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In general terms, what policy has your jurisdiction adopted towards Islamic finance? Are Islamic finance products regulated differently from conventional instruments? What has been the legislative approach?
Islamic finance has played an important role recently in the development of the Indonesian economy. The Indonesian government, through the Ministry of Finance (MoF) and the Financial Services Authority (OJK), strives to provide a level playing field for both conventional and Islamic finance industries. The MoF, Indonesia’s central bank (Bank Indonesia) and OJK have divisions dedicated to Islamic finance within their respective organisational structures. Bank Indonesia issued its Blueprint on the Development of Shariah Banking in Indonesia in 2002, while OJK issued Roadmaps for Shariah Capital Markets (2015-2019), Shariah Banking (2015-2019), Shariah Non-Bank Finance Industry (2015-2019) and the Development of Indonesia Shariah Financing (2017-2019).
Before 2008, Islamic finance was regulated mostly by legislation applicable to conventional finance. In 2008, the government provided a platform for Islamic finance by issuing Law 19 of 2008 on Sovereign Sukuk, Law 21 of 2008 on Shariah Banking and Government Regulation 56 of 2008 on Sovereign Sukuk Issuing Companies (as amended by Government Regulation 73 of 2012).
OJK’s predecessor, the Capital Markets and Financial Institution Supervisory Agency (Bapepam - LK) followed in the government’s footsteps by introducing various implementing regulations specific to Islamic finance. At the same time, various implementing regulations applicable to the conventional finance industry were also issued. The latter were aimed at enhancing compliance and corporate governance. The MoF also promulgated various implementing regulations regarding the issuance of sovereign sukuk, while Bank Indonesia also issued various regulations to support shariah transactions, such as regulations on the sale and purchase of sovereign sukuk on the secondary market, the procedures to transact shariah repurchase agreements as well as shariah hedging regulations.
How well established is Islamic finance in your jurisdiction? Are Islamic windows permitted in your jurisdiction?
Even though the first Indonesian Islamic bank was incorporated 26 years ago, Islamic finance in Indonesia is still in the development stage.
The incorporation of Bank Muamalat Indonesia’s shariah bank in 1992 marked the beginning of Islamic finance in Indonesia. In 1994, the same bank established PT Asuransi Takaful Keluarga and PT Asuransi Takaful Umum, which were the first takaful operators in Indonesia.
In 1998, the government amended Law 7 of 1992 on Banking (Banking Law) to allow conventional banks to provide shariah banking services. This amendment, and the shariah banking sector’s survival of the 1998 monetary crisis, generated significant attention to shariah banking. Opening shariah windows became an attractive proposition. In 1999, the second shariah bank, the state-owned Bank Syariah Mandiri, was established.
In the capital markets sector, the first corporate sukuk were listed in 2002. This listing was followed by numerous others. There were at least three listings of shariah products in the first half of 2016.
As indicated above, from 1992 to 2008, shariah businesses had to comply with laws and regulations applicable to conventional businesses.
OJK states on its website that, as of May 2018, there are currently 13 Islamic commercial banks, 21 conventional commercial banks with Islamic windows and 168 Islamic rural banks in Indonesia. Of the Islamic commercial banks, Bank Syariah Mandiri remains the largest financier, with the greatest number of branches in Indonesia, followed by PT Bank Muamalat Indonesia.
As Indonesia is a country that recognises several religions, investment in businesses that deal in alcohol or pork is permitted. However, investment in businesses that deal in gambling or pornography is prohibited.
What is the main legislation relevant to Islamic banking, capital markets and insurance?
The main legislation relevant to Islamic banking is Law 21 of 2008 on Shariah Banking.
Islamic capital markets are regulated under Law 8 of 1995 on Capital Markets, which generally regulates all capital markets activities. However, sovereign sukuk is specifically regulated under Law 19 of 2008 on Sovereign Sukuk. The primary regulations relevant to corporate sukuk are OJK Regulation 18/POJK.04/2015 on Sukuk Issuance and Requirements, which was enacted on 10 November 2015. This regulation was amended by OJK Regulation 3/POJK.04/2018, enacted on 26 March 2018.
Islamic insurance is regulated under Law 40 of 2014 on Insurance (Insurance Law). The Insurance Law regulates both conventional and Islamic insurance. Under this law, conventional insurance and reinsurance companies that have Islamic windows are required to spin off their Islamic windows into Islamic insurance companies within 10 years of the law’s enactment, or after the participants’ (ie, policyholders’) investment funds and tabarru (premium) funds comprise at least 50 per cent of the sum of the company’s insurance funds, tabarru funds and participants’ investment funds.
