Economic Review and Regulation of Islamic Investment Instruments on Asset-Backed Securities

Potential credits for having houses through Islamic financial services show an increasing opportunity for Islamic bank to channel their funds through mortgage financing. In reality, however, the bank's capital still fails to fulfill these growing demands in such market. In response to this case, Islamic banks need to develop a model of long-term financing through Islamic capital market products. This paper highlights these challenges of developing Islamic asset-backed securities instruments in the form of Letter of participation particularly concerning with economic and regulatory factors. Islamic asset-backed securities in the form of a letter of Participation are one of the Islamic capital market instruments to be published with Financial Multigriya means of PT Persero). Its operations have also been set up in the policy of the financial services authority in the form of Sharia capital market Road Map 2015 - 2019 accompanied with regulation of the financial services authority Number 20/POJK. 04/2015, and the Fatwa of the National Assembly of the Islamic Scholars Council of Indonesia No. 40/DSN-MUI/X/2003. There is a gap, however, between the opportunities and development prospects of Islamic asset-backed securities in the form of a letter of participation looks quite encouraging and its realization.