The above inserted graphic reflects the most used practice of the Murabaha-to-the-Purchase-Order. The reader will be familiar with this.
The Base Prospectus stipulates repeatedly: " whereby the Trustee will, at the request of GSI, use the proceeds of the issuance of the Series to purchase certain commodities from a third party Seller on immediate delivery and immediate payment terms and will immediately sell such commodities to the GSI on immediate delivery terms but with payment on a deferred basis." And further Mr. Asim Khan - MD and head of structuring for Dar Al Istithmar - stated that the paperwork "clearly shows that Trustee, as seller, sells the commodity to GSI, as purchaser. Thats it...." and further that: "Once the commodity is sold to GSI, its then at GSIs discretion to do what it wants to with the commodity". This looks like a plain, even boring Murabaha Facility. Yawn
Mr. Khan further states that: "the legal documents ... have been reviewed and approved by leading scholars in the Islamic finance industry ..." and suggests that Mr. Mohammed Khnifer did not fully read or grasp the contents of the available documentation. It is however clear that Mr. Khnifer did read the documentation sufficiently and that he did grasp the implications thereof very well. Actually, Mr. Khnifer voices a concern of a not unimportant part of the industry.
Simple review of legal documentation is hardly convincing. One must go have a look at the intentions of the parties concerned and their factual behavior. It was this look that originated the 'Tawarruq-debate' in the first place.
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