Finance markets

COVID-19 a catalyst for the development of Islamic finance markets: Expert

Doha: The COVID-19 pandemic is expected to be a catalyst for much needed progress in the development of Islamic financial markets around the world. At the height of the pandemic, the International Islamic Liquidity Management Corporation (IILM) increased the size of its sukuk program to $ 4 billion and increased the total volume of its monthly issuance. It has also adjusted some grades to meet the needs of investors in liquid instruments, an expert said.

HBKU recently hosted a webinar on “The COVID-19 Pandemic and Cross-Border Islamic Liquidity Management”. Experts discussed the immediate intervention of regulatory and supervisory authorities to alleviate the liquidity stress facing banks.

Dr Umar A Oseni (photo), CEO of IILM, said: “IILM’s position in the market has grown as it is among the top ten issuers of sukuk by amount issued in 2020. The Total sukuk issuance for the first quarter of 2021 was $ 6 billion. IILM sukuk meet the demand of Islamic banks and are mainly bought by Islamic investors and according to IILM data, banks account for 79.2% of investors, 73% of which are Islamic banks.

“The milestone we reached in 2020, where we increased the size of the program from $ 3 billion to $ 4 billion, was driven by growing market demand for a high quality money marketing instrument. The relevance of a credible Islamic instrument was emphasized during the pandemic and Qatar’s banks were very supportive. The COVID-19 pandemic should serve as a wake-up call and should be a catalyst for much needed progress in the development of Islamic financial markets around the world, ”he added.

Dr Umar focused on the Islamic market, with the IILM being the only international infrastructure institution to provide cross-border liquidity management that is Sharia-compliant by nature. The presentation highlighted the achievements of IILM and how the institution has grown significantly since its inception and is impacting the Islamic financial industry.

He said, “The IILM aims to improve cross-border investment flows, international ties and financial stability by creating more liquid Sharia-compliant financial instruments for institutions offering Islamic financial services (IIFS). The main objective of this institution is to facilitate the management of cross-border liquidity among institutions offering Islamic financial services (IIFS) by making available a variety of Sharia-compliant instruments, on commercial terms, to meet different needs. liquidity of institutions offering IIFS. . “

Highlighting the actions taken by the Kuala Lumpur-based IILM during the COVID-19 crisis in 2020, Dr Umar said: “We have increased the size of the program to $ 4 billion which was the largest size of the program since its inception, we have funded two new assets with a total of $ 1.55. To combat the impact of COVID-19, we have increased the total volume of monthly emissions by 80% from $ 1.96 billion to $ 3.51 billion to meet the market needs of high-end Islamic instruments. quality during the pandemic year, we made adjustments to the sukuk tenors to suit the investors need and we also increased the marketability ratio to 79% for sharia paper acceptance. ”

Since the inaugural issuance in 2013, we have issued 137 sukuk to claim around $ 66 billion today and the current open volume has stabilized at $ 3.51 billion since last year and increased in size. from the $ 4 billion program at the height of the pandemic because demand increased, and we had to deliver more to the market.

The IILM Sukuk became a solution for cross-border Islamic liquidity management and was formed to solve a basic liquidity management problem that has been discussed at length by regulators. He succeeded in establishing a sovereign backed sukuk issuance in the money market, programmed with features such as an Islamic safe-haven liquidity management instrument during market turmoil, high credit quality backed by a pool of ‘Sovereign bonds issued by IILM, marketable and supported by a robust primary and secondary market infrastructure, appropriate regulatory treatment, broadly acceptable under Sharia principles, denominated in US dollars for cross-border trade.

The role of the IILM is now complementary to that of its central bank members and has achieved its main objectives. Over time, the IILM is expected to increase its importance in the Islamic financial system.