March, 23, 2010

The Islamic bond market will struggle to regain its position for a long time if an alternative for creating short-term cashflow is not developed, according to a senior figure at a leading Islamic finance company based in Dubai International Financial Centre.Abdulrauf Sivany, managing director of Islamic finance at Global Commo-dity Finance, told 7DAYS that it is crucial the Islamic financial sector devises a method to allow Islamic bonds or 'sukuk' investors to generate liquidity when needed.

He explained that in the traditional non-Islamic finance sector, a 'repo alternative' offers holders of bonds the opportunity to create cashflow by selling their bond to the bank for a short period and then buying it back at a slightly increased rate.Sivany says that "one of things that is lacking in the Islamic finance market is liquidity". He believes developing a way sukuk holders can create cash flow would solve this."Otherwise you will have to wait [a long time] until the liquidity in this market comes back to the levels it was in 2007 and 2008," he added.

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