Commodity Trading

Overview

Under the principles of Shariah, Islamic banking institutions cannot make money with money. Instead, all financial transactions must be asset-backed, which have made alternatives such as sales-based, partnership-based and leasing-based contracts widely popular. One of the most popular contracts in Islamic banking and finance is the Commodity Murabahah contract based on the Tawarruq arrangement.

Tawarruq is an arrangement that consists of two sale and purchase contracts. The first involves the sale of an asset by a seller to a purchaser on a deferred basis. Subsequently, the purchaser of the first sale will sell the same asset to a third party on a cash and spot basis.

At UOB, commodities make up the underlying asset of the contract by which the Bank will buy and sell a commodity to create a financial obligation between the Bank and the customer.

For the purpose of completing the Commodity Murabahah transaction, UOBM have selected established brokers to ensure the transaction meets the strict requirements of Shariah.

List of Approved commodities