YELLOW SUKUK UNVEILED: HARNESSING AGRICULTURAL COMMODITY TRADE FOR ISLAMIC FINANCE AND PARADIGM SHIFT IN COMMODITY EXCHANGES

Abstract

Traditional methods dominate agricultural commodity trade, leading to occasional supply surpluses due to inherent periodicity. The lack of adequate storage systems further compounds the challenge, resulting in price volatility and market instability. To address these issues, introducing licensed Warehousing and a Specialized Commodity Exchange system offers an opportunity to integrate agricultural commodity trade with global markets and establish a robust market structure. This integration involves transforming standardized agricultural products held in licensed warehouses into Electronic Warehouse Receipts (e-WhR), which can serve as essential tools for production, consumption, and investment instruments. Moreover, the innovative concept of "Yellow Sukuk" is introduced, representing a groundbreaking financial instrument that can be utilized within the framework of Islamic Capital Markets alongside conventional bank loan transactions. This study examines the evolution of agricultural commodity trade, spot transactions conducted in Commodity Exchanges, and the fundamental aspects of transactions. By embracing these advancements, the agricultural sector can enhance its efficiency, liquidity, and overall market depth while embracing the groundbreaking potential of Yellow Sukuk.