Innovations in Islamic Finance 2015: Nasdaq Dubai Murabaha platform
Adviser: Emirates Islamic
There has been an odd arrangement at work for Islamic financial institutions needing quick, liquid access to liquidity: they have been going not to some local market, nor to each other, but to the London Metal Exchange. It makes sense: the LME is a peerlessly liquid market for commodities, which clearly fit the bill of Shariah compliance. But wouldn’t it be easier, and a greater show of faith in local markets, to transact in the Middle East?
That’s the premise behind Nasdaq Dubai’s new Murabaha platform, a collaboration between Nasdaq Dubai and Emirates Islamic, launched in April 2014.
The platform uses Shariah-compliant certificates that are traded on Nasdaq Dubai’s Central Securities Depository. The certificates are based on wakala investments such as sukuk from Emirates Islamic and other financial institutions. Islamic banks and finance companies can use those certificates to provide cash financing to customers; customers can buy and sell the certificates within minutes through Emirates Islamic Financial Brokerage. Some of these are small deals, a few thousand dirhams; some can run to many millions.
This is not the only way customers can get hold of murabaha, but it has several advantages over alternatives.