Transcript CHAPTER 7 :TREASURY - Minda Intelektual | Segalanya

CHAPTER 7 :TREASURY
•
ISLAMIC INTER-BANK MONEY MARKET
•
FOREIGN EXCHANGE TRADING
Prepared by: Mohammad Salleh Bin Abd Saha
Razizi bin Tarmuji
razizi.uitm.edu.my
What is Islamic Inter-Bank
Money Market ?





Introduced : BNM on 3 January 1994.
Short-term intermediary : Provide ready source of
short-term investment outlets based on the principles
of shariah.
Aim : Facilitating the bank with shortage of liquidity
and with excess of liquidity.
Match the funding requirement.
Participating banks : Commercial banks, Merchant
Banks, eligible Finance companies and eligible
discount houses (bill broker).
razizi.uitm.edu.my
Types of Instruments of IIMM
1. Mudharabah Inter-Bank Investment
2.
Wadiah Inter-Bank Acceptance
3.
Government Investment Issue
4.
Bank Negara Negotiable Notes
5.
Sell and Buy Back Agreement
6.
Cagamas Mudharabah Bonds
7.
When Issue
8.
Islamic Accepted Bills
9.
Sukuk BNM Ijarah
razizi.uitm.edu.my
razizi.uitm.edu.my
1.Mudharabah Inter-Bank Investment
Surplus IB
(INVESTOR BANK)







Invest its surplus funds
Deficit IB
(INVESTEE BANK)
Based on Mudharabah (profit-sharing) contract.
Period : Overnight to 12 months.
Min : RM 50,000
Rate of return : Agreed up-front
Actual return : End of the investment period
Upon maturity : Principal + Profit
BNM introduced the minimum benchmark rate.
razizi.uitm.edu.my
2. Wadiah Acceptance

IB institutions placed their surplus fund with BNM.

Acceptor of funds(Custodian/Trustee) : Take care of the
funds without to pay any return on the account.

Hibah(Gift) : Any dividend paid by bank.

Facilitate liquidity management : BNM use this to absorb
excess liquidity from the IIMM.
Islamic
Banks
BNM
3. Government Investment Issues
(GII)




Government raise funds : Issuance of non-interest bearing.
Primary Reason : IB want to hold liquid papers meet statutory
liquidity requirements and investment (To park idle fund).
:Introduced in July1983 under the concept of Qard al-Hasan
On 15 June 2001, the Government of Malaysia with the advice by Bank
Negara Malaysia, issued a 3 -year GII of RM2.0 billion under a new concept
of of Bai’ al-Inah. The move therefore had added depth to the IIMM as the GII
is now tradable in the secondary market via the concept of Bay’ al-dayn (debt
trading).
razizi.uitm.edu.my
4. Bank Negara Monetary Notes-i
(BNMN-i)

Islamic securities issued by BNM.

Maturity : Lengthened from 1 year to 3 years.

Can be issued depends on investor’s demand
 (i)
Discounted Basis
 (ii) Coupon-Bearing Basis
razizi.uitm.edu.my
5. Sell and Buy Back Agreement
(SBBA)
Entered by : 2 parties.
 Bilateral Agreement.
 Two separate agreement :

 (1)
First Agreement : Seller (owner) sells & Buyer
(investor) buys at a specified price agreed by both.
 (2)
Forward Purchase Agreement : Buyer promises to sell
back to the original owner who should buy it back at a
specified price and future date.
razizi.uitm.edu.my
6. Cagamas Mudharabah Bonds




introduced on 1 March 1994 by Cagamas Berhad
Main OBJECTIVE : Finance the purchase of Islamic
housing debts from FI.
Cagamas purchase the pooled debt on the basis of
Bai’ al-Dayn.
For securitization of the debts : They created
certificates (sukuk/bond) on the basis of Mudharabah.
Bondholder
Cagamas
Share the earned profits
according to the ratios agreed
earlier by both parties.
razizi.uitm.edu.my
7. When Issues (WI)


Definition : A Transaction of sale and purchase of
debt securities before the securities is being issued.
The National Shariah Advisory Council viewed that
the WI transaction is allowed based on the
permissibility to promise for sale and purchase
transactions.
razizi.uitm.edu.my
8. Islamic Accepted Bills (IAB)


Objective : Encourage and promote domestic and
foreign trade.
Types of IAB :
Imports and Local Purchases
 Exports and Local Sales


Under concept :
Al-Murabahah
 Bai ad-Dayn

razizi.uitm.edu.my
(i) Imports & Local Purchases

Financing under : Al-Murabahah
BANK appoints
CUSTOMER
Customer allowed: A deferred payment
term up to 200 days.


