Thomson Reuters launches world’s first Islamic finance benchmark rate

KUALA LUMPUR (Nov 23): Thomson Reuters has launched the world’s first Islamic finance benchmark rate to provide an indicator for the average expected return on Shariah-compliant short-term interbank funding.

The Islamic Interbank Benchmark Rate (IIBR) uses the contributed rates of 16 Islamic banks and the Islamic sections of conventional banks to provide a reliable and crucial alternative for pricing Islamic instruments to the conventional interest-based benchmarks used for mainstream finance.

The benchmark rate was launched in New York, London, Bahrain on Tuesday.

The global head of Islamic finance, Thomson Reuters, Rushdi Siddiqui explained the delinking from conventional performance benchmarks started more than a dozen years ago and this led to the plan to have the IIBR.

“We have taken a collaborative approach as industry challenges are best solved by industry players working towards a common objective,” he said.

Rushdi said the simplicity and robustness of the new benchmark’s methodology, governance, and transparency, combined with the endorsement of many respected Islamic financial institutions and scholars, “will result in a reliable and realistic benchmark that better measures cost of funding for Islamic financial institutions”.

He pointed out the IIBR was an important step forward for Islamic finance authenticity.

The benchmark’s ongoing implementation and integrity will be overseen by an Islamic Benchmark Committee of over 20 Islamic finance institutions. It will be chaired by Dr Nasser Saidi, chief economist of the Dubai International Financial Center (DIFC), and a Shariah Committee consisting of four world-respected Shariah scholars.