Repos in Islamic Finance – 2 | White & Case LLP

transaction tax) and any taxes imposed on the transaction, including any value added tax or similar tax. The buyer will be responsible for paying such taxes and costs, and the seller’s costs and expenses will be reimbursed by the buyer upon demand. The MCMA also provides for the allocation of any taxes, penalties, or interest that may arise as a result of any failure by either party to comply with any applicable law or regulation. 6. Termination of collateralised murabaha transactions and events of default The MCMA includes provisions for the termination of collateralised murabaha transactions upon the occurrence of certain events, such as the insolvency or bankruptcy of a party, or the breach of any representation, warranty, or covenant. Upon termination, the seller will be entitled to sell the commodities to a third party and apply the proceeds in satisfaction of the outstanding deferred payment price and any other amounts due under the MCMA. In the event of early termination, the buyer will be responsible for any costs or losses incurred by the seller as a result of such termination. The MCMA also includes provisions for the acceleration of the deferred payment price in the event of default by the buyer, and for the calculation and payment of any early payment amount due. It is worth noting that repos in the Islamic finance industry are still relatively new and evolving. However, the standardization efforts made by the IIFM through the development of the MCMA are a step in the right direction. By providing a standard template for documenting Shari’ah compliant repos, the MCMA can help facilitate the growth of the Islamic repo market and enhance liquidity management in the Islamic finance industry. As the Islamic finance industry continues to expand, it is expected that repos will become an increasingly important tool for managing liquidity and meeting short-term funding needs. The development of standardized agreements like the MCMA will help ensure consistency and clarity in the use of repos within the Islamic finance industry. Overall, repos have the potential to play a significant role in the Islamic finance industry and contribute to its continued growth and development. 1. Source: https://www.islamicfinance.com/2017/03/repos-islamic-market/