Approved by the Shariah Board of the CBB, the new Sharia compliant Wakalah instrument is aimed at absorbing excess liquidity of the local Islamic retail banks and put it in the central bank.
CBB developed the tool based on a standard contract of the International Islamic Financial Market (IIFM).
For retail Islamic banks which look to deposit excess liquidity with the CBB, the Wakalah tool provides an investment opportunity.
In order to invest cash on behalf of the bank, the banks are required to sign a Wakalah agreement which appoints the CBB as an agent. CBB will invest the funds in the investment portfolio allocated in advance, and contains Islamic Sukuks.
The agreement has duration of one week and is available for Islamic retail banks every Tuesday.
CBB banking operations executive director Salman Bin Isa Al Khalifa said that recently the bank had worked to develop the service for the retail banks to invest excess funds with the Central Bank.
According to him, the new service reconfirms Bahrain’s proposal to develop Sharia compliant products in order to serve the growing Islamic Banking industry.
The Central Bank of Bahrain was established in 1973 as the Bahrain Monetary Agency, shortly after Bahrain got its independence from the UK.
