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Jakarta Post

BI to regulate gold pawning at sharia banks

  • Esther Samboh

    The Jakarta Post

Jakarta   /   Fri, January 6 2012   /  10:16 am

Bank Indonesia (BI) will soon issue a regulation to limit the pawning of gold at sharia banks, as most of bank customers tend to use the service for speculation, the central bank’s senior executive said in Jakarta on Thursday.

“If deposits from the public are used to fund people speculating on rising gold prices, is that appropriate for sharia banks? It’s not,” BI sharia banking director Mulya Siregar told a press briefing at his office. “To make it even worse, gold prices are not rising, they’re going down.”

Mulya said customers traditionally pawned their gold at sharia banks in the hope of securing necessary short-term financing. Now, however, many sharia lenders are making profits from customers pawning gold as an investment to seek higher returns, a practice that is a radical departure from the spirit of sharia financing, which is supposed to fund people...