5.2

1. There is a need for product development and facilitation centres in each country. The Islamic financial institutions, their associations, security market regulators, and the central banks should all be encouraged to have at least one such centre in each country. Targeting the ijarah sukuk towards smaller investors would create secondary market. Otherwise the liquidity surplus banks and institutional investors will acquire the lions share and they are not interested in secondary market trading. The other route is to lower the return on sukuk which will also provide incentives to trade in secondary market. Issuance of Islamic Depository Receipts (IDR) on suitable underlying Islamic instruments has potential to expand the market size, investor base, and liquidity of the products and markets. There is a need to study this aspect from operational side as well as to come up with shari[ah and market rules for such activity. Tax neutrality across various assets is very important for acceptance of new products in the market. The finance and fiscal managers of the countries can play an important role in this regard. Risk characteristics of the products and the markets change over time. IRTI in cooperation with IIFM or IFSB can institute an annual risk evaluation surveys of the Islamic capital market products and of the markets in order to benefit the industry. Other players in the market (investors, issuers, and other for profit institutions) may not be able to initiate such surveys as neutrally as can be performed by IRTI, IIFM or IFSB. Later on after 3 or 4 years of successful issues the risk evaluation exercise can be sold to some for-profit institution or to some association of stock exchanges to continue and improve upon the annual surveys. Issues needing long-term attention: 5.2 It is important to create a benchmark for standardization of market tradable products. Creation of necessary infrastructure institutions for Islamic capital markets is important. Progress has been made in this direction in the form of creation of institutions such as AAOIFI, IIFM, IFSB, LMC, IIRA, etc. 87