Kuala Lumpur. The International Islamic Liquidity Management Corp, which plans to issue its maiden sukuk by June this year, is facing its final hurdle as it aims to secure a network of distributors.
The IILM, which was formed to address the shortage of financial instruments for shariah-compliant banks to manage their short-term funding needs, is courting banks in various countries to be ‘primary dealers’ or distributors to ensure a secondary market for the sukuk.
“At the IILM, we have our own shariah board. They approve our product, but because we are distributing through primary dealers we still have to get the approval of every primary dealer’s sharia committee,” chief executive Rifaat Ahmed Abdel Karim said at a conference in Kuala Lumpur on Friday.
“They may not accept it, we don’t have common guidelines implemented and accepted by the market to facilitate this process,” said Karim.
The IILM has signed on eight banks as primary dealers and is said to be considering others, including Standard Chartered and Malaysia’s Bank Islam.
Karim, formerly the head of the Accounting and Auditing Organization for Islamic Financial Institutions and the Islamic Financial Services Board, called for the establishment of an institution to resolve disputes involved in the development of products for the industry.
“Once there is a dispute, we don’t know whether the courts will implement a product, so there is legal uncertainty,” he said. “We need institutions to have shariah guidelines [that are] accepted by the market.”
The IILM, comprising nine central banks and monetary agencies as well as the Jeddah-based Islamic Development Bank , aims to issue up to $500 million of dollar-denominated sukuk and eventually expand the program up to $3 billion.
The body has delayed its maiden issue several times and last saw a key founding member, the Saudi Arabia Monetary Agency quit unexpectedly. IILM’s remaining shareholders are the central banks of Indonesia, Kuwait, Luxembourg, Malaysia, Mauritius, Nigeria, Qatar, Turkey and the United Arab Emirates, as well as the Islamic Development Bank. Iran is a founding member but not a shareholder.