KUALA LUMPUR - Bank Negara announced Friday rules for a standard application of the Murabahah financing structure, seeking a common reading of Islamic law to help the industry grow.
Bank Negara's Murabahah guidelines follow other recent efforts at harmonization by Islamic banks and Bahrain-based industry body AAOIFI, which would make it cheaper to conduct Shariah financial transactions and encourage cross-border deals.
The Murabahah guidelines "would contribute to further harmonization in the interpretation and application of Shariah views and opinions, especially among Shariah committee members," the central bank said in a statement.
While the industry agrees that gambling, alcohol and interest-based lending are off-limits, it is divided on instruments such as hedge funds and derivatives.
This has made it difficult to sell some products across borders, with one jurisdiction disagreeing with another on whether a product is Islamic.
But some bankers say the lack of standardization promotes innovation, with Islam allowing for differences in views.
Bank Negara's rules apply to Islamic financial institutions in Malaysia, which has the world's largest Shariah bond market.
Murabahah is one of the most popular modes used by banks in Islamic countries to promote riba-free transactions. Typically it is used in asset financing, property, micro finance as well as in import/export of commodities.
© The Saudi Gazette 2009
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