IslamicFinance.de

In #Indonesia deposit insurance is an integral part of the financial fractional-reserve banking system. This structure was put into place twelve years ago through the enactment of the Indonesia Deposit Insurance Act 2004. Islamic deposit insurance has become more relevant of late due to the worldwide development of Islamic finance. Related to the implementation of the fractional banking reserve system in Islamic banking institutions (IBIs), there are issues to do with the reserve structure that is incompatible with sharia principles. Deposit insurance does involve the exchange of money for money and the exchange occurs with different values and at different times. Hence, some sharia scholars would argue that it is an interest-based transaction and therefore non-permissible.