Collateralised Murabahah prescribed as Qualifying Financial Agreement
14 December 2023
A collateralised Murabahah that satisfies the conditions set out below has been prescribed as a Qualified Financial Agreement under the legislation set out in column 2 pursuant to the statutory Orders set out in column 3 of the Table below:
To qualify as a prescribed Qualified Financial Agreement,
both of the following conditions must be satisfied:
First, the transaction must be a “
collateralised Murabahah”, namely a Shariah compliant transaction
1 which comprise:
- sale and purchase of an asset2 by a seller to a purchaser on deferred payment term where the acquisition cost and the profit are disclosed to the purchaser before or at the time of entering into the sale and purchase transaction; and
- any agreement or arrangement which serves as financial collateral to secure the payment obligation arising from a sale and purchase of asset transaction under paragraph (a).
Second, the agreement or set of agreements in respect of the collateralised Murabahah transaction must contain a
netting provision3.
The prescription of collateralised Murabahah with a netting provision in the relevant agreement as a Qualified Financial Agreement means,
inter alia, that the right of the parties to enforce their rights under the agreement will not be affected in the event that the relevant authorities exercise their supervisory powers or issue directives that affect one or more parties to the agreement or in the event of insolvency of any party to the agreement.
The subsidiary legislation mentioned in column 3 of the Table above will come into operation on
18 December 2023.
Alert by Sharifah Shafika Alsagoff (Partner) of the Islamic Finance Practice of Skrine.
1 A “Shariah compliant transaction” is a transaction that complies with any ruling of the Shariah Advisory Council of Bank Negara Malaysia or the Shariah Advisory Council of the Securities Commission Malaysia, as applicable.
2 An “asset” refers to a commodity or any other property, whether tangible or intangible, that is recognised by Shariah as valuable, identifiable, deliverable, and is already in existence and owned by the seller.
3 A “netting provision” is a provision in an agreement which provides that upon the occurrence of the events specified by the parties in the agreement, all obligations owed by one party to another party under all transactions are reduced to or replaced with a single net amount in accordance with the agreement.
This alert contains general information only. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such. For further information, kindly contact skrine@skrine.com.