CIMB Islamic and PETRONAS Sign Inaugural Tahawwut Master Agreement for Islamic Commodity Derivatives

CIMB Islamic Bank Bhd and PETRONAS have signed an inaugural Tahawwut Master Agreement (TMA) for Shariah Compliant Commodity Derivatives.

The signing of the TMA marks PETRONAS’ venture towards Shariah-compliant derivatives, making PETRONAS the first corporation in Malaysia to utilise CIMB Islamic’s Shariah-compliant commodity hedging instruments for Islamic Energy Commodity Derivative trades.

In a joint statement, the companies said the TMA is a multiproduct framework agreement drafted by International Swaps Derivatives Association (ISDA) in collaboration with International Islamic Financial Market (IIFM) Association to govern Shariah-compliant derivative transactions.

“The TMA provides the market with globally accepted and standardised terms for Islamic hedging products, which will spur the growth of Islamic hedging products in the international market.”

CIMB Islamic chief executive officer Ahmad Shahriman Mohd Shariff said the collaboration will contribute towards the development of Malaysia’s International Islamic Financial Centre, in line with Bank Negara’s Financial Sector Blueprint.

PETRONAS treasury vice president Freida Amat meanwhile said the usage of derivatives under the TMA will enable PETRONAS to manage its exposures in a Shariah-compliant manner.

“We remain supportive of the growth of the Islamic finance industry and we believe that this partnership can advocate for more Islamic financial solutions in the future."