KUALA LUMPUR, Nov 24 — Malaysian and UK Islamic banks signed off on a standardised wakala deposit agreement today, which some bankers said could help the industry reduce its reliance on the controversial commodity murabaha structure.
Lenders such as Malaysia’s Maybank Islamic, Bank Islam and CIMB Islamic, UK’s Gatehouse and Indonesia’s PT Bank Syariah Muamalat agreed to use the template for interbank and corporate wakala deposit placements, said an Islamic banking body.
“Besides cost and resource savings, the adoption of the standardised wakala placement agreement would promote transparency, consistency, operational efficiencies and robustness in Islamic deposit placement transactions,” said the Association of Islamic Banking Institutions Malaysia, which launched the template agreement.
Twenty-six institutions signed the pact.
Wakala is an agency structure where a depositor authorises an agent to invest his funds in sharia-approved assets.
Apart from the wakala, many Malaysian banks now use the commodity murabaha structure to operate deposit accounts.
Under the murabaha account, a company that wants to place surplus funds with an Islamic bank will appoint the bank as its buying agent.
The bank then buys commodities such as metal or palm oil on behalf of the company. The bank then offers to buy the commodities from the company on a deferred cash payment basis, with the sale price including a profit to the company from the sale.
The commodity murabaha structure has drawn criticism from some sharia scholars who liken it to a paper trail designed to satisfy the letter of the law, with no actual sale of assets.
“In six months’ time, all the banks will be using the wakala,” said one Malaysian Islamic banker. “It has fewer issues than the commodity murabaha.
“There is also a brokerage fee for the commodity murabaha of around RM25-RM30 for each RM1 million transacted. Imagine how much that amounts to if you do a few billion a day.”
The wakala template agreement is the latest effort at creating common standards and documentation for the US$1 trillion (RM3.4 trillion) Islamic finance sector to encourage more cross-border transactions.
Bahrain-based industry body Accounting and Auditing Organisation for Islamic Financial Institutions has said it would screen Islamic banking products for sharia compliance to promote uniformity.
The Association of Islamic Banking Institutions Malaysia — which groups banks such as OCBC Al-Amin, Public Islamic Bank and the Malaysian units of Kuwait Finance House and Al Rajhi — had earlier launched a standard agreement for commodity murabaha deposit accounts. — Reuters
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