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IILM Plans First Islamic Dollar Bill Sale of Up to $1 Billion

March 21 (Bloomberg) -- International Islamic Liquidity Management Corp. plans to sell as much as $1 billion of the first global Shariah-compliant dollar bills by the middle of the year, according to Chairman Zeti Akhtar Aziz.

The Kuala Lumpur-based multinational agency postponed the offering last year as it awaited a credit rating, an issue that will be resolved at a meeting in the Middle East this month, Zeti, who is also governor of Malaysia’s central bank, told reporters in the capital today.

“That meeting will finalize many issues,” said Zeti. “We hope soon after that we we’ll receive the rating and following that the process of issuance.”

The corporation was formed by 12 central banks and two multinational institutions in January 2011 to provide Islamic lenders with a broader range of instruments in which to park idle funds. The Kuala Lumpur-based Islamic Financial Services Board estimates the $1 trillion industry will grow to $2.8 trillion by 2015.

Growth in Malaysia’s Islamic banking deposits has outpaced non-Shariah-compliant counterparts by almost three times, increasing an average 17.6 percent over the past 10 years, compared with 7.1 percent, according to the central bank’s 2011 Financial Stability and Payment Systems Report issued today.

“The continuous demands and challenges of effectively managing liquidity and the associated asset-liability maturity mismatches have provided the impetus for wide-ranging efforts to further enhance the liquidity management framework,” the report said.

Bank Assets

The country’s Islamic banking assets rose 23.8 percent to 434.6 billion ringgit ($141 billion) last year and accounted for 22.4 percent of the total, according to Bank Negara. Shariah-compliant insurance assets, or takaful, climbed 15.8 percent to 17 billion ringgit.

Sales of sovereign and corporate Islamic bonds, which pay returns on assets to comply with the religion’s ban on interest, almost tripled over the past five years to 353 billion ringgit at the end of 2011, according to today’s report.

The Southeast Asian nation, which pioneered the industry 30 years ago, remained the world leader with a market share of 60 percent, or $108 billion, in outstanding Shariah-compliant bonds, or sukuk, it said. Malaysia accounted for 73.2 percent of global issuance last year, Bank Negara said.

Sales of foreign currency-denominated sukuk in Malaysia increased to $2.1 billion, accounting for 14.5 percent of U.S. currency Islamic bonds globally, according to the report.

To contact the reporter on this story: Barry Porter in Kuala Lumpur at bporter10@bloomberg.net.

To contact the editor responsible for this story: Sandy Hendry in Hong Kong at shendry@bloomberg.net

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