---
title: "What is Islamic interbank money market? | IslamicOpenFinance™"
description: "The market in which Islamic banks lend surplus liquidity to one another and raise short-term funds without interest."
url: https://islamicopenfinance.com/glossary/islamic-interbank-money-market/
lang: en-GB
source: "IslamicOpenFinance"
---

[Glossary](https://islamicopenfinance.com/glossary/) / [Treasury, liquidity and hedging](https://islamicopenfinance.com/glossary/#treasury)

Treasury, liquidity and hedging

# Islamic interbank money market

The market in which Islamic banks lend surplus liquidity to one another and raise short-term funds without interest.

An Islamic interbank money market is where Islamic banks place surplus funds with one another and raise short-term liquidity using instruments structured on Islamic contracts instead of interest-bearing loans. Bank Negara Malaysia's policy document on Islamic collateralised funding describes such funding as essential to liquidity management in Malaysia's market and names sell and buy back and collateralised commodity murabaha as instruments used in it. Each instrument rests on a contract, so treasury systems must record trades as sales, agencies or partnerships, not as deposits with a rate.

## Sources

- [Bank Negara Malaysia, Islamic Collateralised Funding policy document, 2024: introduction, Islamic Interbank Money Market](https://www.bnm.gov.my/documents/20124/938039/pd_Islamic_Collateralised_Funding.pdf)

This entry explains a term; it is not a Shariah ruling. Approving a product is for each institution's own Shariah board and regulator.

## Related terms

[**Commodity murabaha** Interbank and treasury deals in which commodities are bought and sold on deferred payment to place or raise short-term funds.](https://islamicopenfinance.com/glossary/commodity-murabaha/) [**Interbank investment wakalah** An interbank placement in which one bank invests another's funds as agent for a fee, targeting an expected but not guaranteed profit.](https://islamicopenfinance.com/glossary/interbank-investment-wakalah/) [**Collateralised murabahah** A murabaha placement secured by collateral such as sukuk, used as an Islamic alternative to a repo.](https://islamicopenfinance.com/glossary/collateralised-murabahah/) [**Sell and buy back (SBBA)** An interbank arrangement of an outright sale of securities, promises to reverse it and a later outright sale back at a set price.](https://islamicopenfinance.com/glossary/sell-and-buy-back/) [**Short-term liquidity sukuk** Short-term, tradable sukuk that Islamic banks hold as liquid assets and use to manage cash, including across borders.](https://islamicopenfinance.com/glossary/liquidity-sukuk/)

**Treasury, liquidity and hedging**

1. [Commodity murabaha](https://islamicopenfinance.com/glossary/commodity-murabaha/)
2. [Wa'd (promise)](https://islamicopenfinance.com/glossary/wad/)
3. [Muwaadah (mutual promise)](https://islamicopenfinance.com/glossary/muwaadah/)
4. [Tahawwut (hedging)](https://islamicopenfinance.com/glossary/tahawwut/)
5. [Islamic profit rate swap](https://islamicopenfinance.com/glossary/profit-rate-swap/)
6. [Islamic FX forward](https://islamicopenfinance.com/glossary/islamic-fx-forward/)
7. [Islamic cross-currency swap](https://islamicopenfinance.com/glossary/islamic-cross-currency-swap/)
8. [Interbank investment wakalah](https://islamicopenfinance.com/glossary/interbank-investment-wakalah/)

[All 221 terms](https://islamicopenfinance.com/glossary/)