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An Attempt to Develop Sharīʿah Compliant Liquidity Management Instruments for the Financier of Last Resort: With Reference to Qatar Development Plan

Author

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  • KAHF, MONZER

    (Hamad Bin Khalifa University)

  • HAMADI, CHERIN

    (Qatar Central Bank)

Abstract

In 2011, Islamic banking reached around 24% of the banking sector in Qatar, yet Qatar Central Bank (QCB) has not developed a Sharīʿah compliant financier of last resort. This paper investigates to which extent the available liquidity management instruments for Islamic banks are Sharīʿah compliant. Each instrument is analyzed in the context of Sharīʿah standards. Findings of this analysis suggest that the available instruments some Sharīʿah issues, such as ribā, tawarruq, and ijārah ʿīnah. We propose three alternative Sharīʿah compliant liquidity management instruments for the financier of last resort, as well as the interbank market. The first instrument is short-term muḍārabah deposits. The second, is to sell Islamic banks’ leased assets to the central bank. Whereas, the third is open market operations utilizing tradable ṣukūk.

Suggested Citation

  • Kahf, Monzer & Hamadi, Cherin, 2014. "An Attempt to Develop Sharīʿah Compliant Liquidity Management Instruments for the Financier of Last Resort: With Reference to Qatar Development Plan," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 22, pages 109-138.
    • Handle: RePEc:ris:isecst:0004
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    References listed on IDEAS

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    1. Stephen G. Cecchetti & Piti Disyatat, 2010. "Central bank tools and liquidity shortages," Economic Policy Review, Federal Reserve Bank of New York, vol. 16(Aug), pages 29-42.
    2. Simon T Gray, 2006. "Central bank management of surplus liquidity," Lectures, Centre for Central Banking Studies, Bank of England, edition 1, number 6, April.
    3. Obiyathulla Ismath Bacha, 2008. "The Islamic inter bank money market and a dual banking system: the Malaysian experience," International Journal of Islamic and Middle Eastern Finance and Management, Emerald Group Publishing Limited, vol. 1(3), pages 210-226, August.
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    Cited by:

    1. Hamza, Hichem & Saadaoui, Zied, 2018. "Monetary transmission through the debt financing channel of Islamic banks: Does PSIA play a role?," Research in International Business and Finance, Elsevier, vol. 45(C), pages 557-570.
    2. Sarker, Md. Abdul Awwal, 2015. "Islamic Monetary Policy Instruments (IMPIs)," Working Papers 1436-4, The Islamic Research and Teaching Institute (IRTI).
    3. Aliyu, Shehu Usman Rano, 2015. "Developing Islamic Liquidity Management Instruments: Resolving the Impasse between Central Bank of Nigeria (CBN) and Jaiz Bank Plc," MPRA Paper 68898, University Library of Munich, Germany, revised 07 Feb 2016.
    4. Sarker, Md. Abdul Awwal, 2016. "An Evaluation of Islamic Monetary Policy Instruments Introduced in Some Selected OIC Member Countries," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 24(1), pages 1-47.

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