Financing the Trade of Agricultural Commodities

Ahmet Suayb Gundogdu ()
Additional contact information
Ahmet Suayb Gundogdu: Istanbul Sabahattin Zaim University

Chapter Chapter 4 in Food Security, Affordable Housing, and Poverty, 2023, pp 87-124 from Palgrave Macmillan

Abstract: Abstract This chapter presents the Islamic way of agricultural commodity trading and the risk issues faced by financial institutions financing trade transactions. The chapter deals with demand-side issues and risk aspects. It will first categorize the Islamic trade finance contract into asset-based and asset-backed and defines contracts for sub-categories of exports and imports. The categorization is related to the nature of transactions and the risk associated with the transaction. Afterward, the concept of Margin Call for asset-backed Murabaha will be illustrated before the introduction of the Islamic Agricultural Future Contract. Indeed, Shari’ah-compliant derivatives can mitigate risk and decrease uncertainties if appropriately employed. The chapter notes that in the conventional options and futures, which involve Maysir and Gharar, the volatility feeds into instability in agricultural production. Islamic finance restrictions in developing future contracts can lead to agricultural price stability. Hence, the chapter concludes with an Islamic future contract proposal based on electronic warehouse receipts vis-à-vis the liquidity management aspect for financial institutions. These contracts for liquidity management would be resource mobilization for the agricultural sector.

Keywords: Islamic trade finance; Murabaha; Risk management; Asset-backed Murabaha; Export receivable financing; Warehouse receipt financing; Margin call; Islamic derivative; Future Islamic contracts (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:psibcp:978-3-031-27689-7_4

Ordering information: This item can be ordered from
http://www.palgrave.com/9783031276897

DOI: 10.1007/978-3-031-27689-7_4

Access Statistics for this chapter

More chapters in Palgrave Studies in Islamic Banking, Finance and Economics from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().