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Indonesia starts $1 billion Islamic fund

Major fund hoped to revive Sharia-law banking, heal budget deficit
Indonesia islamic banking 2011 09 15Enlarge
An employee of Bank Negara Indonesia's Islamic banking unit counts Indonesian rupiah from a customer in Jakarta in 2003. (ADEK BERRY/AFP/Getty Images)

Though Indonesia's is the world's largest Muslim-majority nation, its Islamic banking sector is quite small.

The government hopes to change that with a $1 billion bond adhering to finance laws guided by the Quran. Called "sukuk" bonds, these funds ostensibly adhere to Islam's complex prohibition against certain charging interest payments that are deemed exploitative.

According to the Wall Street Journal, Indonesia plans to both grow its Islamic investment sector and shore up cash to pay down its budget deficit, which is now more than 2 percent of GDP. By the end of 2011, if enough investors bite, the country's finance minister expects the bond to hit $1 billion.

According to the World Islamic Banking Conference, Islamic banking worldwide is growing at an annual 20 percent. Investing in Sharia-friendly funds is particularly popular in the oil-rich Middle East.

http://www.globalpost.com/dispatches/globalpost-blogs/the-rice-bowl/indonesia-starts-1-billion-islamic-fund