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