IIFM Specialized Sessions held in Surabaya to Accelerate the Global Islamic Financial Market Development

Surabaya, Indonesia, 16 November 2017 – The International Islamic Financial Market (IIFM) and Bank Indonesia successfully organized a “Specialized Session on Islamic Finance” as part of the 4th annual Indonesia Shari’ah Economic Festival (ISEF) on 7th November in Surabaya, Indonesia. The full day event is part of the IIFM effort to brief the markets in its member jurisdictions on IIFM standards as well as provide update on the latest developments in the Islamic finance industry globally.

The event was attended by more than 200 delegates from regulatory bodies, banks, Indonesia National Shari’ah Board, ministries, industries, academics and other market players based in Indonesia and the region. The sessions on Islamic hedging and liquidity management provided briefings particularly relating to IIFM standards in these areas. The session on Sukuk covered the latest trends, developments and challenges in the global as well as Indonesian Sukuk market by expert speakers in the field. There was also a session organized by Bank Indonesia on Islamic financial market development in Indonesia where the experts provided the audience with a detailed briefing on Islamic hedging and liquidity management regulations and practices in Indonesian domestic market.

In his welcome remarks, Anwar Bashori, Director of Islamic Economic and Finance Department at Bank Indonesia thanked the IIFM for organizing this event which addresses important issues in the current Islamic finance landscape such as Sukuk, Islamic hedging and liquidity management. He also thanked the prominent speakers representing regulators, banks, World Bank, ISDA and the participants from various segments of both conventional and Islamic. In his speech, he highlighted Government of Indonesia’s current priority for infrastructure development where he emphasised the high potential of Sukuk in facilitating such projects. He shared Indonesia’s strategic initiatives to integrate social and commercial sectors giving the example of Sukuk linked Awqaf or Awqaf linked Sukuk which can also inspire the global market players.

Ijlal Ahmed Alvi, Chief Executive of IIFM in his opening remarks thanked Bank Indonesia as one of the founding members of IIFM and its support in hosting this important event in Surabaya. In his speech he stressed on the importance of standard-setting bodies in the development of Islamic finance globally and their role in the unification and harmonization of the industry. He emphasised on the need of providing support to these standard-setting bodies like IIFM in the development as well as implementation of standards by all stakeholders particularly in OIC jurisdictions.

Dr. Mulya Siregar, Former Deputy Commissioner of Financial Services Authority of Indonesia (OJK) moderated the first session titled “Sukuk Issuance Trends” where Ijlal A. Alvi presented on Global Sukuk issuances, trends, structural preferences and challenges including Sukuk default and restructuring. This was followed a presentation by Dr. Suminto, Director of Islamic Financing at Ministry of Finance of the Republic of Indonesia which covered the development of sovereign Sukuk market in Indonesia and efforts of the government in Sukuk issuances including infrastructure Sukuk and retail Sukuk. Herwin Bustaman, Head of Shari’ah Banking at Maybank Indonesia was the last presenter who presented on Infrastructure Sukuk in Indonesia and the role of Islamic banks in deepening the Islamic financial market. The experts were of the view that more efforts are needed to increase the level of Sukuk issuances by the corporate sector.

Dr. Prayudhi Azwar, Analyst, Islamic Economics and Finance Department at Bank Indonesia moderated the second session titled “Islamic Hedging Framework” where Ijlal A. Alvi presented on the development of the Islamic hedging segment; IIFM’s pioneering role and its cooperation with joint partner ISDA in developing a complete set of Islamic hedging standards including Master Agreement, Product Confirmations and Credit Support Deed. He also explained the Index and Close-Out mechanism developed based on Shari’ah principles as against conventional calculation based mechanism. This was followed by a presentation on Islamic hedging products by Ashraf Gomma Ali, Director/Regional Head of Shari’ah Governance at CIMB Islamic Bank Berhad where he covered Islamic Foreign Exchange Forward, Islamic Profit Rate Swap and Islamic Cross Currency Swap. Dr. Akhmad Affandi Mahfudz, Director at ZICO Shari’ah Indonesia then presented on the key terms of the Tahawwut Master Agreement, Shariah resolutions and legal practices in Malaysia. The last presentation was by Erryan Abdul Samad, Assistant General Counsel at International Swap & Derivatives Association (ISDA) where he emphasised on the need of strong regulatory framework and required law reforms as well as importance of close-out netting legislation and legal opinions in the development of financial markets. The new regulatory requirements in Europe and North America such as variation margin and posting of collateral were also covered by the presenter.

The third session on “Islamic Inter-Bank Market and the Use of IIFM Unrestricted Wakalah Standard” was moderated by Dr. Raditya Sukmana, Head of Islamic Economic Department at University of Airlangga. The first presenter, Ijlal A. Alvi provided technical details on anticipated profit, early termination, segregated or commingled Wakalah pool and accounting assessment for IIFM standard master agreement on Inter-bank Unrestricted Wakalah. This was followed by Mohammad Riza, Business Director at Maybank Syariah Indonesia whose presentation featured on Indonesian Islamic money market products such as the Inter-bank Mudarabah Investment Certificate. 

The last session was organized by Bank Indonesia titled “Islamic Financial Market Development in Indonesia”. The special session was moderated by Dr. (Cand.) Dimas B. W. Kusuma, Director of International Program for Islamic Economics and Finance at Jogjakarta Muhammadyah University. Cecep Maskanul Hakim from the National Shari’ah Board of Indonesia started the proceedings by presenting on the Fatwa by National Shari’ah Board on Islamic hedging and repo transactions in Indonesia. This was followed by Dr. Rifki Ismal, Senior Analyst at Bank Indonesia presentation on Indonesian Islamic Financial Market Development – Facts and Challenges including the Indonesian efforts to develop the Islamic financial market instruments, infrastructure, regulations and investors. In addition, Bank Indonesia is doing some programmes to integrate the Islamic commercial and social sectors. The third presenter, Ahmad Hafiz Abdul Aziz, Financial Sector Specialist at the World Bank presented on Green Sukuk for Sustainable Development in particular the Malaysian government efforts in occupying green sukuk as one of the social development Islamic financial instruments. The last presentation of the day was by Afrid Wibisono, Head of Global Market at Bank Muamalat Indonesia where he provided details of Repo and Hedging transactions which has been applied in Indonesian domestic market, Islamic repo realizations including some challenges for Islamic banks in applying Islamic repo.

The IIFM Specialized Sessions were appreciated by the attendees for creating awareness on selected topics, providing an opportunity to engage in discussions and updating their knowledge of market developments.