Maybank gives first ever syariah hedging loan in Indonesia

Maybank led the KLCI to a higher close.

PETALING JAYA: Malayan Banking Bhd’s (Maybank) Indonesian unit has provided the first-ever syariah hedging financing in the country worth US$128mil to PT Sarana Multi Infrastruktur (PT SMI).

With the Islamic hedging product, PT SMI is expected to mitigate the risk of foreign-exchange volatility within the period which it needs to pay its obligation.

This may be in the form of profit sharing, margin or rental, as well as the principal of financing in the specified currency, even though the source of funds or income to pay the obligation is obtained in a different currency.

PT SMI is a state-owned enterprise (SOE) under the Finance Ministry of Indonesia.

PT SMI’s president director Emma Sri Martini described the hedging facility as a “breakthrough”, which is expected to increase foreign-exchange liquidity in the domestic market, as well as deepening syariah finance in Indonesia.

The multi-million financing facility, which will be implemented through a cross-currency hedging transaction mechanism, is a contract between two parties to execute two different foreign-exchange transactions within a certain period of time.