Commodity Murabahah Program; A New Instrument for Liquidity Management

Authors

1 Assistant Professor, Economics Department, Shiraz University

2 M. A. Student, Economics, Shiraz University

Abstract

Liquidity management is one of the most important discussions in banking which
applies to all Islamic and conventional banks. The importance of liquidity transcends
the individual bank, since a liquidity shortfall at a single bank may invoke systemic
repercussion causing harm to the whole financial stability of a country. Difference
between maturity of assets and liabilities is the main reason that makes liquidity
risk; therefore, it is important for banks and financial institutions to have adequate
liquidity potential in order to obtain sufficient funds promptly and at a reasonable
cost whenever they face the liquidity problem. Due to lack of liquidity instruments
based on shariah principle, liquidity risk is more important in Islamic banking and
financial institutions. Commodity Murabahah program is one of the innovations that
can help to manage liquidity risk in short-term. This paper provides insights into the
mechanism and structure of Commodity Murabahah Program as an instrument to
manage liquidity.

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