JAKARTA: Bank Indonesia will regulate inter-sharia banks transactions in money market to boost liquidity in the industry, offering different collateral policy, differing it from that of conventional banks.
The central bank expected the regulation to increase attractiveness of Indonesian sharia banking, which currently ranks fourth in the world with regard to its supporting regulation system and infrastructure. (source)
The central bank expected the regulation to increase attractiveness of Indonesian sharia banking, which currently ranks fourth in the world with regard to its supporting regulation system and infrastructure. (source)
The regulation on Inter-sharia bank Money Market is being composed to increase liquidity of sharia banks, said a source at Bank Indonesia.
“The aim is to increase money market transactions between sharia banks, but it uses underlying [collateral] to avoid transaction from becoming speculation,” he told Bisnis recently.
According to him, the underlying asset in the money market may be in the form of sharia commodity futures. Moreover, collateral may use government’s sukuk. “It’s a breakthrough,” he said.
The central bank will release the regulation on money market between sharia banks, not only on the conventional banks, to increase transactions, confirmed Bank Indonesia Deputy Governor Halim Alamsyah.
“The regulation on sharia bank money market is aimed at both increasing transaction of existing products trading with government’s sukuk and inviting more players in the money market,” he explained.
The regulation will indirectly synchronize with the regulation on sharia commodity futures released in October 2011 by the Jakarta Future Exchange (JFX) under Ministry of Trade.
The commodities traded in the sharia futures include cocoa, cashew, and arabica coffee. The sharia commodity futures are expected to help sharia banking increase liquidity and prepare underlying assets with sharia principles.
Bank Muamalat Indonesia welcomes the regulation, said President Director of Muamalat Arviyan Arifin. He expected the regulation would strengthen the sharia-banking instrument in facing bad situations such as economic crisis.
In addition, the instrument will also be used to avoid lack of liquidity, which may occur because of fund mismatch.
Progress
The inter-sharia bank money market is a progress for the industry, mainly in managing liquidity, said PT Bank DKI Head of Sharia Unit Harijanto in the separate occassion.
“The instrument is needed because some sharia banks disburse larger loans than their third party fund,” he added.
According to him, the obligation to provide collateral in sharia money market will not be a problem, because conventional bank have also done the system but in the form of promissory notes.
The collateral can also decrease segmentation in the money market, as it lessens concerns on part of the bank over the risk of a default. “Moreover, the bank needing liquidity can get loans surely because it provides collateral,” he explained.
Survey of Islamic Finance Country Index, by Global Islamic Finance Report, shows that Indonesia ranks fourth in the world behind Malaysia, Iran and Saudi Arabia. (t04/ags)
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