The Jakarta Post

Sharia banks to benefit from trillions in 'zakat'

Indonesia's sharia banks expect to raise a large amount of inexpensive funds from Islamic charity foundations following the signing of a memorandum of understanding (MoU) between Bank Indonesia, the Indonesian Ulema Council (MUI) and several alms and zakat collecting bodies.Under the agreement signed in Jakarta on Monday, the central bank and the MUI's National Sharia Council (DSN) agreed to work together to encourage the Islamic charity foundations to keep their funds in the country's sharia banks.

Government upsizes sukuk sales as bids hit record high

The first sukuk auction this year, held on Tuesday, attracted incoming bids of Rp 13.7 trillion (US$1.1 billion), representing a more than sixfold oversubscription, with the government having set an issuance target of Rp 2 trillion. In comparison, incoming bids in the previous sukuk auction on Oct. 21 barely reached Rp 3.5 trillion. In response to the high demand, the Finance Ministry then decided to upsize the issuance, selling Rp 6.8 trillion of sukuk bonds. Nevertheless, the government will first assess upcoming auction results before deciding to raise more financing from sukuk this year. The high demand could be a seasonal phenomenon due to the market’s long closure for the year-end holiday.

RI lags behind in Islamic economy

Indonesia has much work to do in improving infrastructure and regulations to support an Islamic-compliant economy. Thomson Reuters’ Islamic Finance Development Report 2014 showed Malaysia topped the list, scoring 93 (on a scale of 100), far higher than Indonesia which ranked 12 with a score of 28. However, the 10th World Islamic Economic Forum (WIEF) in Dubai, revealed growing interest from many governments. South Korea was one of the many non-Muslim countries that looked eager to develop the Islamic economic industry. Besides, the halal industry won great attention over the past decade as the volume of the industry reached more than US$2.1 trillion. Moreover, there's growing demand for Muslim-friendly tourism.

Developing Islamic finance through research

In response to the slow growth of Islamic banking and finance, OJK organized the seventh Islamic Finance Research Forum. It was held from Oct. 14 to 16 at the IPB campus, and brought together students, scholars and practitioners of Islamic finance industry to exchange new ideas to help propel the sector’s performance. Among the causes of Islamic finance’s slow growth are the lack of capitalization driven by a paucity of high-quality human capital and a shortage of innovation and creativity. The OJK disclosed that the root problems can be solved by, inter alia, sound research and development activities, which are still lacking in the Islamic finance industry.

Dubai bank to up stake in Panin Syariah

Dubai Islamic Bank (DIB) has officially submitted a request to Indonesia’s Financial Services Authority (OJK) to up its stake in Jakarta-listed Bank Panin Syariah (PNBS). It has expressed its intention to increase its ownership in Panin Syariah to 40 percent. DIB currently owns a 24.9 percent stake in Panin Syariah, a subsidiary of private lender Panin Bank (PNBN). The United Arab Emirates lender acquired Panin Syariah’s shares, reportedly worth Rp 251.79 billion (US$21.7 million), in two stages in May this year. The rest of Panin Syariah’s shares are controlled by Panin Bank with 52.5 percent, Hesti Femi Nugraheni with 5.4 percent and the public with 17.2 percent. The OJK expects to complete the talks and issue approval for DIB later this year.

Ramadhan a boon for sharia business

Indonesia’s sharia banking sector has recorded slow growth as it nears the end of this year’s second quarter, compared to the same period last year, according to a recent report from the Financial Services Authority (OJK). In order to lure more customers, banks have developed their own strategies. Bank BNI Syariah, for instance, has prepared special programs for Ramadan to anticipate the rise in spending that usually accompanies the fasting month. Meanwhile, the OJK disclosed its plan to issue a revised regulation on sharia banks’ minimum capital requirement to assist lenders in the face of a wider scope of risks. The revised regulation will contain two additional indicators to measure the capital sufficiency of each bank.

Sharia hampers investment

Licensing and the implementation of sharia often cause investors to reconsider investing in Aceh. The Aceh provincial administration, through the Aceh Promotion and Investment Board (BIPA), has made strenuous efforts to convince investors to invest capital. BIPA has coordinated with various stakeholders, including city administrations and district level administrations, to help spur economic growth in Aceh. It also initiated a joint commitment to improve the image of Aceh and inputting data on impediments and issues faced by the business world to seek immediate solutions. However, uncertain regulations and licensing as well as an unfriendly attitude towards foreign investors are issues yet to be solved.

Consolidation of sharia banks also needed

Amid talk of merging banks in the country to boost size and competitiveness in the region, the Financial Services Authority (OJK) has said that consolidation of sharia banks is also needed. At the moment, however, many sharia lenders are units that operate within conventional banks. OJK expects the consolidation to take place after all existing sharia business units (UUS) had been spun off from their parent banks. At the moment, there are 11 sharia lenders and 23 UUS operating in the country. After the spin-off, there would be more than 34, but the OJK would like to fix the number at between 25 and 30. One sharia business unit of a commercial bank is reportedly ready to be spun off in 2014.

