Bank Indonesia (BI) will soon issue a regulation to limit the pawning of gold at sharia banks, as most of bank customers tend to use the service for speculation, the central bank’s senior executive said in Jakarta on Thursday.
“If deposits from the public are used to fund people speculating on rising gold prices, is that appropriate for sharia banks? It’s not,” BI sharia banking director Mulya Siregar told a press briefing at his office. “To make it even worse, gold prices are not rising, they’re going down.” (source)
“If deposits from the public are used to fund people speculating on rising gold prices, is that appropriate for sharia banks? It’s not,” BI sharia banking director Mulya Siregar told a press briefing at his office. “To make it even worse, gold prices are not rising, they’re going down.” (source)
Mulya said customers traditionally pawned their gold at sharia banks in the hope of securing necessary short-term financing. Now, however, many sharia lenders are making profits from customers pawning gold as an investment to seek higher returns, a practice that is a radical departure from the spirit of sharia financing, which is supposed to fund people’s immediate needs or the real economy.
The price of gold at state gold miner Aneka Tambang (Antam) has dropped Rp 61,000 per gram, or 12.3 percent, in the past four months to Rp 555,500 on Thursday. Global gold prices have also fallen by about 17 percent during the same period to trade at US$1,610 per ounce.
Gold is traditionally perceived as a “safe haven” investment because of the instability and deflationary nature of “paper” currencies.
“To avoid speculation, we will limit the transaction-value per customer and determine a specific financing to value ratio,” Mulya said, adding that the regulation would be issued later this month in the form of a circular letter to sharia banks and business units that provided gold-pawning services.
The financing-to-value (FTV) ratio would be set at a maximum of 80 percent, meaning customers would have to provide gold worth 20 percent of the amount of funds they borrowed, while the value of transaction for financing would be limited to Rp 100 million per customer, he said.
BI has recently urged the four sharia banks and four sharia units to limit their gold-pawning services to those standards. Of the total 11 sharia banks and 24 sharia business units, only eight of them engage in gold-pawning.
Three sharia banks—Bank Syariah Mandiri, Bank Rakyat Indonesia Syariah and Bank Negara Indonesia Syariah—have decided to end their gold-pawning services following the central bank’s move, being aware of the risks pawning gold carries.
The central bank’s new regulations will affect 137,272 customers who hold sharia pawning accounts. The value of Indonesia’s sharia banks’ gold-pawning grew 45.1 percent, or Rp 3.7 trillion, in the July-September period to Rp 6.1 trillion, while sharia bank financing increased to Rp 92.8 trillion in September from Rp 84.6 trillion in July.
No comments:
Post a Comment