Islamic Liquidity Management – Murabaha Compliant Liquidity Products

It is official! The world has changed, and investors find themselves in a “new normal” also when it comes to money market investments. An advanced liquidity management is not just a necessity but an essential aspect for every investor. The concept of Islamic Liquidity Management (ILM) has not been at the forefront within the overall investment universe but quickly gathers of importance.

The ample liquidity coupled with broad and extensive support of the financial system pushed interest rates to extremely low or even negative levels. This environment causes many challenges when managing liquidity and the Islamic Liquidity Management theorem deals exactly with this subject. Every investor is confronted with the debate about credit vs. duration risk and how best to find the right balance.

The Islamic finance industry holds assets of around $2.5 trillions as of 2018 and grew by an average rate of over 6% over the last six years. Compared to total assets of global financial institutions it is a mere 0.66% but with raising importance. In this context, and with the growing threat of further negative interest rates, new liquidity options have to be taken in consideration.

We are at the cusps of defining the Islamic Liquidity Management for the future. With a growing gap between available liquidity and investable assets new and innovative products need to enter the market to satisfy the demand for Shari´a compliant investments. The current low / negative interest rate situation will not change in the foreseeable future and using the knowledge of when and how much liquidity is needed combined with of Al Waseelah Plc expertise, new innovative Shari´a compliant products will change the Islamic Liquidity Management landscape forever.

As interest rates (Riba) are prohibited any solution needs to take all aspects of Islamic finance into consideration. Murabaha compliant liquidity products based on self-liquidating, physical assets on an instant transaction allows for an advanced liquidity management in the money market space. The fixed rate, fixed date and stable return allow to manage forward liquidity more efficiently.

Al Waseelah Plc made it its mission to provide groundbreaking solutions in the Sukuk space and to offer investors new Liquidity Management tools. Embracing the “new normal” and using advanced liquidity tools will allow investors to make better decisions within their overall liquidity management.

Author: Chris Kruecken, Global Head of Business Development, Bedford Row Capital PLC