Monetary Operations and Islamic Banking in the GCC : Challenges and Options

Author/Editor:

Ananthakrishnan Prasad ; Ritu Basu ; Sergio L. Rodriguez

Publication Date:

November 9, 2015

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

The assessment provides evidence of market segmentation across Islamic and conventional banks in the Gulf Cooperation Council (GCC), leading to excess liquidity, and an uneven playing field for Islamic banks that might affect their growth. Liquidiy management has been a long-standing concern in the global Islamic finance industry as there is a general lack of Shari’ah compliant instruments than can serve as high-quality short-term liquid assets. The degree of segmentation and bank behavior varies across countries depending on Shari’ah permissibility and the availability of Shari’ah-compliant instruments. A partial response would be to support efforts to build Islamic liquid interbank and money markets, which are crucial for monetary policy transmission through the Islamic financial system.This can be achieved, to a large extent, by deepening Islamic government securities and developing Shari’ah-compliant money market instruments.

Series:

Working Paper No. 15/234

Subject(s):

English

Publication Date:

November 9, 2015

ISBN/ISSN:

9781513588513/1018-5941

Stock No:

WPIEA2015234

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

27

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