IIFM releases I’aadat Al Shira’a (Repo Alternative) Reference Paper

29 July 2010
Source : International Islamic Financial Market

The International Islamic Financial Market (IIFM) today released its Reference Paper on I’aadat Al Shira’a (Repo Alternative) concepts and structuring possibilities.

Ijlal Alvi, CEO of IIFM, commenting on the importance of the paper said, “The lack of liquidity management tools, particularly a repo-like product, is a challenge that has been faced by the Islamic finance industry for some time. IIFM initiated the process with the assistance of the working team consisting of leading practitioners from the industry to find a solution or identify the key factors which may eventually lead to the development of a product which Islamic financial institutions can use for their short-term liquidity management requirements”.

Ismail Dadabhoy, Executive Director-Head of Islamic Finance at UBS Investment Bank, Dubai and Chairman of the IIFM ‘IS’ working team said, “Finding a solution for Repo Alternative product that satisfies Shariah while also being acceptable to the general market has been a real challenge. As an ex repo trader, I know how important this product is to the short term & fixed income traders. I am convinced wider use by the market of I'aadat Al Shira'a will add liquidity in the system in terms of cash funding and liquidity float of Sukuk. It will ‘oil’ the wheels for efficiency and be a boost for Sukuk”.

Habib Motani, Partner, Clifford Chance LLP, London and member of the IIFM ‘IS’ working team said, “Various different approaches have been seen in the market up to now. This paper will, Insh’Allah, serve to assist the market in developing a consensus approach".

The IIFM Reference Paper on I’aadat Al Shira’a provides a basis in terms of finding a widely acceptable and market based solution which will play a major role in liquidity management as well as the creation of a more active Sukuk secondary market.