The Central Bank of Bahrain (CBB) has launched a new Sharia compliant liquidity management instrument, Wakalah, for Islamic retail banking segment.
The instrument, developed based on a standard contract of the International Islamic Financial Market (IIFM), will absorb excess liquidity of the local Islamic retail banks and place it with the central bank.
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The tool will require Islamic retail banks to sign a Wakalah agreement that will appoint CBB as an agent (Wakil) to invest cash on behalf of the bank (Muwakkil).
Under the scheme, which will last for one week, the Wakil will invest the funds in the investment portfolio allocated in advance, and will contain Islamic Sukuks.
Central Bank of Bahrain executive director of the banking operations Shaikh Salman bin Isa Al Khalifa said that the central bank had worked recently to develop this service for the Islamic retail banks in order to invest excess funds with the Central Bank, similar to those carried out by conventional banks.
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By GlobalData
