BANKING - Barclays Capital offers Islamic repos in $1 trillion market

Barclays Capital, the investment banking arm of London-based Barclays, is offering Sharia-compliant repurchase agreements to allow Islamic banks and investors manage their funds.

Barclays introduced the product worldwide two weeks ago and is focusing on clients in Malaysia and the Middle East, where the largest Islamic financial institutions are based, Harris Irfan, the bank’s Dubai-based head of Islamic finance products, said in an interview.


“The product is ready to go out the door,” he said in an e-mailed response to questions on August 17.

The Islamic repurchase agreements from Barclays will be based on a Sharia-compliant sale and repurchase agreement and the underlying assets used as collateral, typically sukuk, won’t violate the religion’s ban on interest.

The International Islamic Financial Market, a Bahrain-based agency founded by the central banks of Bahrain, Indonesia and Malaysia, this week proposed allowing third parties to act as intermediaries between buyers and sellers of sukuk used as collateral for short-term funds.

“Liquidity management remains a challenge for Islamic financial institutions and there is strong pent up demand for this kind of product,” Irfan said. Repos improve cash flow because they allow institutions to invest cash for short periods of time, even overnight, he said.

Demand for services complying with Sharia law is increasing about 15 percent annually, according to the Kuala Lumpur-based Islamic Financial Services Board, a standards body for the industry, which oversees about $1 trillion of assets. Holdings may almost triple to $2.8 trillion by 2015, the IFSB estimates. (Bloomberg)

http://www.arabianbusiness.com/595215-barclays-capital-offers-islamic-repos-in-1-trillion-market- Thu August 18, 2010