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Prepared By:
Dr. H. M. Mosarof Hossain
Professor
Department of Finance
University of Dhaka
mosarof@du.ac.bd
1
Islamic Money Market
Introduction:
The money market is an essential and integral component of the
financial system also known as gear of capital market. The tenure
in this market transactions is from overnight to 12 months with
common tenure is 3 months. Transactions in the primary and
secondary markets take place over-the-counter via electronic
telecommunication but some are done in an exchange market.
Instruments traded include futures, options, swaps and forward
rate agreements.
Participants:
Banks, Non-bank financial institutions, business corporations, the
government treasury, the central bank, investment banks,
discount houses and money brokers.
2
Money market instruments
i. Treasury bills
ii. Repurchase agreements
iii. Negotiable certificates of deposits
iv. Commercial papers
v. Bankers acceptance
3
The need for Islamic money market
i. The money market is a key appendage of the banking
system because this market manages banks liquidity
positions.
ii. It resolves the mismatch problem of asset-liability of banks.
iii. Facilitates using of surplus funds and arranging of deficit
funds by participating in interbank market.
4
Differences between islamic and
conventional money market
i. Islamic money market utilises shariah-compliant contracts
such as mudarabah, murabahah and wakalah ,whereas
conventional money market issues debt contract for placement
of funds.