Non-tradeable Islamic commercial papers : a case study of Al Rajhi Banking and Investment Corporation (M) Berhad

Abstract

The aim of this study is to examine the practicality of the issuance of Islamic Commercial Papers (ICPs) through evaluating the structure used by Al Rajhi Banking and Investment Corporation (Malaysia) Berhad (ARBM) pursuant to the Sukuk Programme of up to RM45.0 million in nominal value, issued by QL Resources Berhad (QL) in November 2011, which is referred to as the, “QL-ICPs Sukuk Programme”. The study is intended to highlight the main Shari’ah issues and challenges for ARBM to execute the QL-ICPs Sukuk Programme and how these Shari’ah issues are addressed or resolved by ARBM. In accordance with the aim of this study, a qualitative case study methodology is adopted to evaluate the QL-ICPs Sukuk Programme. The researcher finds several practical Shari’ah issues and then attempt to address the issues by providing a clear understanding on the Principal Terms and Conditions (PTCs) derived from the QL-ICPs Sukuk Programme. The PTCs are complied with the views and the rulings given by the ARBM’s Shari’ah Committee and approved by the Securities Commission of Malaysia. Several main Shari’ah issues to execute the QL-ICPs Sukuk Programme and the mechanisms to address such issues have been highlighted in the study. The study is an insight of the practical standing of the ICPs. It covers many perspectives to evaluate the instrument, while providing general framework and limitation of the ICPs. It also includes the main Shari’ah issues that need to be addressed for further development of the product. In addition to that, the researcher also discovered several general usage and benefits of the Conventional Commercial Papers. The study is significant as it will contribute to the scholarly literature on the Islamic Capital Market products, particularly on the ICPs since the researcher discovered that there is a lack of literature written on the ICPs. Hence, it is hoped that further study of the development of the ICPs can be conducted to narrow the gap between the theoretical understanding of the ICPs and the practical knowledge of the instrument in the context of the Malaysian Islamic Capital Market. The researcher also hoped that the industry practitioners as well as the academicians in the Islamic Capital Market can adopt the study to recognize any loopholes in the legal framework attached to the ICPs so as to develop the ICPs to be one of the Islamic Capital Market products which are competitive and globally accepted in the market.