UAE Islamic bank plans futures for Dubai energy bourse listing

Dubai-based Mashreqbank is structuring an Islamic energy futures contract for trading on the Gulf Arab emirate’s new energy bourse next year, a senior bank official said.

Taha El Tayeb Ahmed, vice-president of Mashreqbank’s Islamic finance unit Badr Al Islami which will launch services later this year, said the bank’s product development team is working on a contract for oil or gas assets for future delivery.
The contract will be based on the Islamic principle of salam, which involves the sale of commodities at a future date for a cash price.

“The salam contract provides the impetus for the development of futures and forwards contracts that are backed by commodities,” Ahmed told Reuters on the sidelines of an Islamic funds conference.

“What we are proposing is an idea in Sharia that has been there for a long time but it is not exploited.”

Ahmed said listing an Islamic futures contract would open up a new, short-term avenue for Islamic banks to invest depositors’ money. Islamic banks face a shortage of instruments in which to invest funds.

The Peninsula Qatar