|Malaysia, the world`s largest Islamic financial market, has rejected providing loans through ringgit bonds to Korean financial companies, the Korean Strategy and Finance Ministry said Wednesday.
Korean financial institutions have faced difficulty tapping Mideast oil money after a bill on Islamic bonds called sukuk failed to pass the Korean parliament.
The Malaysian government has asked the institutions to raise funds by issuing Islamic bonds called sukuk.
Ringgit bonds are frequently issued in the Malaysian currency ringgit within certain limits and periods to extend loans. Ringgit bonds are different from Islamic bonds devised under Islamic law, so Korean financial institutions have used ringgit bonds to attract Mideast oil money since 2008.
Kuala Lumpur had said it would temporarily provide funds through ringgit bonds and urged Seoul to raise funds by issuing susuk bonds if the law on Islamic bonds passed parliament.
The state-run Korea Development Bank is on alert after Korean lawmakers failed to introduce the bill on the Islamic bonds law. The bank recently borrowed 3.5 billion ringgits (1.02 million U.S. dollars) from Malaysia but must raise 2 billion ringgits through the issuance of sukuk bonds at Kuala Lumpur`s request.
Without the passage of the law, the bank cannot use more than half of the borrowed money.