BI to regulate gold pawning at sharia banks
Bank Indonesia (BI) will soon issue a regulation to limit the pawning of gold at sharia banks, as most of bank customers tend to use the service for speculation, the central bank’s senior executive said in Jakarta on Thursday. BI sharia banking director Mulya Siregar said that it is not appropriate for sharia banks If deposits from the public are used to fund people speculating on rising gold prices. In certain circumstances gold prices are not rising, they’re going down. Mulya said customers traditionally pawned their gold at sharia banks in the hope of securing necessary short-term financing. Now, however, many sharia lenders are making profits from customers pawning gold as an investment to seek higher returns, a practice that is a radical departure from the spirit of sharia financing, which is supposed to fund people’s immediate needs or the real economy. The price of gold at state gold miner Aneka Tambang (Antam) has dropped Rp 61,000 per gram, or 12.3 percent, in the past four months to Rp 555,500 on Thursday. Global gold prices have also fallen by about 17 percent during the same period to trade at US$1,610 per ounce. BI will limit the transaction-value per customer and determine a specific financing to value ratio to avoid speculation. The regulation would be issued later this month in the form of a circular letter to sharia banks and business units that provided gold-pawning services. The financing-to-value (FTV) ratio would be set at a maximum of 80 percent, meaning customers would have to provide gold worth 20 percent of the amount of funds they borrowed, while the value of transaction for financing would be limited to Rp 100 million per customer. BI has recently urged the four sharia banks and four sharia units to limit their gold-pawning services to those standards. Of the total 11 sharia banks and 24 sharia business units, only eight of them engage in gold-pawning.
