Shariah Banks Get Profit Boost With Money-Market Products: Islamic Finance

Islamic banks will be offered a range of new money-market instruments in coming months, allowing lenders to earn larger returns from excess cash stored at central banks or locked into longer-dated securities.
The International Islamic Liquidity Management Corp., which is being set up in Kuala Lumpur by 11 central banks, will sell its first short-term bills in dollars early next year, Malaysian central bank Governor Zeti Akhtar Aziz said Oct. 28.
Shariah Banks Get Profit Boost With Money-Market Products: Islamic Finance

Shariah Banks Get Profit Boost With Money-Market Products: Islamic Finance

Prime Rate Capital Management LLP plans to start a $250 million Islamic cash fund in January, Chief Executive Officer Christopher Oultonsaid in a Nov. 23 interview. The U.A.E.’s central bank auctioned its first Shariah-compliant certificates of deposits on Nov. 10.
Demand for services complying with Shariah law is increasing about 15 percent annually and assets under management may almost triple to $2.8 trillion by 2015, according to the Kuala Lumpur-based Islamic Financial Services Board, a standards body for the industry. Money-market products will allow banks to invest idle cash more profitably, Paris-based Anouar Hassoune, an analyst at Moody’s Investors Service, said in an e-mailed response to questions on Dec. 1.
“Liquidity is basically managed by accumulating central bank and interbank placements, as well as some government bonds, the latter still being relatively scarce,” he said. “Banks are penalized by crystallizing a significant amount of funds in cash forms.”
Money Markets
The U.A.E. central bank offered Islamic certificates of deposits of one week up to one year, the monetary authority said in an e-mailed statement Nov. 14. Bahrain, the only country in the Persian Gulf to sell Islamic debt due in six months or less, plans to issue additional securities, central bank Governor Rasheed al-Maraj said in an Oct. 27 interview in Marrakesh, Morocco.
The International Islamic Financial Market, founded by the central banks of Bahrain, Indonesia and Malaysia, plans to create Shariah-compliant repurchase agreements to help Islamic banks manage funds and boost trading, Chief Executive Officer Ijlal Ahmed Alvi said in August.
The first global Shariah-compliant money-market securities will be sold by International Islamic Liquidity Management on a regular basis, Malaysia’s Zeti said in an interview in Washington on Oct. 10.
“Instead of having a series of different counterparts for the placement of excess liquidity and borrowing short-term from a number of correspondents, the idea is to have a one-stop shop for liquidity placements and short-term borrowing,” said Moody’s Hassoune.

Islamic banks will be offered a range of new money-market instruments in coming months, allowing lenders to earn larger returns from excess cash stored at central banks or locked into longer-dated securities.The International Islamic Liquidity Management Corp., which is being set up in Kuala Lumpur by 11 central banks, will sell its first short-term bills in dollars early next year, Malaysian central bank Governor Zeti Akhtar Aziz said Oct. 28. Prime Rate Capital Management LLP plans to start a $250 million Islamic cash fund in January, Chief Executive Officer Christopher Oultonsaid in a Nov. 23 interview. The U.A.E.’s central bank auctioned its first Shariah-compliant certificates of deposits on Nov. 10.Demand for services complying with Shariah law is increasing about 15 percent annually and assets under management may almost triple to $2.8 trillion by 2015, according to the Kuala Lumpur-based Islamic Financial Services Board, a standards body for the industry. Money-market products will allow banks to invest idle cash more profitably, Paris-based Anouar Hassoune, an analyst at Moody’s Investors Service, said in an e-mailed response to questions on Dec. 1.“Liquidity is basically managed by accumulating central bank and interbank placements, as well as some government bonds, the latter still being relatively scarce,” he said. “Banks are penalized by crystallizing a significant amount of funds in cash forms.”
Money Markets
The U.A.E. central bank offered Islamic certificates of deposits of one week up to one year, the monetary authority said in an e-mailed statement Nov. 14. Bahrain, the only country in the Persian Gulf to sell Islamic debt due in six months or less, plans to issue additional securities, central bank Governor Rasheed al-Maraj said in an Oct. 27 interview in Marrakesh, Morocco.
The International Islamic Financial Market, founded by the central banks of Bahrain, Indonesia and Malaysia, plans to create Shariah-compliant repurchase agreements to help Islamic banks manage funds and boost trading, Chief Executive Officer Ijlal Ahmed Alvi said in August.
The first global Shariah-compliant money-market securities will be sold by International Islamic Liquidity Management on a regular basis, Malaysia’s Zeti said in an interview in Washington on Oct. 10.
“Instead of having a series of different counterparts for the placement of excess liquidity and borrowing short-term from a number of correspondents, the idea is to have a one-stop shop for liquidity placements and short-term borrowing,” said Moody’s Hassoune.

http://www.bloomberg.com/news/2010-12-06/shariah-banks-get-profit-boost-with-money-market-products-islamic-finance.html

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