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The Shariah Advisory Council of Bank Negara Malaysia (the SAC) 173rd Meeting
The Shariah Advisory Council of Bank Negara Malaysia (SAC) in its 173rd meeting on 24 January 2017 discussed the following:
Proposal to Enhance Islamic Purchase with Recourse (Islamic PWR) Scheme by Cagamas
The SAC has approved the proposal of Islamic PWR with floating rate to facilitate the available financing products based on floating rate structure in the market. The applied contract for Islamic PWR depends on the type of transacted asset portfolio of Islamic financial institutions (IFIs). The applied contract for Islamic PWR is bai` al-dayn (sale of debt) orbai` al-dayn al-sila`i (sale of debt for commodities) for debt-based asset portfolio, whilst bai` al-a`yaan (sale of tangible asset) is applied for equity-based asset portfolio.
The SAC also endorsed the refinement to the existing Islamic PWR with top up mechanism by incorporating musawamah commodity transaction to effect the payment of subsidised amount from IFIs to Cagamas. In addition, the SAC endorsed the Islamic PWR with a price lower than the outstanding principal based on willing buyer willing seller concept.
This proposal allows IFIs to sell their asset portfolio to Cagamas for the purpose of liquidity management.
Shariah Issues Arising from Implementation of Policy Document Tawarruq
The SAC discussed the criteria of marhun (collateral) pledged to secure payment of debt arising from sale and purchase contract in tawarruq and decided that it should be in line with the criteria of marhun that will be prescribed in the Policy Document (PD) of Rahn.
The SAC also deliberated on rights of customers in taking delivery of the commodity in a tawarruq transaction and opined that the current requirements stipulated in the PD Tawarruq are sufficient to satisfy the requirements. However, the SAC requires a detailed explanation on market practices pertaining to the delivery issue in tawarruq in order to provide further guidance to minimise possible different interpretations by industry players.
