Islamic repurchase agreements may struggle to gain wide acceptance as a tool for financial institutions because the industry lacks clear rules governing their use, participants at a major industry conference told Reuters.
Liquidity management products such as Islamic repos were one of the main themes at the annual meeting of the Bahrain-based Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) in Manama this week.
The shortage of such instruments is becoming increasingly problematic for Islamic finance as the industry grows, bankers and analysts said. By allowing investors to lend out assets for short periods, Islamic repos could help to solve the problem by giving banks a way to balance their short-term liquidity flows with demand.
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