Commodity Murabahah

A primary purpose of the commodity murabahah is providing banks to place its surplus funds with Islamic Liquidity Hub (IHB) in return for fixed income and protected the deposit.

Practically, how does it work? First, the bank will purchase commodity (e.g. palm oil) from supplier A via broker A at RM10m.

Then, the bank will sell the commodity based on murabahah to IHB at RM11m on 6 months credit basis. This is consider a 6-month placement.

ILH will sell the commodity to supplier B via broker B to obtain cash at RM10m, which will be used in financing operations.