The Murabaha Share Financing (MSF) system, to finance the purchase requirements of customers in a Sharia compliant manner, will be implemented from September 2, 2019.
The Securities and Exchange Commission of Pakistan (SECP) has accorded regulatory approval with respect to the MSF and has directed National Clearing Company of Pakistan Limited (NCCPL) to implement MSF System effective from Monday, September 2, 2019.
Murabaha is primarily a sale transaction which will be used to finance the purchase requirements of customers in a Shariah compliant manner. The introduction of MSF facility will benefit the investors who are willing to avail Shariah compliant products for purchase of securities and will facilitate the financiers in extending credit facility in a Shariah compliant manner.
The MSF will allow financing only in Shariah compliant securities included in the PSX-KMI All Share Islamic Index. MSF can be obtained through MSF System through the following options:
a. MSF by Broker Clearing Member (MSF Seller) to its own customers (MSF Buyer)
b. MSF by Non-Broker MSF Seller to a Broker Clearing Member (MSF Buyer)
c. MSF by Non-Broker MSF to a customer of Broker Clearing Member (MSF Buyer)
Following agreements are required to be executed for undertaking MSF Transactions:
A. Master Murabaha Agreement (MMA): to be executed between MSF Seller and MSF Buyer before entering into any MSF Transaction. It covers the terms of extending the financing facility as per format available in NCCPL Regulations.
B. MSF Agreement: to be executed between MFS Seller and MSF Buyer to purchase required security under MMA. This is a system based document needs to be executed before purchasing securities under the MMA.
C. Agency Agreement: to be executed between Customer and Securities Broker and/or Securities Broker and Non-Broker Financier as the case may be to appoint the securities broker as an agent to perform MSF transaction as per format available in NCCPL Regulations.
The approved NCCPL Regulations governing MSF are attached herewith wherein all necessary details pertaining to MSF have been mentioned.
The recording and settlement of MSF Transactions will be handled through an exclusive module of National Clearing and Settlement System (NCSS).
NCCPL has arranged awareness sessions for the market participants for understanding MSF system.
Adil Ghaffar, former General Secretary of PSX Brokers Association, termed it a very positive step, saying the market participants would be able to avail financing in transactions of Sharia compliant companies.
He said Islamic banks have huge liquidity that could now be invested for purchasing shares of 240 Islamic compliant companies in the stock market.
He said Takaful sector has not been included in the MSF system. He suggested that the Takaful sector should be included in MSF system as this sector also has huge liquidity that could be available for market participants.