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DMCC, brokerage in deal to promote Islamic commodity product

dmcc_towersBGC Partners, a global brokerage company servicing the wholesale financial and real estate markets, and the Dubai Multi Commodity Centre announced a partnership to promote a Sharia-compliant Commodity Murabaha mechanism.

This marks the first agreement between DMCC and an interdealer broker to jointly market Commodity Murabaha on the DMCC Tradeflow Platform, DMCC said in a statement.  Launching shortly, this partnership offers the trading community a faster, more efficient method of trading this niche financial product and promotes Dubai as the global centre of Islamic finance

“We are delighted to partner with the DMCC and launch a Sharia-compliant Commodity Murabaha mechanism,” said Charlie Sleightholme, Head of Commodity Murabaha Business at BGC in Dubai, which is regulated by the Dubai Financial Services Authority. “While trading of this product has been in existence for some time, our joint offering brings a modernization to the process, offering speed, convenience and innovation to the execution of this popular product.”

Paul Boots, Director, Tradeflow at DMCC pointed out that with BGC’s premier global reputation, its relationships with institutions across the world, Commodity Murabaha customers will see significant benefits in terms of efficiency and transparency.

Murabaha is an Islamic financing structure, where an intermediary buys an asset with free and clear title to it. The intermediary and prospective buyer then agree upon a sale price (including an agreed upon profit for the intermediary) that can be made through a series of installments, or as a lump sum payment. Murabaha is not an interest-bearing loan, which is considered riba (or excess).

Murabaha is an acceptable form of credit sale under Sharia (Islamic religious law). Similar in structure to a rent to own arrangement, the intermediary retains ownership of the property until the loan is paid in full. It is important to note that to prevent riba, the intermediary cannot be compensated in addition to the agreed upon terms of the contract. For this reason, if the buyer is late on their payments, the intermediary cannot charge any late penalties.