Bahrain’s stock exchange plans to launch a range of Islamic investment products, including a novel equity-based murabaha financing tool and Islamic real estate investment trusts (REITs), its chief executive told Reuters.

The Bahraini stock market is seeking to attract regional funds in the face of heavy competition from bigger markets such as Saudi Arabia, Qatar and the United Arab Emirates; Islamic financial products are a major part of the strategy.

The exchange aims to host trading of sukuk (Islamic bonds), which at present is mostly done over the counter, said Shaikh Khalifa bin Ebrahim Al-Khalifa, appointed as chief executive of Bahrain Bourse in May.

“Banks want a central counterparty, a more appropriate framework to trade, and that is what we are aiming to provide.”

Last month, Bahrain Bourse appointed scholar Osama Mohammed Bahar as sharia advisor to oversee its Islamic financial products.

The “murabaha through equities” platform will be launched before year-end, Al-Khalifa said.

Murabaha is a common structure in Islamic finance; an institution agrees to purchase assets from a counterparty which promises to buy them back with an agreed mark-up at a later date.

The commodities-based version of murabaha, known as tawarruq, is used by some banks to manage their short-term funding, but the choice of commodities as the underlying asset has been criticised as lacking sufficient ties to the real economy, an important principle in Islamic finance. Some religious scholars have argued there is no effective change in ownership of the commodities and little if any exposure to their price movements.

“It is a highly debatable product in Islamic finance, where many of the scholars saw that trading of the same commodity on the same warehouse is not necessarily sharia-compliant,” Al-Khalifa said.

Published in Dawn, October 9th, 2014



Corruption index
27 Jan, 2022

Corruption index

The Transparency report punches a hole in the self-righteous façade of a party that has long beaten the drum of accountability.
27 Jan, 2022

Oslo meeting

A DILEMMA continues to confront the international community where Afghanistan is concerned: whether or not to...
27 Jan, 2022

Sanitary workers’ rights

RELIGIOUS discrimination in Pakistan has many faces and one of its most troubling manifestations is the virtual...
Failure of accountability
Updated 26 Jan, 2022

Failure of accountability

THE resignation of PTI government’s accountability czar Barrister Shahzad Akbar is a blow to the party’s central...
26 Jan, 2022

New freight service

THE launch of a new railway freight service connecting the Karachi port with the industrial and commercial centres ...
26 Jan, 2022

Flying curbs

THE unexpected decision of the European Union Aviation Safety Agency to continue its ban on PIA operations to EU...