Pakistan's stock exchange unveils its first financing system

  • Regular
  • Islamic Finance
  • 4 months ago
  • 26

Pakistan Stock Exchange launched the Murabaha Share Financing (MSF) system earlier this month as a viable alternative to conventional, interest-based financing for investors in the Muslim majority country.

In the absence of a Shariah-compliant financing instrument, investors were forced to purchase shares on credit in a Shariah-compliant manner.

The Murabaha system is a sale transaction which is used to finance the purchasing requirements of shareholders in a Shariah-compliant manner.

It is sold to the customer at cost plus a disclosed amount of profit, with payment due at an agreed future date.

Murabaha is a mode of financing which is commonly used by Islamic banks, it is a type of transaction where the seller discloses the cost of the shares sold and sells it to the buyer by adding some profit thereon.

Murabaha is not a loan given on interest but a sale of shares.

Riba or interest is strictly prohibited in Islam due to which a large number of Muslims choose to not deal with commercial banks which usually offer interest on investment.

The product launched last week is expected to turn the moods bullish in a rather depressing equity market with volumes likely to pick up.




Source: Smart Trend Team