Commodity Murabahah as practiced by Islamic financial institutions : a critical analysis from fiqh perspective

Abstract

Commodity MurābaÍah is an example of product innovation in Islamic banking and finance which is based on MurābaÍah and Tawarruq transactions. Both traditional and contemporary Islamic jurists hold different opinions on its legality in the light of Fiqh. This study explains the nature of Commodity MurābaÍah as practiced by Islamic Financial Institutions from the SharīÑah perspective and outlines the justifications for its permissibility and impermissibility. This study is aimed at understanding Commodity MurābaÍah trading especially the current practical operations and describing its preferred structures to facilitate Islamic financing products, Islamic investment and deposit services products, liquidity management products, Islamic hedging products, and Capital market products. This study presents a number of identified controversial SharīÑah issues and how the Bursa resolves those issues. This study attempts to illustrate in detail the business operational model of Commodity MurābaÍah as introduced by Bursa Sūq Al-SilaÑ operated by Bursa Malaysia. The illustration of 20 different diagrams portray the pith and marrow of the entire discussion on Commodity MurābaÍah trading which forms the current practical observation. This research evaluates the SharīÑah compliance status of the whole operation.