The Islamic money market is integral to the functioning of the Islamic banking system, firstly, i... more The Islamic money market is integral to the functioning of the Islamic banking system, firstly, in providing the Islamic financial institutions with the facility for funding and adjusting portfolios over the short-term, and secondly, serving as a channel for the transmission of monetary policy. Financial instruments and interbank investment would allow surplus banks to channel funds to deficit banks, thereby maintaining the funding and liquidity mechanism necessary to promote stability in the system. The Islamic Interbank Money Market (IIMM) was introduced on January 3, 1994 as a short-term intermediary to provide a ready source of short-term investment outlets based on Syariah principle. Through the IIMM, the Islamic banks and banks participating in the Islamic Banking Scheme (IBS) would be able to match the funding requirements effectively and efficiently. Bank Negara Malaysia (BNM) issued the Guidelines on the IIMM on December 18, 1993 to facilitate proper implementation of the IIMM Types of Instruments in Islamic Interbank Money Market The IIMM covers the Mudharabah Interbank Investment and Interbank trading of Islamic financial instruments. a) Mudharabah Interbank Investment (MII) MII refers to a mechanism whereby a deficit Islamic banking institution (investee bank) can obtain investment from a surplus Islamic banking institution (investor bank) based on Mudharabah (profit sharing). The period of investment is from overnight to 12 months, while the rate of return is based on the rate of gross profit before distribution for investment of 1-year of the investee bank. The profit sharing ratio is negotiable among both parties. The investor bank at the time of negotiation would not know what the return would be, as the actual return will be crystallised towards the end of the investment period. The principal invested shall be repaid at the end of the period, together with a share of the profit arising from the used of the fund by the investee bank. b) Wadiah Acceptance
The Islamic money market is integral to the functioning of the Islamic banking system, firstly, i... more The Islamic money market is integral to the functioning of the Islamic banking system, firstly, in providing the Islamic financial institutions with the facility for funding and adjusting portfolios over the short-term, and secondly, serving as a channel for the transmission of monetary policy. Financial instruments and interbank investment would allow surplus banks to channel funds to deficit banks, thereby maintaining the funding and liquidity mechanism necessary to promote stability in the system. The Islamic Interbank Money Market (IIMM) was introduced on January 3, 1994 as a short-term intermediary to provide a ready source of short-term investment outlets based on Syariah principle. Through the IIMM, the Islamic banks and banks participating in the Islamic Banking Scheme (IBS) would be able to match the funding requirements effectively and efficiently. Bank Negara Malaysia (BNM) issued the Guidelines on the IIMM on December 18, 1993 to facilitate proper implementation of the IIMM Types of Instruments in Islamic Interbank Money Market The IIMM covers the Mudharabah Interbank Investment and Interbank trading of Islamic financial instruments. a) Mudharabah Interbank Investment (MII) MII refers to a mechanism whereby a deficit Islamic banking institution (investee bank) can obtain investment from a surplus Islamic banking institution (investor bank) based on Mudharabah (profit sharing). The period of investment is from overnight to 12 months, while the rate of return is based on the rate of gross profit before distribution for investment of 1-year of the investee bank. The profit sharing ratio is negotiable among both parties. The investor bank at the time of negotiation would not know what the return would be, as the actual return will be crystallised towards the end of the investment period. The principal invested shall be repaid at the end of the period, together with a share of the profit arising from the used of the fund by the investee bank. b) Wadiah Acceptance
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