Dubai platform hosts first Islamic commodity trade

  • Share via facebook
  • Tweet this
  • Bookmark and Share

The Dubai Multi Commodities Centre (DMCC) has hosted the first transaction on its new sharia-compliant commodity trading platform, a deal done between two local banks, company officials told Reuters on Monday.

The AED50m (US$13.6m) facility signed by Noor Islamic Bank, the lending agent, and Commercial Bank of Dubai will be priced on Tuesday.

The Tradeflow platform launched by the DMCC this month is designed to permit Islamic banks and other institutions to manage their liquidity needs. It allows ownership of commodities to be tracked in a way which gives assurance that a "true sale" of assets has occurred - an important concept in Islamic finance.

Emirates National Oil Co and cable manufacturing firm Ducab provided the physical commodities backing the transaction: oil products and copper cables. Both firms are affiliates of Investment Corp of Dubai, the emirate's flagship investment vehicle.

DMCC, Dubai's government-owned commodities centre, hopes the maiden transaction encourages others to follow, its executive chairman Ahmed Bin Sulayem said in an interview.

"Some might assume the US or Europe have similar warrants but this is the only one of its kind in the world," he added.

Islamic banks cannot use conventional interbank money markets because of Islam's ban on interest, so they have struggled with a shortage of instruments to manage liquidity. Tradeflow deals are based on commodity murabaha, a common financing structure in Islamic banking.

Islamic banks have mainly used commodities from the London Metal Exchange to structure short-term funding deals, but DMCC hopes to challenge London for a piece of that business.

Tradeflow has over AED1bn worth of assets in trade receipts that have been approved for trading on its Islamic platform, including commodities such as base metals and foodstuffs such as rice, Tradeflow director Paul Boots said.

Contract terms such as tenor and fees are agreed privately between the two banks, he added. "The cost is going to be in line with what is currently done in the market."

Related:
Join the Discussion

Disclaimer:The view expressed here by our readers are not necessarily shared by Arabian Business, its employees, sponsors or its advertisers.

Please post responsibly. Commenter Rules

  • No comments yet, be the first!

Enter the words above: Enter the numbers you hear:

All comments are subject to approval before appearing

Further reading

Features & Analysis
Women edge into Gulf boardrooms as economies, societies shift

Women edge into Gulf boardrooms as economies, societies shift

Amina al-Rustamani, CEO of TECOM Investments, is leading the...

1
Dubai mulls rule change to lure more domiciled funds

Dubai mulls rule change to lure more domiciled funds

Proposed rules would create a new class of funds in the Dubai...

Gulf's rift over Qatar may slow investment, reforms

Gulf's rift over Qatar may slow investment, reforms

Analysts suggest dispute may not hurt immediately but could impact...

Most Discussed
  • 15
    Germany puzzled as UAE think tank ordered to close

    Matt, your words sound kind of funny given the role the Britain has played in this region for so many decades.
    And given the democratic tradition that... more

    Thursday, 17 April 2014 7:10 PM - one of the joes
  • 10
    UAE father who whipped son to death wins appeal

    "Under Sharia, a parent cannot be executed for killing their child"
    A spouse could be executed if he/she kills his/her spouse, as none of them is... more

    Friday, 18 April 2014 3:38 PM - Nihar
  • 3
    To diet or not to diet?

    It is best to eat by your blood type. Following this diet is miraculous. Generic diets don't always work as certain foods are not good for the individual... more

    Friday, 18 April 2014 11:49 AM - Shamira Mitha
  • 54
    Three UAE women attacked with hammer at London hotel

    I really feel that Arabian Business.Com should now close this comments page. This should be all about sympathy for the families not what it is/has turned... more

    Wednesday, 16 April 2014 1:06 PM - Adrienne
  • 51
    Why Dubai isn't a plastic city

    What is definitely not a plastic city. The Arabs have a culture dating back to several centuries. 50 years back Dubai was just a fishing village. Today... more

    Tuesday, 8 April 2014 3:49 PM - P. MADHUSUDAN
  • 48
    DMCC boss Ahmed Bin Sulayem entertains Robert Mugabe in Dubai

    @fga ''However today, simply because he decided to dispossess a few white farmers of their land and redistribute to the poorer indigenous blacks'' more

    Sunday, 13 April 2014 3:02 PM - Matt Williams