Introduction 23
and strategic planning, and Islamic fi nancial products. The Arbitration and
Reconciliation Centre for Islamic Financial Institutions (ARCIFI) aims to
settle, through reconciliation and arbitration, fi nancial and commercial dis-
putes involving institutions that have chosen to comply with the Shari’ah to
settle disputes.
The major objectives of the Bahrain-based IIFM are (a) to enhance
cooperation among regulatory authorities of Islamic banks, (b) to
address the liquidity problem by expanding the maturity structure of
instruments, and (c) to explore the possibility of sovereign asset-backed
securities. The IIFM is currently working with the International Capital
Markets Association (ICMA) on the further development of primary and
secondary markets for Islamic bonds (sukuk). The two groups are work-
ing together to develop a repurchase (repo) master agreement to help
central banks manage liquidity in the sukuk market; as well as a mas-
ter agreement for murabahah commodities contracts, which are used in
interbank transactions between Islamic banks and between Islamic and
conventional banks.^20
The IIRA aims to assist in the development of regional fi nancial mar-
kets by providing an assessment of the risk profi le of entities and instru-
ments that can be used for investment decisions. The IIRA is sponsored by
multilateral fi nance institutions, several leading banks and other fi nancial
institutions, and rating agencies from different countries. The organization
has a board of directors and an independent rating committee as well as a
Shari’ah board. The IIRA also provides a unique service of rating the level
of compliance fi nancial institutions have with the stipulations adopted by
their Shari’ah committee in good faith, both in letter and in spirit. They also
examine whether there is a mechanism within the institution to evaluate
its compliance with the Shari’ah and whether the Shari’ah committee has
enough authority, information, and resources to perform the examination
and evaluation.
The Liquidity Management Center (LMC) was established to facili-
tate investment of the surplus funds of Islamic banks and fi nancial institu-
tions into quality short- and medium-term fi nancial instruments structured
in accordance with Shari’ah principles. Its shareholders include Bahrain
Islamic Bank, Dubai Islamic Bank, Islamic Development Bank, and Kuwait
Finance House. The LMC assists Islamic fi nancial institutions in managing
their short-term liquidity and supports the interbank market. In addition, the
center attracts assets from governments, fi nancial institutions, and cor-
porations in both the private and public sectors in many countries. The
assets are securitized into readily transferable securities or structured into
other innovative investment instruments. The Center also provides short-
term liquid, tradable, asset-backed treasury instruments (sukuk) in which
fi nancial institutions can invest their surplus liquidity and offers advisory
services dealing with structured, project, and corporate fi nance as well as
equity fl oatation.