Home » wire - Indonesia Market Tool to Help Banks Manage Cash

11/08/2011 02:26:10 PM GMT   Comments ()     Add a comment   Print     E-mail to friend

 [Bloomberg] Indonesia is introducing a tool, known as commodity murabahah (CM), that will enable Islamic lenders to earn returns on excess cash that will spur growth in the Shariah-compliant industry, which Indonesia wants to bolster to 135 billion rupiah ($15.8 billion) this year, said director of Islamic banking at the central bank. The instrument, to debut next month, will allow banks to buy and sell commodities such as palm oil, coal and cocoa at an agreed profit margin, while still complying with Islam’s ban on interest. The Jakarta Futures Exchange will provide a platform for the transactions, after the National Sharia Board approved the contracts on Aug. 5, the exchange said in a statement issued this week. “Instead of just parking idle funds in sukuk, or with Bank Indonesia, we can use CM for interbank lending, to better manage liquidity more efficiently that will lower our cost of funds, allow us to be more competitive and boost returns. They will also explore using CM transactions to back micro-loans targeted at individuals,” said director at Jakarta-based PT Bank Syariah Mandiri. We may look at currency swaps because it will help banks as well as our customers that have international businesses to hedge against exchange-rate volatility,” said director of compliance and risk management at Bank Muamalat Indonesia. Indonesia, joins Malaysia and Persian Gulf countries such as Saudi Arabia,the UAE and Bahrain in offering the transactions. omar1.1

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