Introduction to Bursa Suq As-Sila’

Prepared by Shariah Centre of Excellence

Bursa Suq As-Sila’ (BSAS) is a combination of the Arabic words Bursa (البورصة) meaning platform, Suq (السوق) embodying market and As-Sila’ (السلع) which translates to commodities.

In general, BSAS acts as a platform that conducts commodity trading transactions, especially in Islamic banking transactions involving Tawarruq or Commodity Murabahah contracts.

BSAS was officially launched on 17th August 2009 by a group of Islamic finance industry experts on behalf of Bursa Malaysia, in collaboration with Bank Negara and Securities Commission Malaysia. BSAS recorded a cumulative annual growth rate of 112.2% since its inception. 

BSAS was inspired by the London Metal Exchange platform established as a transaction facilitator in Islamic banking, by providing financial liquidity management facilities and the structuring of Islamic banking products such as fixed deposits, financing, investments, Sukuk and so on and so forth. 

BSAS is implemented through an online application for commodity trade transactions, especially crude palm oil.

The main purpose of BSAS is to help execute financial transactions based on Tawarruq or Commodity Murabahah contracts by providing more than 5 types of underlying assets or commodities for these transactions.

Among the basic assets provided are crude palm oil, polyethylene (plastic resin), coffee beans, rubber, copper, zinc, and so on.

All such commodities exist and are identifiable, can be owned before being sold, can be determined in quality, standards and value and can be delivered and handed over to the buyer.

In summary, the mechanism of Tawarruq or Commodity Murabahah involving BSAS is as follows:
 

1. A Customer, Ahmad, goes to the Bank to apply for personal financing of RM10,000
2. The Bank, by way of utilizing the BSAS platform, buys commodities worth RM10,000 from the Commodity Suppliers.
3. Next, the Bank sells the commodity to Ahmad at a price of RM13,000 (principal + profit rate) and payment will be made in installments.
4. Ahmad has the right and option to take the commodity if he wishes to keep the commodity. If Ahmad wants to get cash, he will continue to sell commodities to the Commodity Suppliers through the BSAS platform by appointing the Bank as his representative to help him sell the commodity earlier.
5. The Bank, acting as Ahmad's representative, will sell commodities to the Commodity Suppliers through BSAS at a price of RM10,000 in cash and the cash will be credited to Ahmad's account.

 

Briefly, the above is the financing mechanism based on Tawarruq or Commodity Murabahah by way of utilizing BSAS. This mechanism is what is executed behind the counter as customers approach the Bank and request for financing whether it be personal financing, car financing, business financing, and home financing.

Every commodity sale and purchase transaction at BSAS is strictly regulated and evidenced by a specific ownership certificate for each transaction. This certificate of ownership proves the ownership of each individual or institution over the commodity sold and purchased.

Apart from that, BSAS also has various guidelines that are to be followed by each party involved with this platform.

The list of guidelines can be referred to here:

Rules of Bursa Suq-Al-Sila

BSAS has received many awards, locally and internationally. Among them the "Most Outstanding Islamic Finance" award at the 7th Kuala Lumpur International Islamic Finance Forum (KLIFF), the Islamic Innovation Award for the "Muamalat Financial Management System Innovative Product" category by the Ministry of Science, Technology and Innovation, and the "Market Innovation" Award from The Asset Triple A magazine.

This recognition shows the high commitment of Islamic finance experts in dignifying the Islamic finance industry in Malaysia, further empowering Malaysia as the main hub of the Islamic finance industry in the world.