Islamic nations to launch money market<\/p>\n
LABUAN, Malaysia (Reuters): A global Islamic inter-bank money
\nmarket, which aims to wean Muslims away from conventional banking
\npractices, will be launched by the end of 2001, Islamic banking
\nofficials said on Wednesday.<\/p>\n
Bankers and regulators from six Muslim nations meeting on the
\nMalaysian tax haven island of Labuan, off Borneo, said the
\nInternational Islamic Financial Market would kick-off by trading
\nin short-term money market instruments. Bahrain and Malaysia's
\nLabuan would be the main trading centers.<\/p>\n
Labuan, an old pirate's cove and a modern-day tourist enclave,
\nis located in the South China Sea and is home to Malaysia's
\nInternational Offshore Financial Center.<\/p>\n
Officials attending the meetings said the U.S. dollar-based
\nglobal Islamic money market was expected to mobilize at least
\n$150 billion and would have 24-hour liquidity and market
\nmanagement centres.<\/p>\n
"We have assigned Malaysia to lead the way in developing a
\nframework for market management center," said S. Jaafar Aznan,
\nvice-president of Jeddah-based Islamic Development Bank, adding
\nthat Bahrain will establish the liquidity management center.<\/p>\n
"It will be operational by the middle or end of next year," he
\nsaid.<\/p>\n
The Islamic Development Bank has 53 Muslim nations as its
\nmembers. Currently there are no markets that would satisfy the
\nliquidity, profitability, security and Syariah compatibility of
\nIslamic banks or banks which offer Islamic financial facilities
\nalongside their conventional products.<\/p>\n
Under Syariah laws, a money market cannot trade or discount
\ndebt and interest is also strictly forbidden.<\/p>\n
"The objective of the International Islamic Financial Market
\nis to offer security and alternative investment that yield higher
\nreturns," said Khalid A. Al-Bassam, executive director, banking
\noperations, Bahrain Monetary Agency.<\/p>\n
The bankers also unveiled a plan to create an Islamic Ratings
\nAgency based in Bahrain, which would vet and assign ratings to
\nIslamic papers along with other conventional ratings agencies.<\/p>\n
Malaysia's Kumpulan Guthrie, a plantations and property
\ndevelopment company, said it would launch a $100 million, five
\nyear global offshore Islamic bond in the first quarter of next
\nyear.<\/p>\n
Kumpulan Guthrie signed a memorandum of understanding with
\nMalaysia's Bank Islam (L) Ltd for issue of the global Islamic
\nbond.<\/p>\n
"Our Kumpulan Guthrie Issuance would be the first paper to be
\ntraded globally in the International Islamic Financial Market and
\nthus set the momentum for future issuance," Ahmad Tajuddin Abdul
\nRahman, chairman of Bank Islam, told a news conference held
\nalongside with the meeting of Islamic bankers.<\/p>\n
Kumpulan Guthrie, a 178-year-old company, said it would use
\nthe proceeds of the bond issue to finance its existing plantation
\nprojects and expansion plans in Indonesia.<\/p>\n
"Some of our existing plantations are maturing for harvesting
\nin southern Sumatra. We are looking for further investment in
\nIndonesia," said Helmy Othman Basha, the company's general
\nmanager, financial planning and services.<\/p>",
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