Which are the principal authorities charged with the oversight of banking, capital markets and insurance products?
OJK is the sole authority charged with overseeing banking, capital markets, insurance and other non-banking financial institutions (such as pension funds and leasing companies).
Identify any notable guidance, policy statements or regulations issued by the regulators or other authorities specifically relevant to Islamic finance.
Law 19 of 2008 on Sovereign Sukuk (Law 19) and Law 21 of 2008 on Islamic Banking, as well as Government Regulation 56 of 2008 on Sovereign Sukuk Issuing Companies (Regulation 56) (which was last amended by Government Regulation 73 of 2012) are specifically relevant to Islamic finance.
Law 19 provides the basis for the issuance of sovereign sukuk and the transfer of beneficiary title, while Regulation 56 provides the basis for the incorporation of special-purpose vehicles that act as, among other things, the sukuk issuers and trustees.
In 2016, OJK issued Regulation 30/POJK.04/2016 on Shariah Real Estate Investment Funds in the form of collective investment contracts. This regulation provides guidance for investment managers and custodian banks on the issuance of shariah real estate investment funds in the form of collective investment contracts to investors. OJK also issued Regulation 33/POJK.05/2016 on the Implementation of Pension Programmes Based on Shariah Principles, and Regulation 61/POJK.04/2016 on the Implementation of Shariah Principles in Capital Markets by Investment Managers.
Is there a central authority responsible for ensuring that transactions or products are shariah-compliant? Are IFIs required to set up shariah supervisory boards? May third parties, related parties or fund sponsors provide supervisory board services or must the board be internal?
The Indonesia Ulema Council (MUI) is generally responsible for determining whether a product or transaction is shariah-compliant. In respect of Islamic finance, the relevant authority is the National Shariah Board of the MUI (DSN-MUI).
Law 40 of 2007 on Limited Liability Companies requires that every company that purports to engage in shariah-compliant business activities establish a shariah supervisory board, which must consist of at least one shariah expert. This board provides advice to the company’s board of directors and otherwise supervises the activities of the company to ensure shariah-compliance.
In addition, in the banking sector, OJK and Bank Indonesia regulations further specify that the tasks and duties of a shariah supervisory board of a shariah bank are to provide advice and opinions to the board of directors, and supervise the bank’s activities so as to ensure compliance with shariah principles.
In the capital markets sector, OJK Regulation 16/POJK.04/2015 on Capital Markets Shariah Experts enacted on 15 November 2015, specifies the tasks, responsibilities and authority of a capital market shariah expert. It is worth noting that a number of articles in this regulation have since been revoked by OJK Regulation 79/POJK.04/2017 on the Registration of Profession Certification Institutions in the Capital Markets Business.
Do members of an institution’s shariah supervisory board require regulatory approval? Are there any other requirements for supervisory board members?
Generally, a recommendation from the MUI is required for the appointment of members to an institution’s shariah supervisory board. Candidate members are also required to pass a fit-and-proper test conducted by OJK. An equivalent test must also be passed by candidate members of boards of directors and commissioners of both shariah and conventional financial institutions.
In the capital markets sector, such members must also obtain an OJK licence.
What are the requirements for Islamic banks to be authorised to carry out business in your jurisdiction?
In order for an Islamic bank to do business in Indonesia, the bank must first secure a permit from OJK. The business must be established in Indonesia as a limited liability company (PT Company) with a minimum paid-up capital of 1 trillion rupiahs.
The prevailing regulations limit the ability of certain categories of party to hold shares in commercial banks, including shariah banks (Category). If the party is engaged in the finance sector, whether as a bank or otherwise, it is permitted to hold up to 40 per cent of the bank’s capital (for a bank, it can be more than 40 per cent of share ownership, provided it satisfies certain requirements). If the party is a legal entity engaged in a non-finance sector, it is permitted to hold up to 30 per cent of the bank’s capital. If the party is an individual, he or she is permitted to hold up to 20 per cent of the bank’s capital (or up to 25 per cent of a shariah bank’s capital).
The prevailing regulations further provide that if shareholders are related to one another, either by way of ownership of shares, family or acting in concert, they will be treated as one party. As such, their maximum share ownership will be limited to the highest of the limits applicable to the relevant Category for one party.
