Indonesia is following the lead of Malaysia and developing an Islamic government Treasury bill market, according to an article in The Business Times (Singapore). The T-bills are denominated in Rupiah and are focused on the domestic market; Reuters reports that only 5% of the outstanding Rp 62.89 trillion ($7.4 billion) are held by foreigners.
As the liquidity management issue becomes more talked about globally with initiatives like the International Islamic Liquidity Management Corporation, there should not be a shift of focus away from individual countries addressing the liquidity management needs of their country's banks. In contrast, they should continue full speed ahead for two reasons.
First, the domestic banks need to balance their need for local currency-denominated short-term T-bills or similar instruments. The IILM will eventually offer local currency issues as they are demanded (read: in countries where Islamic finance has a significant foothold). However, the IILM will focus on global currency issues in USD, EUR, JPY and perhaps GBP.
However, the more important reason is that creating reliance on one product for funding needs puts the Islamic financial system at significant risk if there are political differences that freeze up the operations of the IILM. There is also the potential for Shari'ah differences to arise, although this is less likely given the similarities in interpretation between most Shari'ah scholars on the major issues. Another potential benefit from individual countries' efforts to develop their own short-term issues is that it provides many more testing grounds for different structures that could be more efficient or viewed as "more authentic" than what is likely to be a commodity murabaha-based product.
Indonesia is continuing to support the growth of Islamic banking, largely based on the model of its neighbor Malaysia, several of whose banks have invested in Indonesia. With its large Muslim population, if Indonesia becomes a growth area for Islamic finance, it could further shift the geographical center of Islamic finance eastward.