Islamic interbank money market set to launch by June

Bangladesh Bank is set to launch an Islamic interbank money market by June this year, aiming to improve liquidity management among Shariah-based banks.

The initiative will provide Islamic banks with a structured platform for short-term borrowing and lending, addressing a long-standing gap that prevents them from accessing the conventional call money market. Islamic banks, as a result, often face liquidity pressures during periods of financial strain.

According to the central bank’s plan, transactions will be available for multiple tenures, including 1, 7, 14, 28, 90, and 180 days. Both collateralised and non-collateralised transactions will be allowed, offering greater flexibility in managing funds.

Bangladesh Bank has studied Islamic interbank money market systems in countries such as Indonesia, Malaysia, and Bahrain to develop the framework for the initiative.

A senior Bangladesh Bank official said the new market will enable banks with surplus liquidity to support those facing shortages. “This will establish an effective mechanism for fund transfer among Islamic banks and help ease liquidity constraints,” the official said.

A former managing director of a private Islamic bank said the system would primarily address short-term liquidity needs and would not resolve deeper structural challenges. 

He emphasised the need for stricter oversight by the central bank to ensure proper fund management across the sector.

EAR/MHK