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.