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Sharia repo agreement expected to boost financial market
Sealing the deal: State lender Bank Negara Indonesia (BNI) Syariah president director Dinno Indiano (center), Bank Rakyat Indonesia (BRI) Syariah director Indra Praseno (second right) and Bank Syariah Mandiri president director Agus Sudiarto (right) sign a memorandum of understanding on sharia mini master repurchase agreements â also known as mini MRA or mini repo â at the central bankâs headquarters in Jakarta on Thursday
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Sealing the deal: State lender Bank Negara Indonesia (BNI) Syariah president director Dinno Indiano (center), Bank Rakyat Indonesia (BRI) Syariah director Indra Praseno (second right) and Bank Syariah Mandiri president director Agus Sudiarto (right) sign a memorandum of understanding on sharia mini master repurchase agreements â also known as mini MRA or mini repo â at the central bankâs headquarters in Jakarta on Thursday. The deal was witnessed by Bank Indonesiaâs (BI) head of financial market development task force Tresna Wilda Suparyono (left) and BI deputy governor Erwin Rijanto (second left). Along with 18 sharia banks, which consist of sharia business banks and sharia business units. The deal will provide guidelines for sharia banks in conducting sharia repo transaction.(JP/Jerry Adiguna) (BNI) Syariah president director Dinno Indiano (center), Bank Rakyat Indonesia (BRI) Syariah director Indra Praseno (second right) and Bank Syariah Mandiri president director Agus Sudiarto (right) sign a memorandum of understanding on sharia mini master repurchase agreements â also known as mini MRA or mini repo â at the central bankâs headquarters in Jakarta on Thursday. The deal was witnessed by Bank Indonesiaâs (BI) head of financial market development task force Tresna Wilda Suparyono (left) and BI deputy governor Erwin Rijanto (second left). Along with 18 sharia banks, which consist of sharia business banks and sharia business units. The deal will provide guidelines for sharia banks in conducting sharia repo transaction.(JP/Jerry Adiguna)
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span class="inline inline-center">Sealing the deal: State lender Bank Negara Indonesia (BNI) Syariah president director Dinno Indiano (center), Bank Rakyat Indonesia (BRI) Syariah director Indra Praseno (second right) and Bank Syariah Mandiri president director Agus Sudiarto (right) sign a memorandum of understanding on sharia mini master repurchase agreements ' also known as mini MRA or mini repo ' at the central bank's headquarters in Jakarta on Thursday. The deal was witnessed by Bank Indonesia's (BI) head of financial market development task force Tresna Wilda Suparyono (left) and BI deputy governor Erwin Rijanto (second left). Along with 18 sharia banks, which consist of sharia business banks and sharia business units. The deal will provide guidelines for sharia banks in conducting sharia repo transaction.(JP/Jerry Adiguna)
Eighteen sharia lenders and sharia banking business units have signed a memorandum of understanding (MoU) on a mini master repo agreement (MRA) that is expected to improve liquidity in the sharia financial market.
The MoU was signed at Bank Indonesia's (BI) headquarters on Thursday.
The sharia lenders were Bank Negara Indonesia (BNI) Syariah, Bank Muamalat, Bank Syariah Bukopin, Bank Maybank Syariah Indonesia, Bank Mega Syariah, Bank Rakyat Indonesia (BRI) Syariah, Bank Tabungan Pensiunan Nasional (BTPN) Syariah, Bank Jabar Banten (BJB) Syariah, Bank Victoria Syariah, Bank Syariah Mandiri (BSM) and Panin Bank Syariah.
Meanwhile, the business units are those currently operating under Bank Sinarmas, OCBC NISP, PermataBank, CIMB Niaga, Bank Tabungan Negara (BTN), Bank DKI and Bank Danamon.
In his remarks, BI deputy governor Erwin Rijanto said that the central bank hoped the agreement would spur higher interbank transactions in the sharia financial market.
'The latest data show that the daily transaction volume in the sharia financial market amounts to less than Rp 1 trillion [US$75 million]. There is a huge difference if we compare that with the commercial financial market, in which daily transactions already stand at more than Rp 10 trillion,' he said.
He added that the MRA would also provide higher security to the lenders because of the required underlying security, such as corporate Islamic bonds or sukuk and state sukuk (SBSN), to back the transactions.
Treesna Wilda Suparyono, in charge of BI's financial market development task force, highlighted the importance of a mini MRA, saying that it had helped commercial lenders improve their own liquidity and spur more activity in the market.
'In the past, repo transactions were only conducted between banks and BI with a small volume of Rp 300 billion. Now the transaction volume among the banks has reached an average Rp 1 trillion per day,' she said.
Meanwhile, the Indonesia Islamic Global Market Association (IIGMA) predicts that the recently signed MoU will begin to generate results in the fourth quarter this year.
According to IIGMA chairman Ahmad Badawi, the lenders will need time to formulate their own standard operating procedures (SOPs) before carrying out repo transactions.
'There are only six months left before the year ends. This quarter will see the lenders conduct internal organization and then some of them will begin transactions in the fourth quarter,' he said.
The association also predicts a shift in sharia asset placement as a result of the agreement.
'We will probably see 30 to 40 percent of assets that are currently kept at BI as BI sharia certificates [SBIS] enter the sharia financial market as sukuk in 2015,' he said.
IIGMA data show that there are about Rp 9- to Rp 10 trillion-worth of SBIS at the moment.
A 30 to 40 percent shift would bring Rp 2.7 to Rp 3.6 trillion into the sharia financial market, with the figure expected to rise even higher next year, according to Ahmad.
