Collateral Management
NeX acts as an arranger/financier to structure a financing solution for the seller/exporter and/or buyer/importer by combining end-to-end funding solutions for the entire trade value chain. Security required is a pledge of commodities.
Commodity Future
Commodities futures contracts are agreements to buy or sell commodities at a specific date in the future at a particular price. The contract is for a set amount and specifies when the seller will deliver the asset. It also sets the price.
The three main areas of commodities listed on NeX are food, energy, and metals.
Mudarabah
A Mudarabah contract refers to a form of business contract in which one party (Financier) brings capital and the other personal effort (Entrepreneur). The proportionate share in profit is determined by mutual agreement. The financier is known as ‘Rab El-Maal’ and the entrepreneur as ‘Modareb’.
In this contract, the basic factors of production (from the Non-interest economics viewpoint) — capital, labor, and entrepreneurship — are combined to make an economic activity.
It is an ethical requirement in Mudarabah that all the capital must be paid at the signing of the contract. It cannot be paid in installments. Rab El-Maal can impose any (reasonable) instructions and conditions on the agent, if they are acceptable to the agent, they become part of that contract. Once operation starts, the financier has no right to interfere in the day-to-day business. If agent fails to follow the instructions and satisfy the conditions, then he is liable for loss of capital.
Please note that all Mudarabah contracts are limited by a specific time period; they don’t continue indefinitely.
Murabahah
Murabahah means sales.
Commodity Murabahah is concerned with the sales transaction of commodities that occur between seller and buyer upon an agreed cost-plus margin prior to transaction.
In this arrangement, the price paid is clear and on a fixed and agreed sale price. No interest cost is incurred, providing security. In Non-interest Finance today, commodity Murabahah is used to facilitate a variety of financial products offered to organizations and the public.
Commodity Murabahah provides added value in Non-interest finance as it upholds ethical requirements. A major requirement is the presence of actual product at time of purchase; this ensures the transaction is authentic. In any case where the commodity needs to be monetized it can be sold into the market immediately.
NeXhange offers a platform for Commodity Murabahah transactions. We ensure the availability of our commodity offerings and are particular with ethical guidelines through any transaction.
Musawamah
For Musawamah offerings, the cost price is not disclosed to the buyer, therefore, the agreed selling price is left to the bargaining powers of both the seller and buyer.
In order to comply with Ethical laws, we have adhered strictly to the various conditions for Musawamah transactions. For instance, we have ensured that Musawamah transactions on our exchange are spot transactions in the sense that the exchange takes place instantaneously.
Similarly, all Musawamah offerings also have tangible economic value.
Wakala
Wakala is an agency contract where the account holder (principal) appoints a Non-interest finance institution (agent) to carry out investment activities.
Wakala offerings listed on our exchange allows a much more efficient recycling of short-term liquidity in the Non-interest banking system. In addition, Wakala contracts can be presented in many different forms, including letter of credit, Non-interest monetary certificate, Non-interest bonds, term deposit, and Non-interest compliant insurance.
In Wakala contracts, the actual profit is distributed according to the profit ratio agreed upfront. The agent is able to specify expected return from customers’ deposit by investing into selected instruments for an agreed wakil fee.
Agents will then make the investment to generate a return which is carried out for and on behalf of the customers (Muwakkil). The Muwakkil specifies the returns expected from the investment, and the agents are required to source an investment to achieve the expected returns, after deducting the wakil fees.
We are particular with ethical guidelines through any transactions and are committed to providing comfort and certainty to our clients.