The prevailing regulations also adopt a single-presence policy, which means that a controlling shareholder of one bank cannot be the controlling shareholder of another, unless one bank is a conventional bank and the other bank is a shariah bank, or one of the banks is a joint-venture bank.
May foreign institutions offer Islamic banking and capital markets services in your jurisdiction? Under what conditions?
A foreign institution that intends to provide Islamic banking services in Indonesia must:
- commit to supporting the development of the Indonesian economy through its activities;
- obtain a recommendation from the supervisory authority in its home country (if it operates in the financial sector);
- satisfy the relevant rating requirements under the prevailing regulations; and
- establish a PT Company.
The requirements for the establishment of a shariah bank set out in question 8 are also relevant. However, the PT Company must be a joint-venture PT Company with a maximum foreign shareholding of 99 per cent of its paid-up capital. The government is currently drafting a banking bill that may limit such foreign shareholding to 40 per cent.
Takaful and retakaful operators
What are the requirements for takaful and retakaful operators to gain admission to do business in your jurisdiction?
To gain admission to do business in Indonesia, takaful and retakaful operators must secure an operational business licence from OJK. Such operators must be established in the form of a PT Company or a cooperative. Takaful operators must have a minimum paid-up capital of 100 billion rupiahs (at establishment), whereas retakaful operators must have a minimum paid-up capital of 175 billion rupiahs (at establishment).
How can foreign takaful operators become admitted? Can foreign takaful or retakaful operators carry out business in your jurisdiction as non-admitted insurers? Is fronting a possibility?
Foreign takaful and retakaful operators may be admitted to Indonesia if they have:
- a rating of at least A or equivalent to it issued by a recognised international rating company; and
- a parent company that has at least one subsidiary engaging in the same insurance business, in which case the rating requirement can be fulfilled by that subsidiary.
Further, the operator must obtain OJK approval and the business must be established jointly with at least one Indonesian party in the form of a PT Company. Foreign ownership in a PT Company is limited to up to 80 per cent of the paid-up capital. However, the limitation does not apply if the PT Company is publicly listed.
Without establishing such a presence in Indonesia, foreign takaful and retakaful operators are not allowed to conduct business in Indonesia.
Disclosure and reporting
Are there any specific disclosure or reporting requirements for takaful, sukuk and Islamic funds?
Every financial institution that purports to conduct shariah business activities must file a report prepared by its shariah supervisory board with OJK. This requirement also applies to a party that, though it does not state that its activities in the capital market are based on shariah principles, nevertheless, among other things:
- has a shariah unit;
- is an investment manager that manages shariah investments;
- is a custodian of shariah investments;
- provides other shariah services; and
- part of its operational activity is carried out based on shariah principles in the capital markets.
In addition to complying with the reporting requirements that also apply to equivalent conventional businesses:
- a takaful operator must file an annual and quarterly report to OJK on its shariah supervisory board’s compliance;
- a shariah supervisory board must file annual reports with the shareholders of the shariah issuer or public company it supervises on the results of its supervision of shariah compliance in the capital markets by that issuer or company;
- a sukuk operator must file reports on sukuk issuance and annual reports on the activities of the sukuk operator, including financial reports, to the MoF;
- a shariah supervisory board must prepare annual reports for the investment manager on the results of its supervision of shariah compliance in the capital markets by the shariah mutual fund it supervises. Subsequently, the investment manager must submit this report to OJK; and
- a shariah supervisory board must prepare annual reports for the director of an investment manager on the results of supervision of shariah compliance in the capital markets on shariah real estate investment funds in the form of collective investment contracts. Subsequently, the investment manager must submit this report to OJK.
Sanctions and remedies
What are the sanctions and remedies available when products have been falsely marketed as shariah-compliant?
Sovereign sukuk can only be issued by a business that has obtained a compliance statement from the DSN-MUI. Corporate sukuk can only be issued by a business that has obtained such a compliance statement from its shariah supervisory board or appointed shariah expert team. OJK may impose administrative sanctions on corporate issuers that fail to obtain a compliance statement.
In the capital markets sector, OJK has determined that a business’s shariah expert team is responsible for the shariah compliance of shariah products or services issued or provided by that business. However, prevailing OJK regulations do not specifically provide for any sanctions or remedies if the products are falsely marketed as shariah-compliant. Instead, any report concerning this matter may cause OJK to review the shariah expert team members’ licences.
Non-listed products are not so regulated and it is the duty of the shariah supervisory board to ensure that the relevant company is shariah-compliant in issuing and marketing the products.
