Absence of Interbank Loan Market and Banking Short-Term Liquidity Management Mechanisms: The Most Pressing Problems of the Islamic Finance Model

6 Pages Posted: 23 Feb 2015

See all articles by Magomet Yandiev

Magomet Yandiev

Moscow State University - Faculty of Economics

Date Written: February 15, 2015

Abstract

The Islamic finance model is sufficiently well specified at the “bank-to-client” level, but does not regulate the “central bank-to-bank” and “bank-to-bank” relationships. This paper proposes a concrete Shariah-compatible mechanism for setting up an Islamic interbank loan market and managing Islamic bank liquidity, which allows a segregation of Islamic and non-Islamic finance. Islamic banks should as a minimum delink from LIBOR and other traditional reference rates and come up with their own financial benchmarks.

Keywords: Islamic banks, central bank, liquidity, interbank lending market, money market

JEL Classification: E5, G1, F3

Suggested Citation

Yandiev, Magomet, Absence of Interbank Loan Market and Banking Short-Term Liquidity Management Mechanisms: The Most Pressing Problems of the Islamic Finance Model (February 15, 2015). Available at SSRN: https://ssrn.com/abstract=2565518 or http://dx.doi.org/10.2139/ssrn.2565518

Magomet Yandiev (Contact Author)

Moscow State University - Faculty of Economics ( email )

1-46 Leninskiye Gory
Moscow, 119991
Russia
+79037699393 (Phone)

HOME PAGE: http://www.econ.msu.ru/departments/fincred/staff/M.I.Yandiev/

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