Jurisdiction(s):
United Kingdom

Key definition

Commodities definition

What does Commodities mean? In legal practice, commodities describes fungible raw materials and primary products—such as crude oil, natural gas and power, metals (ferrous and non‑ferrous) and agricultural products—standardised for physical and derivatives trading. The term is descriptive and used across multiple legal contexts, rather than having a single statutory definition. However, in financial regulation, commodity derivatives are defined and regulated under retained UK MiFID and UK EMIR, and in Ireland under EU MiFID II and EMIR, with related rules under UK MAR/EU MAR for market abuse in commodity and related derivatives markets. Key legal features include standard specifications of quality/grade, delivery terms (often via...

Commodity Murabaha for Working Capital and Acquisition Finance: Transaction Steps, LME Metals Practices, Tawarruq Distinctions and AAOIFI Standard 59 Risks

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Practice notes

Commodity murabaha and tawarruq

Murabaha contracts can be structured to fund working capital or acquisitions, including property purchases. When used in this way, the structure is often termed a commodity Murabaha. A related technique, Tawarruq (sometimes called ‘reverse Murabaha’), operates in a very similar manner, and the labels are frequently conflated, yet Shari’ah draws a distinction between them. Commodity Murabaha is required to satisfy the general Murabaha rules and is chiefly concerned with the conduct of the Islamic financial institution (IFI). By contrast, Tawarruq is centred on the Customer: the Mustawriq acquires an asset on deferred terms with the express intention of immediately selling it on for cash to a third party. Scholars of Shari’ah do not all recognise Tawarruq as valid; nonetheless, most consider it allowed where the sale complies with Shari’ah conditions. Meeting working capital needs remains among the most challenging matters in Islamic finance. In the UK, the most straightforward and prevalent route to working capital is still to take an interest-bearing loan from an external finance provider...

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Web page updated on 21/05/2026

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