More sharia-compliant instruments would aid liquidity management, IMF paper argues
Research notes lack of instruments forced Islamic banks to hold a lot of cash
A lack of sharia-compliant financial instruments has led Islamic banks to hold a "significant amount" of cash reserves, making it harder for central banks to conduct monetary operations with them, according a working paper published by the International Monetary Fund.
"Active efforts are needed to develop sharia-compliant instruments to improve the efficiency of monetary operations," Ritu Basu, Ananthakrishnan Prasad and Sergio Rodriguez say, in Monetary operations and Islamic banking in the GCC
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