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Blades

In: Business and Management

Submitted By maryamrana
Words 4045
Pages 17
International Journal of Islamic Financial Services Vol. 1 No.1

ISLAMIC INSTRUMENTS FOR MANAGING LIQUIDITY
Yahia Abdul-Rahman

This paper provides a practitioners perspective on the overwhelming need for prudent management of liquidity and development of Islamic money market instruments.

Islamic banking and financing is gaining momentum world-wide. Many of the international RIBA banks are now focusing on LARIBA banking and financing to gain a significant market share of the funds and the deals which insist on LARIBA dealings. Many estimate the LARIBA funds looking for halal investing and banking to be from $ 50 billion to $80 billion. Most of these funds are now handled in Europe; mainly in the London financial markets. In 1996, Citibank has started "Citibank Islamic" in Bahrain and is now providing limited Islamic financing windows out of its international operations in New York & San Francisco. Islamic banks world-wide have not yet come up with the competitive financial instruments and products which allow them to provide valid avenues to the LARIBA owner of funds and which compete in quality and security with instruments offered by other RIBA banks and investment companies in the world. Yahia Abdul-Rahman 1. The Problem of Liquidity Management Liquidity is the ease by which an asset can be exchanged for another with little or no loss of value; usually cash. Liquid assets are those held in cash or are invested in instruments which can be converted rapidly into cash like deposits in cash with a bank as a current demand deposit, deposits in other banks and investments in short term liquid government securities. The bank manager tries to maximize his/her bank's return on total assets by investing as much of the cash available. However, the management is also challenged by the need to have enough liquidity to meet any mismatch of the term structure (maturity…...

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