Debate over commodity murabahah

STARBIZ:Some Islamic scholars think commodity murabahah should be avoided as much as possible, saying it closely resembles an interest-bearing transaction. Is there a better alternative financing structure?

THE concept of commodity murabahah (or tawarruq in some jurisdictions) has only recently been widely applied in Islamic finance, along with other syariah contracts such as mudarabah, musharaka and bai murabahah.

The application of this trade-related structure with a pre-determined profit rate (or pre-agreed “margin” or “mark-up”) is possible in syariah-compliant financing and deposit products as well as in liquidity management/treasury instruments and other investment products/securities.

However, resistance still exists on the ground from some critics who say that commodity murabahah-based financial products bear a striking resemblance to interest-based products...CONTINUE READING