The Sharjah liquidity support mechanism will help boost liquidity of local banks and enable them to lend to businesses
Sharjah’s finance department initiated a Dh4 billion liquidity support mechanism for banks on Tuesday to help businesses affected by the coronavirus pandemic.
Issued as 12-month dirham-denominated paper in several tranches, the Sharjah liquidity support mechanism (SLSM) sukuk represents the first rated short-term local currency tradeable instrument in the UAE, which can be used for liquidity management by banks.
The finance department said this initiative will allow lenders to use the sukuk as security to access liquidity facilities at the UAE Central Bank of the UAE.
“The authorities in Sharjah and across the region are taking the required measures to provide maximum assistance to all businesses dealing with the impact of the outbreak,” Waleed Al Sayegh, director-general of Sharjah finance department said.
The first tranche of the SLSM was subscribed to in May by Bank of Sharjah with a Dh2bn participation, the emirate’s finance department said. Subsequent tranches with one or more other banks are expected to expand the SLSM to Dh4bn.
The coronavirus pandemic has hit the global economy, which is set to slide into a deep recession this year. It has forced governments to close borders, enforce movement restriction and shut all but essential businesses. Governments and central banks have poured in more than $8 trillion (Dh29.3tn) in economic stimulus to ease the pressure on businesses and to stem job losses.
The UAE was the first country in the Middle East and North Africa to roll out fiscal and monetary support totaling more than Dh282bn. The package includes zero-interest funding to encourage banks to lend, in addition to measures such as discounted utility bills and waivers of government fees for business and individuals.