BANK Negara Malaysia has joined forces with the Securities Commission and industry players to establish a mechanism to be called Commodity Murabahah House.

Making the announcement, BNM Governor Tan Sri Dr Zeti Akhtar Aziz said that the mechanism, which will use crude palm oil as the underlying commodity, will facilitate Islamic financing applying the concept of murabahah or tawarruq.

To promote development of products to meet the diversified requirements of investors, she said the central bank has also introduced a new Islamic monetary instrument, Commodity Murabahah Programme (CMP).

The CMP forms part of the central bank’s diverse range of instruments to manage short-term liquidity in the Malaysian Islamic inter-bank money market.

The CMP is quite unique as it is designed to be the first ever commodity-based instrument that utilises crude palm oil based contracts as its underlying assets, she said.

The bank has executed CMP master agreements with eight Islamic banking institutions including the three foreign owned banking institutions to promote the use of the instrument for liquidity management, she said in her special address at the Global Islamic Finance Forum, Kuala Lumpur, today.

“As commodity murabahah is widely used in other Islamic centres, it is envisaged that this CMP will promote increased linkages between Malaysia and these centres,” Zeti said.