Call money market for Islamic banking starts operation todayStaff Correspondent
The Islami Interbank Fund Market, a separate call money market for Islamic banking, begins operation today.
Bangladesh Bank governor Atiur Rahman will inaugurate the IIFM today at a programme at the central bank headquarters in Dhaka.
Shariah-based banks and financial institutions and Islamic banking branches of commercial banks will engage in overnight money transactions at IIFM.
The BB on December 27, 2011 issued a circular for introducing a separate call money market for Islamic financial institutions as they do not borrow or lend money at the call money market of conventional commercial banks.
The circular said the IIFM would facilitate strengthening of liquidity management of the banks.
The transaction of money will be based on profit instead of interest.
The Shariah-based banks have got about 20 per cent market share of the total asset and liability in the banking sector.
In the conventional call money or overnight money market, the commercial banks make direct transactions with other banks.
But in case of a Shariah-based call money market, the banks will transact with each other through a separate fund – Islami Bond Fund.
The BB circular said that the banks, FIs and Islamic branches of commercial banks could handover their excess funds to Islami Bond Fund on daily basis. The Islami Bond Fund would take the fund as custodian. Any Islamic bank requiring fund will borrow the money from the IBF.
The profits on money invested from the IBF, which would be accumulated on daily basis, would be distributed among participants on a temporary basis in proportion with their capital in the fund.
The profits would be adjusted in the year-end in proportion with the profits declared by the borrower bank.
The circular said that all transactions would be based on Mudaraba.
An official of BB said that the IIFM would help ease the existing liquidity crisis of the Shariah-based banks.
He said in recent times, small-scale shariah-based banks and FIs faced liquidity crisis despite having Tk 3,000 to Tk 4,000 excess liquidity with the Shariah-based banks.
‘These small-scale banks cannot go to other banks to borrow money as the banks charge interest. Islami banks do not transect on interest-based funds,’ said the official.
Managing director of a Shariah-based bank recently told New Age that the new market would facilitate spreading of Islami banking in the country. ‘Islami banks could not borrow from other banks traditionally. Now the Shariah-based banks would transect money among themselves,’ he said.
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