Islamic Banks and Central Banking
15 Pages Posted: 18 Oct 2017
Date Written: September 15, 2017
Islamic banking is a growing sector of the financial services industry, but Islamic law (Shari’ah) does not permit the payment or receipt of interest. This poses a problem for central banks that only offer interest-bearing liquidity facilities to banks. This article explores the ways in which a central bank can establish a liquidity facility that is compliant with Shari’ah, along with the model we have decided to adopt for our new Shari’ah-compliant facility.
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