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Abu Dhabi, UAEMonday 19 November 2018

Arab Monetary Fund calls for central banks to step up in Islamic finance

The region’s central banks have moved to offer Islamic banks new, Sharia-compliant liquidity facilities in a bid to help shore up their short-term financial positions.

Central banks need to have a stronger role in setting regulations for the region’s Islamic banks, and must press ahead with introducing new liquidity management tools, the head of the Arab Monetary Fund said on Sunday.

“There is a need for more efforts to strengthen the supervisory and regulatory capacity of central banks,” said Abdulrahman Al Hamidy, the director general of AMF, in Dubai on Sunday.

“That includes new tools to help banks “hedge various risks”, he added.

Regulators need to introduce new liquidity management tools, and to work towards “the strengthening of governance and the development of human and technical capacity” in the industry, Mr Al Hamidy said.

The lack of tools for Islamic banks to manage their ­short-term financial obligations “still represents one of the most important challenges” for the sector, and one which places “a burden on policymakers and Islamic banks”.

Sharia imposes restrictions on the kinds of products that Islamic banks can use for their day-to-day fin­ancing operations.

The region’s central banks have moved to offer Islamic banks new, Sharia-compliant liq­uidity facilities in a bid to help shore up their short-term financial positions.

The UAE Central Bank introduced a Sharia-compliant short-term lending facility in March last year.

It allows banks to sell and repurchase Sharia-compliant securities overnight at profit.

Islamic finance is now ­systemically important in most Arabian Gulf countries, with Islamic financial assets ­accounting for more than 15 per cent of total assets in the UAE, ­Kuwait, Saudi Arabia and ­Qatar.

abouyamourn@thenational.ae

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