Bay’ al-Wafa Repo [BW Repo-i]: A Proposed Shariah Compliant Liquidity Management Instrument from the Classical Perspective
January 4th, 2020
By Abdul-Azeez Maruf Olayemi
The dearth of Shariah compliant instruments for liquidity management is yet a major challenge that works against the stability and the growth of Islamic banking and finance. However, an in-depth study of the literatures of Fiqh ‘Islamic jurisprudence’ shows that one of the method that was used to solve the problem by classical scholars was the introduction of some hybrid contract, such as Bay’ al-‘Uhudah, Bay’ al-Wafa contracts etc. Adopting jurisprudential and legal methodology, the current study seeks to propose a new tradable and viable instrument for the market. The instrument is coined “BW Repo-i.” It is a Shariah compliant repurchase agreement. If the instrument is adopted, it is believed that it will offer a solution to the challenges of liquidity management in the Islamic financial institutions. The instrument shall be tradable at both the primary market and secondary market of the Islamic money market.