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Islamic Money Market In Malaysia

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Business, governments and financial institutions get chances to finance their short term cash needs by using money market instruments. They are fixed-income securities with maturities in a year or less make them extremely liquid. They issue discount to their face value and provide a high degree of safety because the issuers commonly come from the highest credit rating.

They are many instruments listed in Islamic Money Market in Malaysia. Mudharabah Interbank Investment (MII) is one of the instruments which focusing on profit sharing in a day-to-day basis, or at weekends for three days. The deficit Islamic bank institutions can also invest money and make investment from the help of surplus Islamic bank institutions. Deficit must be financed …show more content…
GII is another form of marketable debt securities issued by Government of Malaysia to raise funds from the domestic capital market to finance the Government’s development expenditure. GII is the Islamic securities and issued in compliance with Shariah requirements. Other than these instruments, they are Malaysian Islamic Treasury Bills (MITB), Malaysian Government Securities (MGS) and Malaysian Treasury Bills (MTB). The concept of Qard-al-Hassan does not satisfy the GII as tradable instruments in the secondary market. To overcome this shortfall, BNM makes a way which facilitates the players to purchase and sell the papers with the central bank. The entire price sold and purchase will be determined by BNM, so that they can maintain the system to record any movement in …show more content…
Their objectives are to promote and encourage domestic and foreign trade by providing Malaysian traders with Islamic financing product. This IAB is formulated by the Islamic principles and following the concept of Murabahah which refers in selling the merchandise at a price based on cost-plus profit margin agreed by both parties (deferred lump-sum) and Bai ad-Dayn that refers to the sale of a debt arising from a trade transaction in the form of deferred payment sale (debt trading).

There are two types of financing under the IAB facilities Firstly, imports and local purchases. These types of financing will be financed under al Murabahah working capital mechanism. Customers will buy the required goods from the seller on behalf of the bank. They pay the seller and sell back the good to the other customers at a price, inclusive of a profit margin. After the maturity of al Murabah financing, the customers will pay the cost for the goods plus the profit

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