THE RISE OF ISLAMIC FINANCE: 2-STEP MURABAHA
AbstractThe Islamic finance industry should refrain from replicating conventional tools by complicated scams which hold Arabic names. There is enough room for product development within the sphere of Islamic Shari’ah. Today, the Islamic finance industry is still heavily recourse to commodity Murabaha for liquidity management regardless of prohibition of the practice by Islamic Fiqh Academia. This mainly results from the lack of a proper liquidity management alternative for Islamic banks. Although Sukuk can serve the purpose to some extent, not only commodity Murabaha but also Sukuk is not expected to underpin the Islamic finance industry for the future. In this paper, 2-Step Murabaha is proposed as a strong alternative to the popular but questionable Islamic resource mobilization/liquidity management tools. It is suggested that the Islamic finance industry healthily rise on 2-Step Murabaha. The literature review part of the paper dwells on Islamic finance in the context of resource mobilization/liquidity management. The disbursement procedures in full detail are explained for the 2-Step Murabaha transaction in a case of a Gambian importer and an Egyptian exporter of yarn. Then, the structure is evaluated to suggest the 2-Step Murabaha to be embedded in stock exchanges in order to facilitate international trade while serving the Islamic finance industry for liquidity management.
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