The International Islamic Financial Market (IIFM) has released its reference paper on I'aadat Al Shira'a (repo alternative) concepts and structuring possibilities.

'The lack of liquidity management tools, particularly a repo-like product, is a challenge that has been faced by the Islamic finance industry for some time,' IIFM chief executive Ijlal Alvi said.

'IIFM initiated the process with the assistance of the working team consisting of leading practitioners from the industry to find a solution or identify the key factors which may eventually lead to the development of a product which Islamic financial institutions can use for their short-term liquidity management requirements,' he added.

'Finding a solution for repo alternative product that satisfies Sharia while also being acceptable to the general market has been a real challenge,' IIFM working team chairman and UBS Investment Bank Dubai executive director and head of Islamic Finance Ismail Dadabhoy said.

'As an ex-repo trader, I know how important this product is to the short- term and fixed income traders,' he said.

'I am convinced wider use by the market of I'aadat Al Shira'a will add liquidity to the system in terms of cash funding and liquidity float of sukuk.

'It will 'oil' the wheels for efficiency and be a boost for sukuk,' he added.

'Different approaches have been seen in the market up to now,' Clifford Chance London partner and IIFM working team member Habib Motani said.

'This paper will serve to assist the market in developing a consensus approach.'

The IIFM reference paper on I'aadat Al Shira'a provides a basis in terms of finding a widely acceptable and market-based solution which will play a major role in liquidity management as well as the creation of a more active sukuk secondary market.-TradeArabia News Service