Said Charlie Sleightholme, Head of Commodity Murabaha Business at BGC in Dubai: "While trading of this product has been in existence for some time, our joint offering brings a modernisation to the process, offering speed, convenience and innovation to the execution of this popular product."
"We are thrilled to offer an exciting, world class mechanism for the trading of commodity murabaha which we believe will garner significant interest from the trading community both domestically and internationally," commented Paul Boots, Director, Tradeflow at DMCC.
"With BGC's premier global reputation, its relationships with top-tier institutions across the world and its leading electronic trading capabilities, we believe that commodity murabaha customers will see significant benefits in terms of efficiency and transparency. This, in turn, will continue to promote and assert Dubai's reputation as a preeminent global capital of Islamic finance."
Established in 2002 by Royal Decree, the DMCC is a strategic government initiative of the Government of Dubai designed to enhance trade flows through the UAE by providing infrastructure and an optimal environment allowing clients to fully benefit from both a regulated framework and convenient location.
The DMCC has helped to bridge the gap in the region between the commodity industry and trade finance by providing a mechanism for the issue of electronic warehouse receipts on behalf of the owners of stored commodities since 2004. In 2012, the DMCC Tradeflow platform unified these services, providing members with a holistic approach to the process of certifying commodities for the purposes of trade finance, as well as for the trade of locally stored commodities between Islamic banking institutions and their counterparties through the commodity murabaha mechanism.
*Murabaha is not an interest-bearing loan, which is considered riba (or excess) and forbidden under shari'ah (Islamic religious law), and is rather an acceptable form of credit sale. Murabaha is an Islamic financing structure in which an intermediary buys an asset with free and clear title to it. The intermediary and prospective buyer then agree upon a sale price (including an agreed-upon profit for the intermediary) that can be made through a series of installments, or as a lump sum payment.
Similar in structure to a rent-to-own arrangement, the intermediary retains ownership of the property until the loan is paid in full. It is important to note that to prevent riba, the intermediary cannot be compensated in addition to the agreed-upon terms of the contract. For this reason, if the buyer is late on their payments, the intermediary cannot charge any late penalties.