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haria lender Bank Syariah Mandiri (BSM), a subsidiary of state-owned Bank Mandiri, has secured an agreement from the Indonesia Deposit Insurance Corporation (LPS) to guarantee haj funds deposited in the bank.

BSM president director Yuslam Fauzi said in Jakarta on Tuesday that BSM became the first sharia bank to secure an LPS agreement that guaranteed haj funds of about Rp 7 trillion (US$680 million) kept in the bank.

'€œNow that we have secured the guarantee agreement, we hope to manage a higher amount of haj funds in the future,'€ he said

All sharia banks and sharia units of commercial banks (UUS) wishing to manage haj funds are required by the Religious Affairs Ministry to secure a guarantee letter from the LPS before October. The requirement is aimed at convincing future haj pilgrims that their funds are safe even though they are kept under the ministry'€™s name.

The ministry'€™s director general for haj and umrah (minor haj) Anggito Abimanyu acknowledged, however,that many pilgrims had expressed concerns. '€œThey are afraid their money won'€™t be recognized as theirs because all funds are kept in one account under the Religious Affairs Ministry'€™s name,'€ he said.

As of June, the total amount of haj funds stood at Rp 56 trillion, up from Rp 45 trillion a year before. About Rp 31 trillion of the funds was invested in Islamic bonds or sukuk, and the remaining Rp 25 trillion was deposited in 27 banks. Of the funds kept in the banks, around 50 percent or
Rp 12.5 trillion was deposited in regular commercial banks and the rest was being managed by sharia banks.

According to Anggito, the LPS letter requirement is also a way to anticipate the future shift of the Rp 12.5 trillion funds currently managed by commercial banks to sharia banks. The shift will take one year and is expected to completed in mid-2014.

LPS executive director Mirza Adityaswara said that the LPS automatically guaranteed funds kept in all banks, as regulated by the LPS law.