Course Details
Course Outline
5 days course
The Nature of Money & Implication on Treasury
● The rules of Sarf and contract
● Riba Al-Nasiah
» Discussion: identifying assets that may be traded or
pledged from a Sharia’a perspective
● Overview of traditional Money Market activities:
» Deposit & Interbank transactions
» Tradable Instruments
» Repo
Key Islamic Depository Tools
● Summary rules for non-remunerative deposits:
» Qard/Wadiah deposits
● Summary rules for remunerative deposits:
» Mudarabah deposits
» Wakalah deposits
» Murabaha deposits
● Traditional Intrabank Relationship: Fund Transfer Pricing
(FTP), Inter branch Pricing (IBP) etc
Main Islamic Interbank Tool
● Murabaha vs. Tawarruq vs. Reverse Murabaha - is there any difference?
● Shari'a concerned about this tool
● Brokers, OTC and live warrants
● Breakage, Back value and compounding
● Suq al Sila - Murabaha and Tawarruq in Malaysia
● Standardized documents: IIFM, AIBIM
● Leakage of Islamic funds - what is this? How do different markets deal with this?
Other Islamic Interbank Tool
● Wakalah to do Murabaha vs. Investment Wakalah - what’s the difference?
● Case study: Investment Dar vs. Blom Interbank Wakalah
● Interbank Mudarabah
● Wadiah for hibah & Wadiah for points
Tradable Instruments
● A brief review of traditional tradable tools:
» Certificate of Deposits
» Government Securities (T-Bills etc)
» Banker’s Acceptance
» Commercial Papers
» Quotation basis: yield vs. discount
● Does the Islamic market have alternatives for all the tools above?
Introduction to Sukuk - alternative Islamic tradable instruments
● Short term, high grade issuance for Basel III:
» Central Bank of Bahrain Salam Sukuk
» Short term Sukuk Ijarah
» Are these instruments freely tradable in the secondary
market?
● Longer-Term Sukuk
» Common structures: Ijarah, Istithmar
» Asset-based vs. Asset-backed Sukuk
» Tradability - Shari'a guideline
» Tenure: Malaysia vs. Global
» Pricing: Fixed-rate vs. Floating Rate Sukuk
Repo
● Understanding a conventional repo
● Why are Repos not widely used in the Islamic market?
● How could an Islamic repo work?
● The IIFM solution
● Alternative solutions
Managing FX Risk
● Shari'a compliant forward alternatives:
» Promise based solutions - unilateral promise, two
unilateral promises vs. bilateral promises
» Promise to deposit i.e. Cross Currency Deposit
» Are these solutions on the balance sheet or off-balance
sheet?
» Exiting these forward?
● How do Islamic banks hedge themselves?
» Long Murabaha
» Back to back promise
Group Exercise: Examine a traditional FX Swap & construct a
Sharia’a compliant FX Swap
Managing FX Risk II
● Sharia’a tools that provide options:
» Arbun
» Promises
» Juala
● How do we use the above to structure Shari'a compliant
currency options?
» Arbun - is the arbun for currency?
» Promises - how do we structure the option premium?
» Which solution is widely used?
● Calculating effective and break-even strike rate
● Are the options tradable?
Group Exercises:
1. How to use Tawarruq for Currency Option?
2. Are the following FX Risk Management Strategies
replicable in the Islamic market?
i. Put Option
ii. Put Spread
Managing Rate Risk
● Shari'a analysis of the following traditional tools for interest
rate risk management
» Forward Rate Agreement (FRA)
» Interest Rate Futures
» Swaps - Interest Rate Swap (IRS) and Cross Currency
Swap (CCS)
» Interest Rate Options
Group Discussion: Are the following Interest Rate Option
Strategies replicable in the Islamic market?
i. Interest Rate Cap
ii. Interest Rate Floor
iii. Interest Rate Collar
