Photo of Governor Bank Indonesia giving the Key Note Address
NERACA newspaper, 12^th September 2006

Sukuk Via SPV: Bank Indonesia (BI) is hoping that the Government of Indonesia will expedite the issuance of national ‘obligations’ on shariah and sukuks in the next few months through the formation of a SPV which is being suggested by the Minister of Finance. This was mentioned in the speech by the Governor of Bank Indonesia, Burhanuddin Abdullah while delivering the Key Note address in the seminar International Conference on Islamic Banking, Capital Market and Financial Market, Grand Hyatt Hotel, Jakarta, Monday, 11 September 2006.

IIFM Holds First International Conference in Indonesia
NERACA newspaper, 12^th September 2006

Jakarta – Bank Indonesia (BI) is hoping that the Government of Indonesia will expedite the issuance of national obligations on shariah and sukuks in the next few months.

The plan is for the issuance of the sukuk through the formation of a Special Purpose Vehicle (SPV) or formation of a specific company which is being suggested by the Minister of Finance.

“Today, there is a team already in placed and in discussions with the Minister of Finance tasks with solving problems related to the SPV in the contacts of the issuance of sukuk or an Islamic banking instrument,” said Governor BI, Burhanuddin Abdullah.

The statement was made by Mr. Burhanuddin in the press briefing that was held in the seminar International Conference on Islamic Banking, Capital Market and Financial Market, Grand Hyatt Hotel, Jakarta, Monday, 11 September 2006.

According to Mr. Burhanuddin, with the issuance of the sukuk, it will hasten the flow of new investment funds from the Middle-East which will be used to assist in the development of Indonesia.

Now, according to Mr. Burhanuddin, there is a team handling and debating on the issues surrounding the sukuk with regard to legislative aspects.

Sukuk is an alternative means of assisting in the development of Indonesia due to its low cost of funds.

The CEO of IIFM, Ijlal A. Alvi, said that the amount of international sukuks issued to-date has reached USD19 billion, up from USD13 billion at the end of 2005. 

Countries that had issued its sukuk among others are Malaysia, Bahrain, Pakistan and Brunei.

The international Shariah or Islamic financial business continues to record intense growth and within this short space of 3-4 years its growth has reached more that 20% per annum.

“Capitalization of global Islamic finance in 1993 was only USD53.8 billion and had increased to USD252 billion at the end of 2005,” said the Executive Director of the Central Bank of Bahrain, Mr. Khalid Hamad, at the same press briefing.

According to Mr. Khalid, the growth of Islamic financial assets was unexpected by the conventional banking industry that has Islamic units. Mr. Khalid further clarified that if the Islamic units’ assets in the conventional banks were to be included, then global international Islamic assets would double.

“If total Islamic business is taken into consideration, it could have reached USD450 billion at the end of 2005,” said Mr. Khalid.      

“Seen from the potential of infrastructure development, it is hoped that the Government of Indonesia would expedite the legislative acts concerning the issuance of sukuks. This is supported by many Middle-East investors whom have shown interest to invest in Indonesia,” said Mr. Khalid in the press briefing.  

“Yes, we are requesting that the Government of Indonesia issues its sukuk as there are many Middle-East investors that would be interested to invest in Indonesia,” said Mr. Khalid. While, the CEO of IIFM, Mr. Ijlal A. Alvi, said that Indonesia has many investment potentials but it is hoped that the Government would developed infrastructure readiness for future investments. 

Meanwhile, Bank Indonesia has given its ‘green light’ to the Islamic banking industry to develop new Islamic products even though the central bank has yet to issue any new directives on it. “Please proceed if the products do not contravene international Shari’ah, even though BI has not issued any directives,” said the Deputy Governor of Bank Indonesia, HE Siti Fadjrijah at the same press briefing.

Variations of standardized Islamic products are needed to increase the interest of investors as the potential of Islamic banking is huge, said HE Siti Fadjrijah. Islamic economy will continue to grow significantly, according to HE Siti Fadjrijah and along with that Bank Indonesia will continue to develop its rules and practices in accordance with international best practices.

Bank Indonesia has also played a role by being members of international organizations set-up to standardized global Islamic banking rules and practices. The organizations where Bank Indonesia is involved include, the International Islamic Financial Market and Islamic Financial Services Board, and AAOIFI.   

Islamic Capital &
Money Market
Unification
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