Islamic Finance 

Maybank Indonesia provides sharia hedging financing of US$128m to PT SMI

| 25 October, 2018
Maybank Indonesia provides sharia hedging financing of US$128m to PT SMI
Customers leave a branch of Malaysia's<span class="highlight"> Maybank </span>in Putrajaya October 9, 2009. REUTERS/Bazuki Muhammad


Maybank Indonesia has successfully arranged Indonesia’s first ever sharia hedging facility worth US$128 million for PT Sarana Multi Infrastruktur (PT SMI).

“The hedging partnership is a tangible manifestation of Maybank Indonesia’s support to corporations, including state-owned enterprises, in ensuring effective management of their financing through mitigating foreign exchange risks,” President Director of Maybank Indonesia, Taswin Zakaria said.

The partnership is in line with Maybank Indonesia’s focus to support strategic State-Owned Enterprises (SOEs), especially PT SMI, which play an active role in facilitating Indonesia’s infrastructure financing needs, as well as in supporting the development of infrastructure projects in the country, he said in a statement.

“To us, this sharia hedging product is very much in line with Maybank’s mission to humanise financial services, and being at the heart of the community by providing the best services and solutions to our business partners,” added Taswin.

The facility is in the form of a Foreign Currency Hedging iB (Islamic Facility).

Taswin and President Director of PT SMI Emma Sri Martini recently formalised the agreement for this facility in Bali.

The Foreign Currency Hedging iB will be implemented through a Cross Currency Hedging iB transaction mechanism. It is a contract between two parties to execute two different foreign exchange transactions within a certain period of time, based on the Sharia al-Wahawwuth al-Murakkab (Complex Hedging Transaction) or al-Tahawwud al-Basith (Simple Hedging Transaction) principles.

The benefit of the hedging product to PT SMI is to enable the company to mitigate the risk of volatility of foreign exchange within the period which it needs to pay its obligation, whether in the form of profit sharing/margin/rental as well as the principal of financing in the specified currency, although the source of funds or income to pay the obligation are obtained in a different currency.

“Foreign Currency Hedging iB is relevant given the current foreign exchange rate volatility as it promotes risk mitigation and prudent financial management. We hope this transaction will be a pioneer for alternative funding and sound risk management of foreign exchange as it prioritises prudential principles,” added Emma.

Copyright New Straits Times