Features:
The profit payments are made through the execution of a series of underlying Shariah-compliant contracts.
Applicable Shariah Structure:
- Commodity Murabahah Structure
The Islamic Profit Rate Swap under the Commodity Murabahah structure seeks to achieve Shariah-compliance by using Commodity Murabahah Transactions. The Commodity Murabahah transaction is a sale arrangement whereby a counterparty purchases Shariah permissible commodities from a supplier (at a cost price) and then sells such Shariah permissible commodities to another party at a marked-up price to include the counterparty’s profit margin. - Wa`d (Undertaking/Promise) Structure
The Islamic Profit Rate Swap under the Wa`d (purchase undertaking) structure seeks to achieve Shariah-compliance by using Purchase Undertaking (Wa`d) followed by Commodity Murabahah Transactions. The Purchase Undertaking (Wa`d) relates to parties to the Islamic Profit Rate Swap transactions who will, independently of and separately from the other, provide unilateral undertaking to enter into a series of multiple Commodity Murabahah Transactions upon satisfaction of the conditions as agreed between the parties and as specified in the Purchase Undertaking (Wa`d).
Tenure: Above one year
Amount: The minimum amount for an IPRS transaction is RM5 million (or equivalent) and the maximum is subject to the client's limit
Currency: Multicurrency
Documentation:
- Islamic Derivatives Master Agreement (IDMA)/ Tahawwut Master Agreement
- Term sheets