Bahrain to set up 'liquidity management centre'

A Dh185 million ($50 million) Liquidity Management Centre (LMC) will be set up in Bahrain as part of the proposed Interna-tional Islamic Financial Market (IIFM). It will help Islamic banks and financial institutions manage excess short-term liquidity.

All Islamic and conventional banks have been invited to participate in establishing the centre, which will reportedly be the first of its kind. The decision was taken at a two-day International Islamic Financial Market meeting late last week.

Sources explained that the plan to establish IIFM was jointly taken by the Bahrain Monetary Agency, Islamic Development Bank (IDB), and Malaysia's Labuan Offshore Financial Supervisory Authority (Lofsa), the three signatories to an MoU signed in October 1999. The central banks of Brunei, Sudan and Indonesia have also joined since.

Last week's meeting, attended by delegates from Malaysia, Indonesia, Brunei and Sudan, besides the IDB and Islamic banks operating in Bahrain, also decided to launch five Sharia-based instruments shortly in a bid to support the IIFM.

These instruments - designed by Sudan - include central Musharka certificates, government Musharka certificates, Salam short-term securities, Ijaara Sukuk and Islamic Devel-opment Sukuk.

Othman Hamad Khair, general manager, Sudan Financial Services Co, said: "There is a need to develop such instruments to meet investor demand when the IIFM comes into being."

The meeting reviewed reports of the core implementation team from Bahrain and Malaysia on the establishment of the planned Liquidity Management Centre, and discussed the experiments of some in issuing Islamic instruments.