Mashreqbank to launch Islamic futures contract

11 September 2006

Dubai's Mashreqbank, which provides Islamic banking services in the Middle East, is to create an Islamic energy futures contract for trading on the region's energy exchange, due to be launched next year.

Services are set to be launched later this year, with the contract due to be traded on the Dubai Mercantile Exchange late on in 2007, Associated Foreign Press reports.

The bank is now working on structuring a contract for oil and gas assets, keeping it compliant with the Islamic principle of salam.

Taha El Tayeb, vice-president of Mashreqbank's Islamic finance business, explained that the new contract would take advantage of allowances within Shariah law that has not previously been taken advantage of.

"The salam contract provides the impetus for the development of futures and forwards contracts that are backed by commodities," he told Reuters.

"What we are proposing is an idea in Shariah that has been there for a long time but it is not exploited."

It is hoped that the new investment strategy will help Islamic banks which are seen to suffer from a shortage of investment options.

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