Malaysia-based International Islamic Liquidity Management Corp (IILM) will issue its long-awaited sukuk programme worth $490 million this month, offering tenors of three months, the financial institution said in a statement on Thursday.

The IILM, founded in October 2010, aims to address a major weakness in Islamic finance: the shortage of highly-liquid investment-grade financial instruments to help banks manage their short-term funding needs.

It plans to raise the programme to as much as $3 billion, aided by a multi-jurisdictional network of primary dealers that will ensure a secondary market, which includes Albaraka Turk and Standard Chartered as primary dealers.

The dollar-denominated sukuk programme, rated A-1 by S&P, is backed by sovereign assets from member countries and will carry maturities of up to one year, said the IILM. Islamic bonds do not pay interest but offer returns from physical assets.

IILM delayed its maiden issue several times and replaced its chief executive in October last year.

People familiar with the matter have said it encountered complex issues involving regulations in various jurisdictions and the choice of assets to back the sukuk.

While the executive's exit remains unexplained, the IILM sukuk is poised to be welcome by a wide range of investors including Saudi Arabian and Bahraini lenders as well as money market funds.

"The IILM sukuk (will) have strong global support as they represent a unique collaboration .. with the aim of enhancing the financial stability and the efficient functioning of Islamic financial markets," it said in the statement.

The remaining shareholders of the IILM are the central banks and monetary agencies of Indonesia, Kuwait, Luxembourg, Malaysia, Mauritius, Nigeria, Qatar, Turkey and the United Arab Emirates, as well as the Islamic Development Bank. Iran is a member of the IILM but not a shareholder.

In April, Saudi Arabia Monetary Agency's (Sama) pulled out of the IILM unexpectedly, depriving the IILM of a key founding member, home to some of the world's largest Islamic banks .

IILM also reshuffled its sharia board, losing four of its original six members including senior Saudi and Qatari scholars . - Reuters