Islamic banks call for better cooperation
Islamic banks call for better cooperation
JAKARTA (JP): The ninth two-day international conference on
Islamic banking ended here Saturday, paving the way for better
cooperation among Islamic banks throughout the world.
Bank Indonesia's Governor, J. Soedradjad Djiwandono, told
reporters that the conference also came up with a suggestion for
stronger support from governments and central banks to encourage
the operation of Islamic banks.
"The regulatory frameworks of the central banks, especially in
supervision activities, need adjustment," Soedradjad told
reporters about the result of the conference, which was
participated in by 130 Islamic banking experts representing
central banks, Islamic banks and financial institutions.
Soedradjad said that the conference, jointly organized by Bank
Indonesia and the International Association of Islamic Banks,
also agreed to form a committee to monitor the implementation of
the policies set out by conference.
He said that the conference paved the way for better
cooperation among Islamic banks worldwide in dealing with the
technical aspects of the banks, which base their service on
profit or loss sharing arrangements rather than on interest as is
the practice of conventional banks.
"For Indonesia, where the operation of Islamic banks is still
relatively new, the conference's outcome is very beneficial," he
said. "The theme of the conference was very much suitable for the
stage of development of our Islamic banks. So we can received a
lot of input," he added.
Constraints
The conference also discussed the constraints faced by Islamic
banks in non-Islamic countries, such as the creation of liquidity
instruments to support their operations.
For Bank Indonesia, as the central bank, he noted, the
development of Islamic banks also poses new challenges in
providing facilities for their liquidity needs.
Soedradjad said that the central bank's facilities in
securities transaction activities are at present available only
for non-shariah banks.
Consequently, he added, it is necessary for Bank Indonesia to
create liquidity facilities that are compatible with the non-
interest Islamic banks.
He said that such facilities should have specific
characteristics so that they can be sold or bought as securities
on the basis of nominal prices or at face value with a risk-
sharing agreement.
The central bank also faces new challenges in the area of
supervision of the Islamic banks because the Indonesian banking
law guarantees equal treatment to both Islamic and conventional
banks. (hen)