Thursday, Nov 11, 2010
DUBAI (Zawya Dow Jones)--The United Arab Emirates central bank will "soon" offer Sharia-compliant certificates of deposits, or CDs, based on the Murabaha concept in a bid to help local Islamic banks manage cash, according to an official statement published Thursday.
The Sharia-compliant CDs will serve as "a monetary policy tool for the Central Bank of the U.A.E." and "as a liquidity management tool for the Islamic banks," the central bank said in a circular posted on its website.
The participating banks' profit has been set at 2.5% per annum on deferred payment basis, the central bank said in the statement. The CDs' maturities range from one week to five years and will be denominated in U.A.E. dirhams, U.S. dollars and euros.
U.A.E. central bank officials earlier this year said there was a need for Shariah-compliant CDs to be issued by the central bank.
The central bank didn't give a date for the offering but said all banks that wish to participate in the program must first sign a Commodity Murabaha Deposit Master Agreement with the central bank.
A Murabahah transaction is a sale and deferred-payment agreement based on an asset in which the cost and profit margin are pre-agreed between a bank and its customer. Transactions in Islamic finance are based on the exchange of assets rather than interest to comply with Shariah principles.
-By Leila Hatoum, Dow Jones Newswires; +971-4-446-1686; leila.hatoum@dowjones.com
Copyright (c) 2010 Dow Jones & Co.
(END) Dow Jones Newswires
11-11-10 1149GMT
