IIFM Awareness Seminar on Islamic Finance – 12th November 2019

The IIFM Awareness Seminar on Islamic Finance took place on Tuesday, 12th November 2019 at Bank Indonesia premises in Jakarta, Indonesia, and was co-organized by IIFM and the Bank of Indonesia as part of the 6th Indonesia Shariah Economic Festival (ISEF) 2019. In a welcoming address. Mr.Daniel Mah Abdullah, the Director General, Labuan Financial Services Authority, who is also the Vice Chairman of IIFM, mentioned the importance of the event as timely and crucial as Indonesia is the largest Muslim majority population country in the world. As Indonesia has put a serious plan in place to grow the country in an Islamic manner, the country must also benchmark their practices according to global standards, including those on Islamic finance. Dr Rifki, the Head of the Islamic Economic and Finance Department, elaborated further that there are plans to establish a Shariah Financial National Committee (KNKS) as a catalyst in an effort to accelerate, expand and advance the development of Islamic economics in order to support the development of the national economy. He also highlighted some current issues and challenges in implementing the economic plans including global uncertainty, high public expectation and a lack of awareness to achieve Maqasid al-Shariah.

There were four panellist sessions arranged during this event covering topics about Sukuk, trade finance, hedging and liquidity management. Mr. Ijlal Alvi, the CEO of IIFM, presented the developments in the global sukuk market based on the Annual IIFM Sukuk Report for 2019. Dr. Umar Oseni, the acting CEO of IILM, spoke about IILM’s plan to expand its remit to other member countries such as Indonesia that want to accelerate the growth of their Islamic economy. Madam Dwi Irianti, the Director, Islamic Financing, Directorate General, Budget Financing & Risk Management, shared the Indonesian government’s efforts in establishing a Sukuk law in Indonesia and issuing sovereign Sukuk, including the latest Green Sukuk. They are also planning to issue retail Green Sukuk in the near future.

The second session focused on Trade Finance. Mr. Ijlal Alvi of IIFM once again presented, this time on the IIFM-BAFT master Participation Agreements for Trade Finance Transactions. Mr. Romy, Head of syariah Banking, PT Bank Maybank Indonesia, then shared the bank’s experience in trade finance transactions in Indonesiaand also emphasised the need for greater standardisation to improve the efficiency of trade finance transactions. The session was closed by DDCAP’s own Mr. Roslan Ahmad, the Chief Representative of DDGI KL, where he commented that DDCAP has been very active in supporting and facilitating Sharia’a-compliant trade finance transactions across the globe, highlighting that standardised documents and agreements would help to lower the cost of transactions for market players.

The third session was held on the topic of ISDA-IIFM Islamic Hedging Standards, introduced by Mr. Islmail Dadabhoy, Advisor to IIFM Dubai. He presented features of ISDA/IIFM Tahawwut Master Agreement, ISDA/IIFM Islamic Foreign Exchange Forward and ISDA/IIFM Islamic Credit Support Deed. Mr. Adiwarman, the Founder Partner, Karim Business Consulting, Jakarta, briefed about local hedging mechanisms that are a little different than IIFM standards, although they have been approved and accepted by the local financial industry players.

The last session concerned liquidity management and was chaired by Mr. Erwin, the Director Department of Monetary Management, Bank Indonesia. Mr. Ismail presented key features and benefits of IIFM’s Inter-Bank Unrestricted Master Investment Wakalah Agreement. This was followed by elaboration from a local player, Mr. Ade, the Director of Bank Syariah Mandiri, Jakarta. He explained how local banks managed their liquidity by using Islamic Repos, interbank money market and Sukuk products that are very limited and were sufficient to accommodate demand if the Islamic finance market in Indonesia is to grow further. DDCAP, again represented by Mr. Roslan, emphasized the importance of managing liquidity in both the primary and secondary financial markets to maintain financial institutions’ capital levels. In this context, DDCAP has been assisting global players in their financial transactions by facilitating commodity-based transactions for liquidity management purposes in particular.

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