Yesterday marked a further milestone in the development for the Islamic Finance industry with the publication by the International Islamic Finance Market (IIFM) of the Master Collateralised Murabahah Agreement (the MCM Agreement).
The IIFM, the Shari'a Advisory Panel of IIFM and Clifford Chance have been working alongside a global working group of market participants to develop a widely acceptable industry-standard agreement to serve the market in meeting the need for a collateralised mechanism through which to generate liquidity.
The MCM Agreement provides a mechanism for access to liquidity on a collateralised basis (based on the Shari'a principle of Arrahn) utilising Sukuk and other Shari'a compliant securities as collateral, is an important new tool for Islamic Financial institutions as they seek to address the increased global regulatory focus on liquidity and collateral. Alongside the MCM Agreement, IIFM has published an Operational Guidance Memorandum to facilitate adoption of the Agreement by Islamic Financial Institutions. IIFM is also making the Agreement available to non IIFM members.
Clifford Chance acted as legal counsel to IIFM in the preparation of the MCM Agreement and the Operational Guidance Memorandum. In this briefing, we explain further the principal features of the MCM Agreement.