Case Study 1: The Commodity Murabahah Gone Wrong
Global Islamic Bank (GIB) offers commodity Murabahah personal finance:
- Client applies via mobile app for $100,000.
- The system purchases 50 tons of nickel on LME through Broker Alpha.
- The system sells nickel to the client at cost + 8% = $108,000 payable in 48 months.
- The client authorizes GIB to "handle logistics".
- GIB sells to Broker Beta for $100,000 spot.
- $100,000 is deposited to the client.
- Broker Alpha and Broker Beta are subsidiaries of the same trading house.
- Nickel certificates reference commingled warehouse lots.
- The Shari'ah board approved the product 4 years ago, but the central bank now requires proof of genuine commodity ownership transfer.
| Topic | Finding | Compliant? |
|---|---|---|
| Murabahah | Bank purchases commodity — genuine ownership transfer needed | ✅ If genuine |
| Murabahah | "Handle logistics" authorization = delegation to sell | ❌ Disguised agency |
| Tawarruq | Commingled warehouse lots — commodity NOT distinct | ❌ |
| Tawarruq | Broker Alpha and Beta share same parent — circular | ❌ |
| Tawarruq | Single application links credit purchase and on-sale | ❌ |
| Tawarruq | "Logistics" authorization = delegation to institution | ❌ |
| Tawarruq | Client plays no active role in on-sale | ❌ |
| Fatwa Ethics | 4-year-old approval + new regulatory requirements = fresh fatwa needed | ❌ |
Case Study 2: Salam vs. Istisna'a — Choosing the Right Structure
Request A: A wheat farmer needs $200,000 to fund planting; expects 500 tons of Grade A wheat in 6 months. → Salam: wheat is fungible; farmer needs full capital upfront; strict specifications (protein ≥12%, moisture ≤14%); delivery in 6 months; NOT from a specific farm.
Request B: A tech company needs $500,000 to build a custom data center; 12-month project. → Istisna'a: custom-built item; flexible payment (20% upfront, progress payments); detailed technical specifications; manufacturer cannot exclude defect liability; bank may enter Parallel Istisna'a.
If the wheat farmer delivers only 400 tons: The buyer has three remedies:
- accept 400 tons and recover proportional capital for the undelivered 100 tons
- wait for the remaining 100 tons
- cancel and recover all capital
The buyer cannot claim compensation for opportunity loss.
| Request | Best Structure | Why | Key Controls |
|---|---|---|---|
| A: wheat farmer needs $200,000 for 500 tons of Grade A wheat in 6 months | Salam | The wheat is fungible and the farmer needs full capital upfront | Full price paid now; wheat specified by grade, protein, moisture, quantity, delivery date, and delivery place; not tied to a specific farm |
| B: tech company needs $500,000 to build a custom data center over 12 months | Istisna'a | The asset is custom-built and manufactured to technical specifications | Payment may be staged; specifications must be detailed; manufacturer cannot exclude defect liability; bank may use Parallel Istisna'a |
Takeaway: Salam solves the funding need for a generic fungible commodity, while Istisna'a solves the construction need for a custom asset. The default remedy analysis follows that choice of structure: Salam short-delivery remedies protect capital without awarding opportunity-loss compensation.