OJK Issues Three Guidelines To Strengthen Islamic Banking

Wednesday, 30 Oct 2024

By ferry@insightinnews.com

The Financial Services Authority (OJK) continues to promote the strengthening of the characteristics of Islamic banking through the development of Islamic banking products that possess distinct Sharia features. Consequently, Islamic banking offers a unique value proposition that conventional banking cannot replicate.

To support this initiative, OJK has issued three guidelines for Islamic banking products, which include: Guidelines for Mudarabah Financing Products, Guidelines for the Implementation of Shariah Restricted Investment Accounts (SRIA) with MudharabahMuqayyadah Contracts, and Guidelines for the Implementation of Cash Waqf Linked Deposits (CWLD).

These guidelines for Islamic banking products were launched during the peak event of the 2024 Annual Islamic Banking Meeting, themed “Accelerating the Development of Islamic Banking to Build the Nation,” by the Executive Head of Banking Supervision at OJK, Dian Ediana Rae, in Banda Aceh on Friday, October 25.

"The guidelines prepared by OJK are expected to provide direction for the industry and stakeholders involved in the implementation of Islamic banking products, thereby fostering a common understanding and perspective in their execution," Dian stated in a press release on Sunday, October 27, 2024.

The three guidelines for Islamic banking products are anticipated to complement the previous OJK Regulations (POJK) with more detailed and technical explanations. Additionally, the guidelines include various examples and accounting practices to facilitate industry players in their implementation.

Dian emphasized that the characteristics of mudarabah financing, which is based on profit-sharing, are perceived to offer a concept of fairness for both banks and customers.

"The mudarabah financing product is unique and highly competitive as it promotes a profit-sharing concept based on the performance of the financed business. The potential fluctuations in income generated are considered to better align with the concept of fairness for both banks and customers," Dian said.

Meanwhile, Dian stated that SRIA with the MudharabahMuqayyadah contract is a follow-up to Law Number 4 of 2023 concerning the Development and Strengthening of the Financial Sector (Law P2SK), which has distinguished between investment products and savings products in Islamic banking.

"In response to the P2SK Law, the OJK has introduced the SRIA product with the MudharabahMuqayyadah contract, which is an investment scheme where the risk is borne by the investor. This initiative is part of OJK's efforts to strengthen the characteristics of Islamic banking as outlined in the Roadmap for the Development and Strengthening of Islamic Banking in Indonesia (RP3SI) 2023-2027," she explained.

Additionally, Dian emphasized the differentiation and uniqueness of the Cash Waqf Linked Deposit (CWLD), which sets it apart from conventional products and provides socio-economic benefits.

"The Cash Waqf Linked Deposit (CWLD) is a product that possesses unique characteristics and high competitiveness by integrating both the commercial and social functions of Islamic banks simultaneously (creating shared value). This is expected to be a breakthrough in the operations of Islamic banks, thereby positively impacting the wider community and enhancing the performance of Islamic banks," Dian concluded.

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