Monday, January 13, 2014

TMR: M’sian JV firm taps Mid-East Murabahah mart

By Sathish Govind

A Malaysian joint venture (JV) is targeting the lucrative Middle East market in commodity Murabahah which, according to the Saudi-based newspaper Arab News, has a daily trading volume of between US$8 billion (RM26.28 billion) and US$11 billion.

In order to tap into the Middle East market, in particular the Gulf region, the local Islamic advisory firm Ableace Raakin Sdn Bhd (ABRSB) has teamed up with the Amanie Group in a 50-50 venture with the creation of a company based in Dubai.

“The JV company, Ableace Raakin-Amanie, hopes to export the Malaysian expertise in Murabahah commodity to the Middle East since we see the region as a huge market with great potential,” ABRSB MD Azzizi Mohamad Ghazi said in an exclusive interview with The Malaysian Reserve (TMR).

Ableace Raakin-Amanie will capitalise on the Amanie Group’s existing network in the Middle East to facilitate its entry in the region, principally in Dubai, to make its mark in what it says is a “virtually untapped” market by Malaysian firms.

“The company will initially capitalise on existing clients of the Amanie Group in the United Arab Emirates (UAE), namely Bahrain, Saudi Arabia, Qatar and the Northern Af rican region while the company will continue to explore new clientele altogether,” Azzizi said.

Dealing in Murabahah commodity demands extensive knowledge in Islamic Shariah as well as in commodity trading, and is capital intensive.

In this venture, Ableace Raakin is backed by industry captains in the area of palm oil, banking and commodity trading, while the Amanie Group is well known for its Shariah advisory services that expands from Malaysia to the Middle East and Northern Africa region.

Bursa Suq Al-Sila (BSAS), which is Malaysia’s trading platform for Murabahah commodity, recorded an impressive 89% increase in its average daily trading value or RM2.3 billion in 2012, from RM1.2 billion in 2011, following growing acceptance among global market participants.

In the UAE, the main tool which Gulf based banks use to manage short-term liquidity is commodity Murabahah, which is a cost-plus-profit solution widely used in the Mena region as well as in Malaysia.

Azzizi said that while the company had started in 2006 and initially offered palm oil products as the underlying assets, its portfolio has evolved to include (it has since extended to) other commodity-based products such as rubber and cocoa.

He said that although the company had undertaken its first Murabahah transactions with Kuwait Finance House (Malaysia) Bhd, it has since extended its services to other banks and financial institutions in Malaysia and Singapore.

Of the advantages of the Murabahah method of financing, Azzizi said that clients are told of a fixed profit during financing term. “Installment terms agreed upon at inception of contract in assisting in cash flow budgeting and cash forecasting.”

THE MALAYSIAN RESERVE, 06 January 2014  

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