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Monetary Operations and Islamic Banking in the GCC: Challenges and Options
Author:
Ms. Ritu Basu
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,
Mr. Ananthakrishnan Prasad
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Mr. Sergio L. Rodriguez
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Series:
IMF Working Papers
Volume/Issue:
Volume 2015: Issue 234
Language:
English
Publication Date:
09 Nov 2015
DOI:
https://doi.org/10.5089/9781513588513.001
ISBN:
9781513588513
ISSN:
1018-5941
Pages:
27
Keywords:
WP; bank; central bank; asset; market; liquid asset; Islamic Banking; GCC; Monetary Operations; conventional bank; participation paper; banking assets; Omani bank; asset share; banks ratio; return on assets; Money markets; Islamic finance; Liquidity management; Global
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund