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Islamic Treasury Products: An Update
Prof Datuk Dr Azmi Omar
Glossary of Islamic Financial Terms
Commodity Murabahah
Programme (CMP-i)
Islamic Cross Currency Swap
(ICCS)
Islamic Forward Rate
Agreement (IFRA)
Islamic Profit Rate Swap
(IPRS)
Low Return
Maturity mismatch
A trade transaction designed for investment purposes
as well as to mobilize depositors’ fund. It is
introduced as an alternative innovation to liquidity
management instruments in the broad Islamic Money
Market spectrum.
An arrangement between 2 parties to exchange a
series of profit (interest) and/or principal payments
denominated in one currency for another series of
profit (interest) and/or payments denominated in
another currency, based on a notional principal
amount, over agreed period.
An agreement between 2 parties to exchange one
payment of profit (interest) denominated in a single
currency for another payment of profit (interest)
denominated in the same currency, based on a
notional principal amount, at a single specified
period.
An agreement to exchange profit/return/coupon rates
between two counterparties (normally consist of a
Fixed Rate Party with a Floating Rate Party or a
Floating Rate Party with another Floating Rate Party
or any other variant).
Returns from short term investments tend to be low
as compared to conventional.
Liabilities are short term and assets are long term.
List of Islamic Treasury Products and Instruments in Malaysia
Product
General Investment Account-i
(GIA-i)
Special Investment Account-i
(SIA-i)
Negotiable Debt Certificate-i
(NDC-i)
Shari’ah
Principle
Mudharabah
Mudharabah
BBA
Bai al-Dayn
Negotiable Instrument of
Deposit-i (NID-i)
Government Investment
Issue-i (GII-i)
Mudharabah
Qardul Hasan
Bai Al-Inah,
Definition
Refers to an arrangement made
between two parties i.e. the fund
provider and the entrepreneur
(who provides expertise) to enable
the entrepreneur to carry out
business projects. The profitsharing ratio needs to be predetermined during the agreement.
In the case of losses, the losses are
to be borne by the provider of the
funds*.
* Unless the loss arises out of
willful
negligence,
misappropriation
by
the
entrepreneur, etc.
Refers to the sale of goods on a
deferred payment basis at a price
which includes a profit margin
agreed to by both parties.
Refers to debt financing, i.e. the
provision of financial resources
required for production, commerce
and services by way of
sale/purchase of trade documents
and papers. It is a short-term
facility with a maturity of not
more than a year. Only documents
evidencing real debts arising from
bona fide commercial transactions
can be traded.
Refers to an interest-free loan. The
borrower is only required to repay
the principal amount borrowed,
but he may pay an additional
amount at his absolute discretion,
as a token of appreciation.
It refers to a contract, which
involves sell and buy back
Bank Negara Negotiable
Notes-i (BNNN-i)
Private Debt Securities-i
(PDS-i)
Bai Al-Dayn
BBA
Bai Al-Inah
transactions of an asset by a seller
to the customer. The seller will sell
the asset on cash basis but the
customer will buy back the asset
on deferred payment at a price
higher than the cash price.
-
Bai Al-Dayn
Bai Al-Inah
-
BBA
Murabahah
Bai Al-Dayn
BBA
Refers to the sale of goods at a
price which includes a profit
margin in addition to the cost.
Such a contract is valid on
condition that the price, other costs
and the profit margin of the seller
are stated at the time of the
agreement on the sale.
Refers to an arrangement under
which the lessor leases an
equipment, building or other
facility to a client at an agreed
rental against a fixed charge, as
agreed by both parties.
Refers to a contract of sales and
purchase of assets by specification
or order where the price is paid in
advance but the assets are
manufactured or produced and
delivered at a later date.
Refers to an agreement whereby
payment is made immediately
while the goods are delivered at a
later date. It is equivalent to an
advance payment.
-
Bai al-Dayn
Murabahah
Bai Al-Dayn
-
Ijarah
Istisna’
Salam
Sell and Buy Back
Agreement-i (SBBA-i)
Accepted Bills-I