The IsDB Institute (IsDBI) and Indonesia’s Financial Services Authority, or Otoritas Jasa Keuangan (OJK), held a meeting in Jakarta to discuss potential partnerships that focus on innovative Islamic financial products.
A meeting held between team members and officials from the two organizations saw them exploring areas of mutual interest, notably the IsDBI-led Sukuk Development Program, which aims to enhance and support the development of Sukuk in IsDB member countries.
The Sukuk Development Program’s three main components are the Sukuk Enhancement Fund (SEF), a risk-mitigation mechanism involving a pool of contributions from Sukuk-issuing members; the Sovereign Finance Corporation, an entity dedicated to financing the government’s activities using fixed-income Islamic modes of financing; and Cash Waqf Linked Sukuk, which invests in sovereign Sukuk and channels returns into financing social programs.
Mahendra Siregar, the chairman of the OJK who was present at the meeting, welcomed the proposed Sukuk Development Program, noting that such innovative products align with the recent Indonesia Omnibus Law that mandated the regulator to establish a committee for the development of innovative Islamic financial products.
Dr Sami Al-Suwailem, the acting director-
The IsDBI first started working on the SEF initiative in 2020 when the global coronavirus pandemic first hit, to provide partial protection to investors and improve the access of issuers to capital markets.
In an interview with IFN in May 2023, Dr Hylmun Izhar, a senior economist at the IsDBI and a lead for the SEF initiative, noted that Indonesia, Saudi Arabia and Turkiye were the three countries considered by the institute to be able to pilot the SEF project, given their market size and Islamic finance industries.
Dr Hylmun added that the IsDBI had pitched the SEF to several parties including the Indonesian finance ministry, and that Indonesian regulators had already agreed to form a task force that would evaluate the feasibility of the SEF and alternative options for its implementation.