Jurisdiction in disputes
Which courts, tribunals or other bodies have jurisdiction to hear Islamic finance disputes?
The Islamic Banking Law requires disputing parties to settle disputes before the Religious Court, unless an alternative dispute resolution method has been agreed between the parties.
The Insurance Law requires that all insurance companies (including takaful and retakaful operators) become members of a mediation institution, which will function as the venue for disputes between the company and policyholders, participants and other beneficiaries.
In 2014, OJK issued Regulation 1/POJK.07/2014 on Alternative Dispute Resolution Institutions for the Financial Sector, under which disputing parties may settle disputes through these new institutions or the courts, failing amicable settlement. The regulation requires each financial services sector to establish an alternative dispute resolution institution by coordinating with the relevant business association.
As of the implementation of this OJK regulation, on 18 December 2017, six alternative dispute resolution institutions were established and acknowledged by OJK. Each such institution has jurisdiction over a different sector. The different sectors include insurance, capital markets, pension funds, banking, guarantees, financing, pawnbroking and venture capital.
Accommodation of concepts
Mudarabah - profit sharing partnership separating responsibility for capital investment and management.
Bank Indonesia guidelines incorporate mudarabah into the financial services regulatory regime.
Mudarabah agreements may be entered into with respect to savings and lending transactions. In savings transactions, the bank acts as the fund manager (mudarib), while the customer acts as its owner (shahibul maal). The bank and the customer agree on the sharing of profits, and the costs and expenses chargeable to the customer. The bank is not permitted to reduce the customer’s share of the profit without consent. The bank may use the funds deposited by the mudarib for murabahah or ijarah transactions as well as for other mudarabah transactions. In the latter case, the bank will be fully responsible for any losses incurred.
In lending transactions, the bank acts as shahibul maal and the customer as mudarib. The bank is entitled to supervise, but may not manage, the customer’s business. The bank and the customer must agree on the sharing of profits. Mudarabah financing must be granted as funds or goods, but not as receivables. Mudarabah repayments may be in instalments or a lump sum. Distribution of profits must be done based on a report from the customer and based on a contract agreed between the bank and the customer, which must be supported by ‘verifiable evidence’. In the case of any losses, the bank may only share the losses up to the lending amount.
Murabahah - cost plus profit agreement.
Murabahah agreements are commonly used in financing. According to Bank Indonesia guidelines, in murabahah transactions, a bank will act as shahibul maal for the purpose of purchasing certain goods, and the customer will act as the purchaser of those goods. The parties must determine the quantity, quality, cost and specifications of the goods. The bank may finance all or part of the cost of the goods and must provide the funds required for the purchase. The margin between the cost of the goods and their sale price must be agreed between the bank and the customer at the beginning of the transaction and must not change. The payment terms must also be agreed between the bank and the customer.
Further, the bank may at any time grant a reasonable discount to the customer. The bank may also request compensation from the customer if the agreement is cancelled, up to the amount of the actual cost of the goods.
The same value added tax that applies to conventional financing transactions applies to murabahah transactions.
The bank may require the customer to provide collateral.
Musharakah - profit sharing joint venture partnership agreement.
Musharakah agreements are another form of agreement that can be used in financing.
According to Bank Indonesia guidelines, under a musharakah agreement the bank and the customer act as partners, jointly providing capital or goods to finance a certain activity. The customer will usually manage the business on its own; however, it may also do so together with the bank.
The agreement will specify profit-sharing and financing terms, neither of which can be amended unless both parties agree.
Financing under musharakah agreements must be in the form of funds or goods, not receivables.
Repayment may be by instalments or a lump sum. Distributions of profit must be based on a report prepared by the customer, which is supported by ‘verifiable evidence’. The bank and the customer will bear losses in proportion with their investment.
The DSN-MUI does not require equal participation. The party with the greater responsibility is entitled to a greater share of the profit (if such entitlement is regulated in the agreement between the bank and the customer).
Ijarah - lease to own agreement.
According to Bank Indonesia guidelines and a relevant MUI fatwah, in financing transactions that involve ijarah agreements, the bank will act as the fund provider for the purpose of procuring the lease object and as lessor, with the customer as lessee. The leased object can consist of movable or immovable goods, but must be capable of being specifically valued and identified. The bank and the customer must agree on the lease price and term.
The bank is obliged to guarantee the quality and quantity of the leased object and provide it at the agreed time. Payment may be by instalments or a lump sum.