Securitized by : Bill of Exhange
Bai al-Dayn : if bank decides to sell IAB
To the 3rd party.
CUSTOMER
purchases the goods
from SELLER and pay
on behalf of BANK

razizi.uitm.edu.my
Resell goods to the
CUSTOMER at a
price + profit margin
(ii) Export & Local Sales

Traded under : Bai al-Dayn
EXPORTER
prepare
export
documentation
Sent to the
IMPORTER’s
BANK
EXPORTER
shall draw
from CB a
new bill of
exchange as
a substitution
bill, this will
be the IAB.
razizi.uitm.edu.my
BANK
purchases the
IAB
Proceeds
credited to
EXPORTER’s
account
9. Islamic Negotiable Instruments
(INI)
The INI covers two instruments such as: i)
Islamic Negotiable Instruments of Deposit (INID)
The applicable concept is Al-Mudharabah. It refers to a sum of
money deposited with the Islamic banking institutions and repayable
to the bearer on a specified future date at the nominal value of
INID plus declared dividend.

ii)
Negotiable
Islamic
Debt
Certificate
(NIDC)
The transaction involves the sale of banking institution's assets to the
customer at an agreed price on cash basis. Subsequently the assets
is purchased back from the customer at principal value plus profit
and to be settled at an agreed future date.
razizi.uitm.edu.my
10. Islamic Private Debt Securities

Islamic Private Debt Securities (IPDS) has been
introduced in Malaysia since 1990. At the moment,
the IPDS which are outstanding in the market were
issued based on the Shariah compliant concept of
Bai Bithaman Ajil, Murabahah and al Mudharabah.
razizi.uitm.edu.my
11. Ar Rahnu Agreement-I (RA-i)


Under RA-I, the Lender will provide a loan to the
borrower based on the concept of Qard al- Hasan. The
borrower will pledge its securities as collateral for the
loan granted. However, in the event where the borrower
fails to repay the loan on maturity date, the lender has
the right to sell the pledged securities and use the
proceeds from the sale of the securities to settle the
loan. If there is surplus money, the lender will return the
balance to the borrower.
BNM will use RA-I as a liquidity management tool for its
money market operations. Return from the RA-I will be
in the form of gift (hibah) and is determined based on
the average inter bank money market rates.
razizi.uitm.edu.my
12. Sukuk Bank Negara Malaysia
Ijarah (SBNMI)

This sukuk based on the Al-Ijarah or ‘sale and lease
back’ concept, a structure that is widely used in the
Middle East. A special purpose vehicle, BNM Sukuk
Berhad has been established to issue the sukuk
Ijarah. The proceeds from the issuance will be used
to purchase Bank Negara Malaysia’s assets.
razizi.uitm.edu.my
Cont…





Based on : sale and lease back.
Proceeds from the issuance : Used to purchase BNM’s
assets.
Assets then be leased to BNM : For rental payment
(distributed to investors as a return on semi-annual
basis)
Maturity : End of the lease tenure (then sell the assets
back to BNM)
BNM Sukuk BHD : Issue the Sukuk Ijarah.
razizi.uitm.edu.my
What is Foreign Exchange?
Investors worldwide can
open an account.
Buy other currencies.
Sell if the currency moves
in the right direction.
razizi.uitm.edu.my
FOREX in Islamic




Under Islamic Law :
 Permissible : When one currency is trading on the spot
 Prohibited : Forward trading
Aqd Ceremony : The same amount and the same type of goods.
If the exchange is different in its type : exchange its according
to your wishes but must on the spot.
Refers to hadith of the holy prophet (peace be upon him)
“ sell gold for gold, silver for silver….in same quantities on the
spot; and when the commodities razizi.uitm.edu.my
are different, sell as it suits you,
but on the spot”
Parties Involved in FOREX
Commercial
Banks on
behalf of
clients.
Money brokers
as middlemen.
BNM
Individual
razizi.uitm.edu.my
Types of FOREX
Spot
Market
Types
of
FOREX
razizi.uitm.edu.my
Forward
Market
Characteristics of Islamic FOREX

1. Freedom from pricing control and manipulation.

2. Entitlement to transact at fair prices.

3. Freedom to contract.

4. Freedom from Gharar.

5. Freedom from Riba.

6. Freedom from Maysir.
razizi.uitm.edu.my