KUALA LUMPUR, Sept 4 (Reuters) - Malaysia-based International Islamic Liquidity Management Corp (IILM) hopes to widen its membership base as it seeks feedback from the market on its Islamic bond issuance programme, its top executive said.
The IILM launched its short-term sukuk programme in August last year, aiming to meet a shortage of highly liquid, investment-grade financial instruments which Islamic banks can use to manage their short-term funding needs.
Its programme now has $1.65 billion of sukuk outstanding and could eventually grow to more than $2 billion; nine countries are directly represented in the IILM and it is keen to add more.
“Now that IILM has issued, it can attract new members and it will attempt to,” chief executive Rifaat Ahmed Abdel Karim told Reuters on the sidelines of the Global Islamic Finance Forum.
The IILM is a consortium of central banks and monetary agencies from Indonesia, Kuwait, Luxembourg, Mauritius, Qatar, Malaysia, Nigeria, Turkey and the United Arab Emirates, as well as the Jeddah-based Islamic Development Bank.
In April last year, the IILM said Saudi Arabia had left the IILM, with the central banks of Qatar and Malaysia buying out its share. The reasons for Saudi Arabia’s departure were not disclosed.
A wider membership would boost demand for the IILM’s sukuk, since Islamic banks in certain countries cannot hold IILM sukuk without permission from their local regulator, Karim added.
“If they give it a regulatory treatment in their own jurisdiction, that will increase demand for IILM (sukuk).”
One potential new member is Oman; that country’s central bank governor told Reuters last October that it was considering whether to join the IILM or allow its banks to hold IILM sukuk. Last month, Oman’s central bank participated in an IILM roundtable held in London.
A growing membership could also widen the network of primary dealer banks which distribute IILM sukuk, as they are nominated by the body’s governing board. The IILM currently has nine primary dealers; Indonesia has yet to nominate a local bank.
Last month, the IILM increased its total sukuk outstanding to $1.65 billion, up from its inaugural $490 million deal; it has also lengthened maturities by auctioning $400 million worth of six-month sukuk.
Previously the IILM had only issued U.S. dollar-denominated three-month sukuk, although its programme permits multiple currencies and maturities of up to one year.
Issuing in other currencies is a matter for the IILM’s governing board, while other tenors will be driven by market appetite, said Karim, who joined the IILM in October 2012.
“We have to be driven by the market. So far they are asking for three months or six months.” (Reporting By Al-Zaquan Amer Hamzah and Bernardo Vizcaino; Editing by Andrew Torchia)