The bank may require that the customer maintain the leased object and bear the maintenance costs in accordance with the agreement. Description of any material and structural maintenance costs must be stipulated in the contract. The bank may not require that the customer be responsible for damage to the leased object, unless the customer is at fault.
Ijarah agreements may also be used in hire purchase transactions, whereby the bank undertakes that the customer will have the option to obtain ownership of the leased object upon expiry of the lease.
Wadiah - safekeeping agreement.
According to Bank Indonesia guidelines, wadiah agreements may be used in safekeeping transactions. In such transactions, the bank will act as the recipient of deposited funds, while the customer will act as the depositor. The bank may not guarantee any incentive, reward or bonus to the customer. However, the bank may, at its sole discretion, grant the customer a gift of, for example, a share of the profits earned from the deposited funds.
The bank may charge the customer administration fees if they directly relate to the management of the deposited funds.
The bank must guarantee the return of the deposited funds and allow the customer to collect the funds at any time.
If there is a breach of fiduciary duties or any misuse of the funds, an Indonesian court may require the breaching party to pay compensation, terminate the contract, transfer the risk, pay penalties or pay court costs, pursuant to a ‘compilation’ of shariah economic law issued by the Supreme Court.
Sukuk - Islamic securities. Have sukuk or other Islamic securities been structured and issued in your jurisdiction to comply with Islamic principles, such as the prohibition of interest?
Sukuk has been structured and issued in Indonesia since 2002. PT Indosat Tbk, a telecommunications services provider, became the first company to issue sukuk in Indonesia. This sukuk was issued under a mudarabah agreement and was oversubscribed. Further corporate sukuk issuances followed.
The legal basis for the issuance of sukuk by the government was established by Law 19 of 2008 on Sovereign Sukuk and Government Regulation 56 of 2008 on the Sovereign Sukuk Issuing Company (which was last amended by Government Regulation 73 of 2012).
What is the legal position of sukuk holders in an insolvency or a restructuring? Are sukuk instruments viewed as equity or debt instruments? Have there been any court decisions or legislation declaring whether sukuk holders are deemed to own the underlying assets?
Indonesian legislation does not specify whether sukuk holders own the underlying assets.
Whether sukuk instruments are viewed as equity or debt instruments depends on the contract under which the sukuk is issued. Pursuant to the generally accepted Indonesian accounting standards that are applicable to shariah transactions, sukuk mudarabah issued by a shariah company are treated as temporary shirkah, while sukuk mudarabah issued by a conventional company are treated as liabilities. Ijarah sukuk are also treated as liabilities, regardless of whether the issuer is a shariah or conventional company.
In a mudarabah transaction, the sukuk holder is theoretically viewed as an investor and consequently bears all the risks arising from the transaction (except where losses are caused by the negligence of, or breach committed by, the mudarib). Accordingly, in practice, the sukuk issuer is required to provide the sukuk holders with an undertaking that it will purchase the sukuk and an acknowledgement of indebtedness. As a general rule, an acknowledgment of indebtedness can be enforced in the absence of a court decision.
In a recent insolvency and restructuring case involving bond and sukuk holders, the sukuk holders were treated as conventional bondholders.
Takaful - Islamic insurance. Are there any conventional cooperative or mutual insurance vehicles that are, or could be adapted to be, shariah-compliant?
There is only one conventional cooperative or mutual insurance vehicle in Indonesia. This entity has established a shariah window. The Insurance Law makes the establishment of further such shariah-compliant vehicles difficult. Takaful and retakaful operators that are partly owned by foreign investors must be established as PT Companies.
Which lines of insurance are currently covered in the takaful market? Is takaful typically ceded to conventional reinsurers or is retakaful common in practice?
The Insurance Law requires that only lines of insurance involving objects that are shariah-compliant (such as buildings that are used for activities that are shariah-compliant) can be covered by the takaful market.
Retakaful is common in practice, mainly because many reinsurance companies have Islamic windows.
What are the principal regulatory obstacles facing the Islamic finance industry in your jurisdiction?
The primary obstacle is the absence of any regulation concerning the rights of sukuk holders in the case of default, bankruptcy or possible replacement of the underlying assets.
In the past, any notable conflicts between the accounting standards adopted in Indonesia and shariah principles would have been addressed through revisions to accounting standards. The Board for Shariah Accounting Standards of the Association of Indonesian Accountants issued Shariah Finance Accounting Standard 110 Revision 2015, which was effective from 1 January 2016.
