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Potential Islamic Certificates

In: Business and Management

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tenPOTENTIAL ISLAMIC CERTIFICATES FOR RESOURCE MOBILIZATION
MOHAMED EL-HENNAWI*

1. INTRODUCTION
The development of financial instruments has become an essential ingredient for the economic development of Islamic countries, most of which are underdeveloped. The absence of these instruments, together with the problem of limited resources and skills which are necessary to cope with the growing investment needs, tends to hinder the development process of these countries.

Islamic countries need to stimulate higher domestic savings rates and to efficiently channel the savings into productive investments, as a precondition for accelerating economic growth. This calls for the development of relatively advanced financial markets with all the relevant components, such as new financial institutions, securities markets, etc.

Islamic banks, national and international, have recently come into existence to play an important intermediary role in pooling savings, especially from small investors, and channelling them into productive investments. This role has been constrained, to a great extent, by the absence of capital markets and financial instruments based on shari'ah. Islamic banks,

therefore, have embarked on a serious effort to develop their own instruments for mobilizing the funds of the Islamic Ummah and using them to foster economic and social development of the ummah.

To be more specific, some of these banks suffer from excess liquidity, for which no suitable placements are available, while others are suffering from a lack of liquid funds to meet their basic requirements. Both situations are undesirable, causing difficulties for the banks involved. The situation is even more serious as the Islamic banking system has no institutional arrangements which would extend loans to banks in time of need and act as the lender of last resort, as the central banks do

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