ISLAMIC LIQUIDITY MANAGEMENT – THE MALAYSIAN EXPERIENCE

The paper examines the Malaysian experience in managing Islamic liquidity from the perspective of regulators. While there are a multitude of factors that create a vibrant money market system for effectively managing liquidity, this paper looks at six factors: a large number of active players in the market; diversity and sophistication of Islamic instruments; a market transparency framework; an effective mechanism and system for tendering, settlement and information dissemination; government support in market development; and a robust legal and regulatory framework. The paper also discusses issues relating to Islamic liquidity management and raises the possibility of building linkages among Islamic financial markets, developing joint funds, strengthening information sharing and human talent management as well as creating a private-sector-driven association for Islamic financial market participants.