lahad Datu 2,500 4,000 10.0 Total Offer 10,000 4,000 40.0 Potential income for CSP : 9 Offer Amount Fee Income Daily Weekly Monthly Annually RM40 million RM9 RM360 RM1,800 RM7,200 RM86,400 RM400 million RM9 RM3,600 RM18,000 RM72,000 RM864,000 10 The worlds first multi-commodity and multi-currency commodity trading platform to support murabahah transactions A hybrid market offering members a choice of trading electronically through a secured web-based system or through traditional voice broking Bids and Offers are placed daily and trades are matched electronically Commodities are deliverable upon election of the purchaser Members are governed by a set of trading rules encompassing best market practices and Shariah principles Housed in a Shariah-compliant wholly-owned subsidiary of Bursa Malaysia called Bursa Malaysia Islamic Services Sdn Bhd (BMIS). Bursa Suq Al-Sila Overview 11 Item Details Basic Feature Real deliverable market - delivery is by default Allows periodical Shariah verification audit Underlying E-cert representing ownership of commodity in BSAS Contract specification Participants Commodity Supplying Participant (CSP) Commodity Trading Participant (CTP) Taking Delivery Buyer indicates intention directly to BMIS Leaves open position beyond market closing for the day Trading Session Sunday - Friday : 10.00am to 10.30pm Friday (1 st session) : 10.00am to 12.30pm (break) : 12.30pm to 2.30pm (2 nd session) : 2.30pm to 10.30pm Bursa Suq Al-Sila Salient features 12 Commodity Payment (spot) Payment (deferred) Islamic Bank A Client / Islamic Bank B 2 1 4 Bursa Suq Al-Sila Transaction Flow 13 Commodity Supplier A Commodity Supplier B Commodity Supplier C Commodity Supplier D 5 3 Commodity Payment (spot) Payment (deferred) Islamic Bank A Client / Islamic Bank B 2 1 4 Bursa Suq Al-Sila Transaction Flow 14 Commodity Supplier A Commodity Supplier B Commodity Supplier C Commodity Supplier D 5 3 1 CSP key in the commodities offered for the day The stocks will be accumulated in BSAS inventory Commodity Payment (spot) Payment (deferred) Islamic Bank A Client / Islamic Bank B 2 1 4 Bursa Suq Al-Sila Transaction Flow 15 Commodity Supplier A Commodity Supplier B Commodity Supplier C Commodity Supplier D 5 3 2 Suppliers sell commodity directly to IBA on cash, ownership transfers to IBA Bursa ensures delivery of commodity to IBA if delivery is requested IBA credits payment into BMIS account (BMIS as settlement agent for Suppliers) E-Certificate generated by system detailing trade information E-CERTS - A Commodity Payment (spot) Payment (deferred) Islamic Bank A Client / Islamic Bank B 2 1 4 Bursa Suq Al-Sila Transaction Flow 17 Commodity Supplier A Commodity Supplier B Commodity Supplier C Commodity Supplier D 5 3 3 IBA sells commodity to its Client/IBB at marked-up price, on deferred payment basis Ownership transfers to Client/IBB as evidenced in the eCert E-CERTS E-CERTS - B Commodity Payment (spot) Payment (deferred) Islamic Bank A Client / Islamic Bank B 2 1 4 Bursa Suq Al-Sila Transaction Flow 19 Commodity Supplier A Commodity Supplier B Commodity Supplier C Commodity Supplier D 5 3 4 Client/IBB sells CPO to BMIS on cash BMIS debit its settlement account for Client/IBB Ownership transfers to BMIS as evidenced in the eCert E-CERTS E-CERTS - C Commodity Payment (spot) Payment (deferred) Islamic Bank A Client / Islamic Bank B 2 1 4 Bursa Suq Al-Sila Transaction Flow 21 Commodity Supplier A Commodity Supplier B Commodity Supplier C Commodity Supplier D 5 3 5 BMIS offer (to sell) & Suppliers bid (to purchase): matching done on random basis Ownership transfers to Supplier Commodity may or may not be reoffered into system Commodity Payment (spot) Payment (deferred) Islamic Bank A Client / Islamic Bank B 2 1 4 Bursa Suq Al-Sila Transaction Flow 22 Commodity Supplier A Commodity Supplier B Commodity Supplier C Commodity Supplier D 5 3