Central Bank of Bahrain launches Islamic liquidity facility

Wakalah instrument allows banks to make short-term deposits

The Central Bank of Bahrain

The Central Bank of Bahrain has launched an Islamic liquidity facility aimed at allowing banks to achieve a sharia-compliant return on deposits of excess reserves.

Retail Islamic banks may now deposit reserves at the central bank under a ‘wakalah' agreement. This appoints the central bank as an agent to invest their cash, with the resulting profits shared between them.

Under the facility, the central bank invests in a pre-agreed portfolio, in this case sukuk – a sharia-compliant asset roughly

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