THE United Arab Emirates' central bank will launch Islamic certificates of deposit by the end of the year to help the Gulf state's Islamic banks manage cash, a senior banker at Standard Chartered Saadiq said yesterday.

Afaq Khan, chief executive of StanChart's Islamic banking unit, said test transactions could take place as early November.

"It will be a tool to absorb the excess liquidity in the Islamic money market," Khan said on the sidelines of an Islamic finance conference in the UAE capital.

A lack of liquidity management tools is seen as one of the key challenges to the emerging Islamic finance industry, which has close to US$1 trillion worth of assets globally. Islamic finance accounts for 16 percent of the UAE's banking assets, compared to just 5 percent for Pakistan.