ABSTRACT:
This paper investigates the evolving dynamics of the oil palm industry and its intricate implications for Islamic finance, particularly in the context of Malaysia where both sectors hold significant economic importance. Given the pivotal role of oil palm as a key commodity in Islamic financial instruments, notably in tawarruq (commodity trading), understanding the interplay between these two industries is crucial for charting a strategic path forward for both. Building upon prior research that has explored the oil palm-Islamic finance nexus, this study delves deeper into the specific Malaysian context, where oil palm reigns as the most frequently utilised commodity by Islamic financial institutions. By analysing the latest developments, we aim to uncover not only the inherent risks but also the untapped potential that oil palm presents for the Islamic finance sector. Effectively managing the risks associated with oil palm production and trade, while simultaneously harnessing its potential benefits, can significantly enhance the growth trajectory of both the oil palm industry and the Islamic finance sector in Malaysia. This, in turn, could have far-reaching implications for the overall economic development of the country. The insights gleaned from this research will be invaluable for policymakers, financial institutions, and industry stakeholders alike, enabling them to make informed decisions that foster sustainable growth and resilience in these interconnected sectors.
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