Figure 1: Conventional OMO Transactions and Indonesian Sharia OPT 2015-2021 (Billion Rupiah)

Source: Bank Indonesia

In Indonesia, Sharia OMO transactions lag far behind conventional OMO transactions (Figure 1). Conventional OMO transactions reached 619 Trillion Rupiah in 2021, while Sharia OMO only reached 61 Trillion. Conventional OMO broke its lowest transaction record in the last five years (116 Trillion) in 2019, but the lowest value was not able to be surpassed by Sharia OMO's highest transaction value in 2021 (61 Trillion).

Figure 2: Percentage of Sharia OMO against Total OMO 2017-2021

Source: Bank Indonesia

Sharia OMO represents a small percentage of total OMO (Figure 2). From 2017 to 2021, the average share of Sharia OMO transactions was only 10.43 percent of total OMO transactions. Only in 2019 did the share of Sharia OMO reach 20%. Conventional OMO transactions fell sharply in 2019, despite a significant increase in Sharia OMO transactions.

Figure 3: Growth of Sharia OPT 2005-2021

Source: Bank Indonesia, processed

Sharia OMO growth has not been positive, indicating that it is highly volatile (Figure 3). Sharia OMO growth was negative six times between 2005 and 2021, namely in 2006 (-2%), 2008 (-59%), 2010 (-31%), 2012 (-1%), 2015 (-23%), and 2018 (-10%) (Figure 2). The year with the greatest decrease in transactions was 2008. Nonetheless, Sharia OMO grew by more than 100 percent in 2005, 2007, 2016, and 2019. This condition should be used as a lesson by Bank Indonesia in the future to boost the growth of Sharia OMO transactions.

Small Sharia OMO transactions occur for a variety of reasons. The first is the number of Islamic banks that remain small and have little equity. Although conventional banks can conduct Sharia OMO transactions, Sharia banks are the primary users of Sharia OMO instruments. The Central Bank is expected to be able to participate in promoting Sharia OMO in conventional banks in order for Sharia OMO transactions to experience positive growth. Furthermore, the Central Bank must increase the profitability of Sharia OMO so that more parties will want to transact in Sharia OMO.

Second, Sharia OMO instrument innovation is still limited. As previously stated, Indonesia only has three Sharia OMO instruments: SBIS, Reserve Repo SBSN, and SukBI. This variant lags far behind Malaysia, which has five Sharia OMO tools. In comparison, Malaysia's Sharia OMO transactions reached 104 billion USD in 2021, while Indonesia remained at 4 billion USD. The Central Bank must conduct several studies with various parties, such as Sharia Bank and Sharia Supervisory Board, in order to develop the new Sharia OMO instrument (DPS). Do not allow later instrument innovation to fail to meet the needs, much less to violate sharia values.

Written by: Eka Puspa Dewi, Student at Airlangga University's Department of Sharia Economics, Faculty of Economics and Business.