Business

Friday August 21, 2009

CMMA to help innovation in Islamic financial products


KUALA LUMPUR: The local Islamic money market has vast potential and the formulation of innovative financial instruments will ensure that the banking industry remains vibrant, says Association of Islamic Banking Institutions Malaysia president Datuk Zukri Samat.

He said the new Corporate Murabahah Master Agreement (CMMA) would help raise the level of innovation for deposit products and other Islamic financial instruments.

The CMMA specifies a common modus operandi for Islamic financial institutions in accepting deposits via commodity murabahah.

“The potential for the agreement to be adopted is great; we hope the international community will evaluate and use it as well,” Zukri said after the CMMA launch yesterday.

“It will eliminate the need for corporates to vet each and every agreement proposed by different Islamic banks on the same product.”

The adoption of CMMA would promote transparency, robustness, operational efficiency and constituency in Islamic financial transactions, he added.

The development of the standard documentation for corporate deposit taking complements the earlier Interbank Murabahah Master Agreement that the association launched on April 15.

So far, at least five corporates have pledged their commitment towards CMMA.

Earlier, Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah said as Malaysia progressed to a higher income economy, the services sector was expected to contribute 60% of gross domestic product by 2020.

“The financial industry is expected to be a critical component in the nation’s service economy, with Islamic finance taking centrestage as one of Malaysia’s strongest competitive value propositions,” he said in his speech.

For Islamic finance to be a viable mainstream system on a global scale, elements such as cost competitiveness, accessibility and adaptability must be in place, he added.

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