Obtaining and Deploying Liquidity — practice questions

Correct answer: C. Clause 4/1: Obtaining and deploying liquidity through interest-bearing loans is prohibited, whether directly, through overdrafts, or through interest-bearing or commission-based facilities. Any liquidity support made available by supervisory or regulatory bodies, such as central banks, must be provided only through Shari’ah-compliant modes, such as Mudarabah and investment agency.

Correct answer: A. Clause 4/2/1: An Institution may obtain liquidity by selling commodities on a Salam basis, receiving the price up-front, and then purchasing the relevant commodities for delivery on maturity. It may secure a promise to sell from a third-party commodity broker to mitigate the risk of fluctuation between the sale and purchase prices. Selling a Salam receivable before possession, or deferring both countervalues, is prohibited (Shari’ah Standard No. (10), Clauses 3/1/3 and 4/1).

Correct answer: D. Clause 4/2/3: A permissible mode of obtaining liquidity is for the Institution to sell some of its assets for immediate cash and then, if required, lease the asset back on rent payable in arrears, observing the relevant provisions of Shari’ah Standard No. (9) on Ijarah and Ijarah Muntahia Bittamleek. Sale and leaseback is thus not treated as ’Inah per se, and there is no requirement for advance rent or for any particular type of buyer.