Banks urged to hold product innovation

JAKARTA: Bank Indonesia will encourage national banks to conduct product innovation based on international standard in order to absorb global liquidity.In the future, national Islamic banking can also take advantage of Islamic hedging after the new regulation launched by International Islamic Financial Market (IIFM).Deputy Governor of BI Halim Alam said the product innovation is one of the formulations in national development strategy of Islamic banking. It will be realized in by providing the domestic market with quality services of international standard."Coverage of international-standard services includes product quality, human resources, facilities, services and technologies, and expanding service network," he said in the 23 meeting of Board of Directors of the International Islamic Financial Market, last night.According to him, the strategy of Islamic banking development in Indonesia could be driven to the high level from the growth over the years. In the last five years the average growth of Islamic banking assets in Indonesia has reached above 33% per year.Until October 2010, the total assets of Islamic banking has reached IDR86 trillion. Institutionally, this time the number of Islamic banks has reached 11 Islamic banks, 23 Islamic business units and 146 sharia BPR (state-owned bank), with total sharia branch office of 1,625 offices all over the country.Director of Sharia Banking Directorate Bank Indonesia Mulya Siregar said the national banking system in the future can access hedging facility after it is launched by IIFM.According to him, one day, Islamic banking industry in Indonesia can use sharia hedging facility in the first half of 2011. "The Master Agreement will be arranged by IIFM to help Islamic banks in the world to conduct hedging transactions," he said.He explained the hedging facility currently can only be used by conventional banks. However, as he continued, the exchange rate volatility that occurred recently is needed by the Islamic banking industry in protecting its assets.(t03/wiw)

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