The world's first Islamic financial market is schedule to be launched in October 2001. Called the International Islamic Financial Market (IIFM), it will be U.S. dollar-based. One of its main aims will be address the issue of liquidity according to Sharia principles for the rapidly growing Islamic banking system.
The IIFM is the brainchild of the Bahrain Monetary Agency BMA, the Islamic Development Bank (IDB) and Malaysia's Labuan Offshore Financial Supervisory Authority (Lofsa). The three organization signed a memorandum of understanding in October last year to create the project. Since then, they have been joined by the central banks of Brunei, Sudan and Indonesia.
A fourth meeting of the working group was held in Brunei at the end of August, and representatives of 11 leading Islamic banks attended. They agreed that the IIFM would not be restricted to Islamic banks, but conventional banks will also be encouraged to participate.
According to a report in the Egyptian Gazette, four main points were stressed at the Brunei meeting. One was the need for the various governments to issue sovereign assets-backed participation securities, or sukuks. The other issues raised included the need for diversification of products to be traded on the IIFM, the need to establish lines of credit between the various Islamic banks, and the establishment of a liquidity management center to serve the liquidity requirements of Islamic banks locally, regionally and internationally.
In the case of the liquidity management center, it was decided that it be set up with the support of the IDB and large banking groups in Bahrain and the region, with the IDB acting as the secretariat. – (Albawaba-MEBG)
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