The Potential of Islamic Finance Instruments in Addressing the Cash Liquidity Problem in Libya. (A Prospective Study)

Abstract

This research aims to examine the Islamic financing methods that can be utilized to address the liquidity crisis in the Libyan banking sector. It also seeks to identify the effectiveness of Islamic financial instruments in attracting liquidity and channeling it toward stimulating the Libyan economy. The researchers adopted both the descriptive-analytical and exploratory methodologies in conducting this study. The study reached several key findings, the most important of which is that activating Islamic financial instruments represents an appropriate option for the Libyan context, particularly given their proven success in other Islamic countries. The study further concluded that Islamic sukuk constitute one of the main financing tools for providing liquidity within the banking sector. Moreover, the study presented several recommendations, including the development of modern Islamic banking products to attract savings; the integration of the informal economy into the formal economic cycle through tax incentives and regulatory measures; restoring public confidence in the banking system by ensuring deposit guarantees and regular liquidity provision; and the activation of the Libyan capital market through establishing a special platform for trading Islamic sukuk.