Murabahah - Overview

Transcription

1. BNM /RH/STD 028-4 Islamic Banking and Takaful Department Murabahah Page 4/43 PART A: OVERVIEW 1. 1.1 Introduction Compliance with Shariah requirement is a prerequisite in ensuring legitimacy of Islamic financial products and services. Failure to observe the essential conditions of a specific Shariah contract may render the financial transactions entered between an Islamic financial institution (IFI) and a customer to be invalid and thus, may lead to adverse impact on the institutional safety and soundness. In this regard, Bank Negara Malaysia (the Bank) embarks on the development of a Shariah contract-based regulatory policy to enhance end-to-end compliance with Shariah and therefore, ensure the integrity and sustainability of the IFI. 1.2 The Shariah contract-based regulatory policy consists of two components, namely Shariah requirements and operational requirements. The first component highlights the salient features and essential conditions of a specific Shariah contract. Clear stipulation of Shariah rulings pertaining to a particular contract is intended to facilitate sound understanding and cohesive adoption among the IFI. The second component outlines operational requirements encompassing core principles underpinning sound banking practices, expectations for good governance, robust documentations, fair market practices and effective risk management. These regulatory expectations aim to complement and support effective application of the Shariah contract. 1.3 Murabahah contract is a type of “trust sale” contract under Shariah in which the purchaser relies upon the integrity of the seller to acquire the desired Shariah compliant asset at a reasonable cost. In line with the underpinning element of trust in murabahah contract, the seller is required to disclose the breakdown of the selling price to the Issued on: 23 December 2013
2. BNM /RH/STD 028-4 Islamic Banking and Takaful Department Murabahah Page 5/43 purchaser, which comprises the acquisition cost and the mark-up or profit margin. 1.4 In the context of Islamic financial transaction, an IFI perform both roles of a trader and a financier under the murabahah contract. As a trader, the IFI undertake to acquire a specific asset from the vendor or supplier based on the customer’s specification and subsequently sells the asset to the customer with full disclosure of the asset’s acquisition cost and profit margin. Typically, the IFI would accord deferred settlement terms on the agreed selling price to the customer under the murabahah contract to facilitate the financing arrangement. 1.5 An IFI may undertake direct dealing with the supplier or appoint the customer as an agent to acquire the asset on its behalf for the purpose of murabahah transaction. Shariah emphasises the need for the seller to secure the ownership and assume the risk associated with ownership of the asset prior to the execution of the murabahah contract, regardless of the preceding undertaking provided by the customer to purchase the asset. 1.6 In terms of risk profiling, the execution of murabahah transaction exposes an IFI to several types of risks that include the operational risks arising from the asset ownership, market risk associated with the potential loss in the value of the asset owned by IFI as well as credit risk arising from the losses associated with the potential failure of the customer to settle the outstanding debt obligation. As such, it is pertinent for the IFI to establish a comprehensive risk management framework to support effective management of the risks associated with murabahah transaction Issued on: 23 December 2013
3. BNM /RH/STD 028-4 2. 2.1 Islamic Banking and Takaful Department Murabahah Page 6/43 Policy objectives This policy document aims– (a) to provide reference on the Shariah rulings associated with murabahah contract; (b) to set out key operational requirements with regard to the implementation of murabahah contract; and (c) to promote end-to-end compliance with Shariah requirements as well as to ensure sound banking practices and consumer protection are implemented throughout the life cycle of murabahah contract. 3. 3.1 Scope of policy document This policy document covers murabahah contract and murabahah to the purchase orderer arrangement (MPO). 3.2 This policy document complements the rulings by the Shariah Advisory Council of the Bank (SAC) as well as the relevant regulatory framework on risk management, capital adequacy and governance issued by the Bank. 4. 4.1 Applicability The policy document is applicable to all Islamic financial institutions as defined in paragraph 8.2. 5. 5.1 Legal provisions The requirements in this policy document are– (a) specified pursuant to sections 29 (1) and (2) of the Islamic Financial Services Act 2013 (IFSA); and Issued on: 23 December 2013
4. BNM /RH/STD 028-4 (b) Islamic Banking and Takaful Department Murabahah Page 7/43 issued pursuant to sections 41 and 129(3) of the Development Financial Institutions Act 2002 (DFIA). 6. 6.1 7. 7.1 Effective date This policy document comes into effect on 1 January 2014. Policy superseded The Shariah Parameter Reference 1 – Murabahah issued on 26 August 2009 is superseded. 8. 8.1 Interpretation The terms and expressions used in this policy document shall have the same meanings assigned to them in the Financial Services Act 2013 (FSA), IFSA and DFIA, as the case may be, unless otherwise defined in this policy document. 8.2 For the purpose of this policy document– “S” denotes a standard, requirement or specification that must be complied with. Failure to comply may result in one or more enforcement actions; “G” denotes guidance which may consist of such information, advice or recommendation intended to promote common understanding and sound industry practices which are encouraged to be adopted. “Islamic financial institutions” means – (a) Islamic banks and takaful operators licensed under the IFSA; Issued on: 23 December 2013
5. BNM /RH/STD 028-4 (b) Islamic Banking and Takaful Department Murabahah Page 8/43 licensed banks and licensed investment banks under the FSA approved under section 15(1)(a) of the FSA to carry on Islamic banking business; and (c) prescribed institutions under the DFIA approved under section 129(1) of the DFIA to carry on Islamic banking business or Islamic financial business. 9. 9.1 Related legal and policy documents This policy document must be read together with the legal and policy documents listed in Appendix 5. Issued on: 23 December 2013