Monday, August 24, 2009

Corporate Murabahah Master Agreement to boost money mart

The Corporate Murabahah Master Agreement (CMMA), a standard document for deposit-taking between financial institutions and corporate customers, was launched yesterday, in a move to boost the Islamic money market.
Association of Islamic Banking Institutions Malaysia (AIBIM) President, Datuk Zukri Samat described the launch as timely as it would unlock the vast potential of the domestic Islamic money market. He said the average daily transactions is estimated to top RM6 billion, as such, CMMA could assume a significant role in raising the innovation level of deposit products.
"The adoption of the CMMA for corporate deposits is expected to result in cost and resource savings for both Islamic banks and corporations," Zukri said during the launch of the master agreement in conjunction with the Malaysian Corporate Conference 2009 in Kuala Lumpur yesterday.
AIBIM also signed a memorandum of understanding with Takaful Malaysia, ACR Retakaful, Astro, Maesat and the Employees Provident Fund to part icipate i n CMMA. Zukri said the standard agreement would specify a common modus operandi for Islamic financial institutions in accepting deposits via commodity Murabahah.
"It will help eliminate the need for corporate customers to vet through each and every agreement proposed by different Islamic financial institutions on the same product.
The agreement will also provide certainty and a standard methodology in ensuring principal and profit due to corporate depositors," Zukri explained. Being fundamentally a deposit-taking product, the Murabahah arrangement naturally involves two main parties, namely the Deposit Placing Entity (DPE) and the Deposit Taking Ent it y (DTE).
The DPE or the principal is a company or corporation which intends to place its surplus funds with the bank. Conversely, the DTE is the bank itself. The purchase by the bank, in its capacity as the agent of the principal, will be effected upon spot payment and immediate delivery by suppliers. Zukri said the sale price consisted of two elements, the purchase price initially paid by the principal, and an amount that represents the profit for the principal on the sale of the commodities to the bank.
Earlier, Second Finance Minister, Datuk Seri Ahmad Husni Hanadzlah, who attended the launch, said the Islamic banking association would definitely promote its usage and application with local and foreign Islamic financial institutions globally.
He said for Islamic finance to be accepted as a viable mainstream system on a global scale, there must be elements of cost competitiveness, accessibility and adaptability.
"Shariah compliant products need to have the ability to be replicated across as many markets, he said, adding that it would encourage Islamic finance to be adopted in relatively under-developed financial markets and also in the more sophisticated financial capitals of the world. — Bernama (The article appeared in The Malaysian Reserve, Aug 21, 2009, p8)

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