Examining Contracts used in Islamic Trade Financing: Issues in Bai Al- Dayn and Murabahah
Examining Contracts used in Islamic Trade Financing: Issues in Bai Al- Dayn and Murabahah

Summary/Abstract: In an interest-based economy, trade transactions are financed through credit for the purpose of acquiring and selling goods in the domestic or international markets. In an Islamic economy, trade operations may be financed through credit or on a participatory basis. The purpose of this paper is to review two Islamic financial contracts; Murabahah and Bai Al-Dayn. This paper also aims to review Islamic Trade Finance (ITF) and issues concerning ITF facilities, given they are operating under conventional International Chamber of Commerce (ICC) rules. To achieve the research goals, data has been gathered from journal articles, books, industry reports, and product disclosure statements issued in Malaysia. This paper highlights the underlying issues for Murabahah and Bai Al-Dayn, and provides recommendations to overcome the challenges associated with processes shaped by the underlying Islamic trade finance contract.

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