Gold Murabaha financing concept
Question:
I want to ask a question relating to Gold.
Can a financial institution purchase gold on behalf of client and sells the same to client on mark up on deferred basis. Basically thr way murabaha for asset financing works in case of vehicle and so forth.
What could be done if the asset to be finance itself is gold. Can we earn mark up on this. If not, what's the alternative.
Jazakllah khair for your suggestions
Answer:
In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.
The issue of trading gold for cash is based on the principle of Bay al-Sarf (Islamic currency trading). Therefore all the rules and laws of Bay al-Sarf will be applicable. The laws and regulations of Bay al-Sarf are very specific and clear.
The concept of Murabaha for gold is complex and intricate yet not impermissible if constructed in a specific shariah compliant manner such as the complete segregation and independency of the different “legs” and “contractual parties” involved in the proposed transaction. The issue of immediate Qabdh (possession) and immediate effectuation of sale (Bay Baat/Nafiz) through a direct agent of the client/bank is of specific importance as well as the interposing of Qabdh from Qabdh Aman to Qabdh Dhaman to ensure the correct effectuation of the transactional modalities is equally critical to the validity of the proposed Murabaha. Nevertheless a commodity Murabaha based on Tawarruq with gold has been ruled impermissible by the majority of scholars. We cannot issue a blanket ruling and would prefer for you to submit the actual proposed financial construct for our shariah review. The issues of pertinent importance are as follows:
1. Does the client/bank receive physical and immediate possession (Qabdh)?
2. Does the bank/client devolve the issue of possession to a custody agent at a vault?
3. Does the vault provide an immediate warehousing receipt or gold deposit certificate?
4. What is the nature of the relationship between the trader/broker, vault, client and the bank?
5. What would the underlying agreements refer to in the case of a Murabaha transaction?
6. How does the client swap possession with that of the bank to effectuate a valid shariah compliant Murabaha transaction?
You can learn more on this subject by downloading a copy of my book called “Your Brief Guide to Islamic Finance” via the website: www.shariahbusiness.com. This book is a series of lectures and notes delivered to various students of Islamic Finance, banking and economics and the forward has been documented by great luminary scholars including our respected Hazrat Mufti Ebrahim Desai Saheb Rahmatullahi Alayhi.
You can also listen to a weekly programme called “Shariah Compliant Business Campaign” which addresses contemporary business matters on Channel Islam International to learn more here: http://ciiradio.com/listen-live/
You are welcome to contact us directly at the Darul Iftaa for any advice to provide specific guidance on reviewing specific financial solutions and products at: https://www.shariahbusiness.com/about-us/ask-a-question/
and Allah Ta'ala Knows Best
(Mufti) Ismail Desai
Chairman of Shariah Board and Fatwa Committee
Darul Iftaa, Durban, South Africa
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