Indonesia will let Shariah-compliant banks hedge against exchange-rate movements to spur growth in Islamic financial assets and narrow the gap with Malaysia’s industry, which is seven times larger.
Bank Indonesia, the National Shariah Board and the Indonesia Institute of Accountants have approved the instruments, available in Malaysia since 2006, Adiwarman Azwar Karim, Jakarta-based vice chairman of the board’s Islamic capital market working committee, said in an Aug. 3 interview. The central bank said it is working on regulations, declining to say when they would be finished.
A new type of call money market -- Islamic Inter-bank Fund Market (IIFM) -- for sharia-based banks started its journey yesterday.
In such a market, transactions are based on profit instead of interest.
Bangladesh Bank Governor Atiur Rahman inaugurated the IIFM at the central bank.
Few took notice outside certain coteries of specialist bankers and lawyers, but the launch of a 42 page master documentation for derivatives that comply with Muslim religious principles could have a far-reaching impact on the Islamic finance industry.
The International Islamic Financial Market (IIFM), a Bahrain-based Islamic capital markets body, and the International Swaps and Derivatives Association (ISDA) have for the past four years been working on standardised documentation for derivative instruments that comply with sharia, or Islamic law.