KL outlines first global Islamic money market
KL outlines first global Islamic money market
LABUAN, Malaysia (Reuters): Malaysian and Gulf market
regulators and bankers agreed on Tuesday to launch what they
called the first global Islamic inter-bank market with Bahrain
and Malaysia's Labuan as the two trading centres.
The U.S. dollar-based Islamic money market will mobilise
billions of dollars of Islamic funds and facilitate liquidity
management 24 hours a day, they said after a meeting on this tax
haven island off Borneo.
"We have resolved most of the issues, so we can go ahead,"
Mohamad Razif Abdul Kadir, director-general of the Labuan
Offshore Financial Services Authority (LOFSA), Labuan's
regulator, told Reuters.
"We hope to launch by the end of the year."
Currently there are no markets that would satisfy the
liquidity, profitability, security and Syariah compatibility
needs of Islamic banks or banks that offer Islamic financing
alongside their conventional systems.
Under Syariah laws, a money market cannot trade or discount
debt. Interest is also strictly forbidden.
The money market could help breathe new life into Labuan, a
nine-year-old offshore centre that is home to 61 international
banks and 62 insurers whose operations were curtailed by the
Asian financial crisis.
"In Labuan, we have to find a niche and our niche we thought
is Islamic banking and finance," said Razif, who hosted the two-
day talks comprising Labuan and Bahrain bankers as well as
representatives from the Islamic Development Bank.
Razif said Brunei, Indonesia and Saudi Arabia have also
expressed support for the project. Other Islamic nations are
expected to follow suit.
Razif said the meeting had ironed out the Syariah issues. The
only issue still pending is policy matters involving central
banks, he said.
The plan envisaged the setting up of a liquidity management
house, where central banks can lend and borrow money from the
market.
Labuan has teamed up with the Bahrain Monetary Agency, which
oversees the thriving Bahrain financial and banking centre, to
develop the money market.