Ducab – First in the world to embrace Shariah compliant metals hedging - IFN

Ducab – First in the world to embrace Shariah compliant metals hedging

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UAE: Dubai-based Ducab has successfully implemented Shariah compliant metal hedging practices in its business activities. The company is said to be the first regional cable manufacturing company to initiate the conversion of metals hedging practices into Islamic structures. It aims to wholly transform its conventional hedging practices and aluminum contracts into Shariah compliant arrangements within the upcoming months. Ducab has been using Islamic metals hedging products for its major line of businesses since the beginning of the year. Thus far, the company has managed to convert 70% of its hedging portfolio into Shariah compliant structures. Commenting on the venture, Andrew Shaw, the managing director of Ducab, said: “Strengthening Islamic economic principals are an integral part of our overall approach to growth and development; and we will further continue to explore such ideas in other parts of our business. We hope that risk management practices globally in the metals industry will adopt these practices in the coming months.” Together with Société Générale, Ducab developed the structure and documentation required in compliance with the London Metal Exchange (LME). Mohamed Virani, the head of Islamic products for Middle East institutional sales at Société Générale stated: “The concept of hedging, risk management is not prohibited under Islamic finance but the conventional use of derivatives are prohibited so we used techniques that are permitted within the scope of Islamic finance. Using these Islamic techniques with coordination with renowned scholars we were able to get a product that meets the requirement of Ducab.” He further added that the bank is also in talks with several other companies in the region to develop more Islamic finance products and services. Ducab already has an established history in Islamic finance. It first procured a AED500 million (US$136.11 million) financing facility from Noor Islamic Bank in 2011 to fund the construction of the Ducab-HV plant. Following the launch of the Islamic Tradeflow platform by the Dubai Multi Commodities Center, Ducab and Emirates National Oil Company provided oil products and copper cables as the physical assets backing a commodity Murabahah facility worth AED50 million (US$13.61 million). The company is hoping to persuade other companies using global metals exchanges in London, Chicago and Shanghai to adopt Islamic trading practices. It seeks to make the structure a standard product to be traded on the LME in due course.