Access to interbank money markets for short-term borrowings gives considerable flexibility to banks to adjust their short-term cash flows. Existence of secondary markets for financial instruments is also an important source of liquidity. However, this conventional mechanism of liquidity management including interbank market, secondary market financial instruments  BIS central bankers’ speeches  1  and facilities from the central bank as the lender of last resort are all based on interest and therefore, not acceptable for Islamic financial institutions. In addition to the challenges regarding the liquidity management, there are also supervisory and regulatory issues to be considered. In order to resolve the differences in country level regulations regarding appropriate Shari’ah-compliant instruments, working on globally accepted liquidity management regulations and infrastructure could be a viable option. Establishment of a carefully designed and structured Global Shariah Supervisory Board could be a step in the right direction. In this context, we also appreciate the excellent and productive work of Bank Negara Malaysia, the Gulf central banks and other parties. As a major effort, the International Islamic Liquidity Management Corporation (IILM) has been established to assist institutions offering Islamic financial services in addressing their liquidity management issues in an efficient and effective manner. This institution addresses one of the fundamental problems of Islamic financial institutions: the provision of adequate liquidity in times of stress. Once there is an international lender-of-last-resort facility (to complement and not to replace existing national facilities), the provision of Islamic financial services will be carried out with an increased confidence.
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