In what circumstances may shariah law become the governing law for a contract or a dispute? Have there been any recent notable cases on jurisdictional issues, the applicability of shariah or the conflict of shariah and local law relevant to the finance sector?
Contracts are usually expressed to be governed by Indonesian law and not shariah-implementing Indonesian legislation specifically. However, if a dispute comes before the Religious Court, the court may apply the Compilation of Shariah Economy Law in making its decision.
Various cases have been heard before the District and Religious Courts concerning the applicability of shariah principles in banking transactions.
Are there any special considerations for the takeover of an Islamic financial institution, outside the requirements of the general merger control regime?
There are no such special considerations.
Other notable features
Are there any notable features of the Islamic finance regime and markets for Islamic finance products in your jurisdiction not covered above?
Microfinance is becoming one of the notable features of the Indonesian Islamic finance regime and markets for Islamic finance products.
The government issued Law 1 of 2013 on Microfinance Institutions and enacted implementing regulations a year later. Microfinance institutions may complete conventional and shariah transactions and can only be established and owned by Indonesian individuals or entities (direct and indirect foreign ownership is prohibited).
Further, the development of financial technology (fintech) in Indonesia has also become a notable feature of the Indonesian Islamic finance regime. In general, fintech business is regulated under OJK Regulation 77/POJK.01/2016 on Information Technology-Based Lending Services, enacted on 29 December 2016. However, this regulation does not provide any guidance in relation to fintech businesses operating in accordance with shariah principles. Alternatively, the DSN-MUI recently issued Fatwah No. 117/DSN-MUI/II/2018, which may be used as guidance for companies wishing to carry out fintech-related business in accordance with shariah principles in Indonesia (see ‘Update and trends’).
Updates and trends
Updates and trends
Updates and trends
OJK may soon regulate:
- the business organisation of shariah financing companies and shariah business units of financing companies; and
- fintech business based on shariah principles.
The DSN-MUI has recently issued:
- Fatwah No. 117/DSN-MUI/II/2018 on Information Technology-Based Financing Services Based on Shariah Principles (DSN-MUI 117/2018) - this fatwah is currently used to provide guidance for companies wishing to carry out fintech-related business in accordance with shariah principles in Indonesia.
- DSN-MUI 117/2018 provides general guidance on financing services based on information technology regarding fintech businesses operating in accordance with shariah principles. Fintech businesses must not be or involve dharar (harm), gharar (uncertainty), haram (sinful), maysir (gambling), riba (interest), tadlis al-aib (hiding defects) and zulm (injustice). Further, the fatwah also regulates the service model for a fintech company operating under shariah principles, including:
- financing for the procurement of third-party-ordered goods (purchase orders);
- financing for the procurement of goods for online sellers;
- financing for the procurement of goods for online sellers with payments made through a payment gateway organiser;
- financing for employees; and
- community-based financing.
- Fatwah No. 118/DSN-MUI/II/2018 on Guidance for Shariah Banks’ Customers Deposit Guarantee. This fatwah was issued as guidance for shariah compliance with regard to the shariah bank customer deposit guarantee provided by the Savings Guarantee Institution.
- Fatwah No. 120/DSN-MUI/II/2018 on Securitisation in the Form of Asset-Backed Securities Based on Shariah Principles - this fatwah was issued as a guidance for a shariah-compliant securitisation in the form of asset-backed securities in general.
- Fatwah No. 121/DSN-MUI/II/2018 on Asset-Backed Securities in the Form of Participation Letter Based on Shariah Principles - this fatwah was issued to respond to the rising needs for the development of shariah-compliant home financing facilities.
In 2017, the DSN-MUI issued several new fatwahs concerning agreements (aqd) on sale and purchase, ijarah, mudarabah, murabahah, shirkah and wakalah bil ujrah (agency contract with fee) (New Fatwahs). Each of the New Fatwahs was intended to serve as the main guidance for every transaction using the relevant type of aqd. This is an improvement upon the previous regime, under which there were specific provisions for either banking, financing company, financial sector or other business activities.
In addition to the above, with the increased use of electronic money as an alternative method of payment, the DSN-MUI issued Fatwah No. 116/DSN-MUI/IX/2017 on Shariah Electronic Money. This fatwah contemplates, among others, the types of aqd that may be used between issuers and holders of electronic money, as well as between issuers and other parties (principal, acquirer, merchant, settlement agencies, digital financial services agents, etc), while stipulating that the nominal amount of the electronic money must be deposited in shariah banks.