Bank Muamalat saw 51% profit

PT Bank Muamalat Indonesia posted Rp372.20 billion (US36.1 million) in net profits for the first half of 2013, a 51.27 percent increase from the same period of last year. Bank Muamalat’s net earnings as of June 2013 reached Rp 1.25 trillion, compared to Rp 868.33 billion in June 2012. Margins for murabaha totaled Rp 925.23 billion, or an increase of 47.22 percent from the 2012 figure. Muamalats earnings from musharakah, or partnerships, reached Rp 746.65 billion, higher than the Rp 461.64 billion in June 2012. As of the first semester of 2013, Bank Muamalat managed Rp 47.92 trillion in assets, or up 46.59 percent from the same period in 2012. Meanwhile, PT Bank Ekonomi Raharja (BAEK) on the other hand reported a fall in net profits to Rp 105.33 billion, down 23.34 percent from last year’s Rp 137.4 billion. Bank Ekonomi Raharja recorded Rp 26.59 trillion in assets as of June 30 2013.

Analysis: 2013: A slew of new banking policies

Just in time for the beginning of 2013, Bank Indonesia (BI) introduced several new regulations serving to improve banks’ competitive and operating efficiencies, maintain stability via capital enhancement and ensure long-term sustainable growth among other things. Some of the rulings are higher CAR for higher-risk profiled banks, limitation in banking activities based on banks’ tier I capital, and productive loans with minimum MSME to limit credit risk.

Govt to use sukuk for infrastructure projects

The government of Indonesia plans the issuance of rupiah-denominated sukuk next year which shall be used for financing state projects. Analysts welcome this move considering it a breakthrough in the development of the country’s undersized Islamic finance sector. According to the 2013 state budget financial note, up to Rp 1 trillion (US$103.5 million) will be borrowed by the Finance Ministry using sukuk issuance to finance state projects next year. Islamic bonds should be perceived as an alternative source of financing for the government’s infrastructure projects.

Islamic finance works in fostering sustainable economic growth: Zeti

Malaysian's central bank governor has claimd that Islamic finance will contribute to the global agenda of developing sustainable growth. Providing financial services that add value to the real economy is the focal point of Islamic finance and tenets.

Sharia banking sees extraordinary development

Sharia banking soars in several countries including Indonesia with 191 operating sharia banks. Between 2007 and 2011, the sharia banking sector has achieved an average growth-rate of 40.2 percent per annum. Even thought the potential of sharia banking is big, the conventional banking system still plays an important role in banking system which cannot be overseen.

Jeddah-based IDB sets up business forum in Indonesia

On monday, Islamic Development Bank (IDB) Group opened its office of business forum (thiqah) at the Investment Coordinating Board (BKPM) in Jakarta. Since this is the bank's first office beyond the boundaries of Saudi Arabia, it is expexted that it will contribute to IDB's expansion and mobilization of its resources and promotion of Indonesia as a major investment destination for IDB's members. This move will enable a connection between Indonesia and investors from other Muslim countries, thus taking advantage of the rapidly growing Islamic economy.

More on: http://www.thejakartapost.com/news/2012/09/18/jeddah-based-idb-sets-busi...

Sharia loans likely to get own LTV limit

Sharia banks in the country will soon be subject to Bank Indonesia’s new policy regulating minimum down payments for housing and automotive loans. However, a deputy governor for the central bank says that they may have different limits than those for commercial banks. This month, BI said that sharia banks would soon be included in its policy to restrict loans to value in automotive and housing lending. These had entered into effect for Indonesian commercial banks in June.

Malaysia retains lead in Islamic finance

Malaysia maintains its leading position in Islamic finance having a large volume of Islamic investors looking for syariah-compliant investments like sukuk compared to Singapore. The huge number of Muslim-owned companies in Malaysia is one of the most significant reasons for the high demand for syariah-compliant financing and sukuk issuance. 60 percent of global sukuk deals are concluded in Malaysia.

Indonesia: Embracing the growth of Islamic finance

Indonesia is seeking to further develop its Islamic banking sector, looking to tap into the growing market for sharia-compliant financial instruments, though it still has some way to go before being able to match the major players in the segment.

Sharia banking grows strong in Indonesia

The people of West Java also showed their support by injecting Rp 106 billion into the bank. Although its business was not too bright in its early days, the bank recorded a profit of Rp 372.5 billion in the second quarter of 2009. The achievement of Bank Muamalat is proof of the great potential of sharia banking in Indonesia. Sharia banking is based on Islamic law.

Bank Indonesia data reveals there are currently five sharia banks operating in the country, namely Bank Syariah Mandiri, Bank Muamalat Indonesia, Bank Syariah Mega, Bank Syariah Bukopin and Bank Syariah BRI. Twenty-six other banks have sharia banking units, such as Bank Permata, Bank BNI, Bank CIMB-Niaga, Bank Danamon and BPD DKI.

The Acting Governor of Bank Indonesia said that banks based on Islamic law are predicted to enjoy further growth in 2010. Darmin added that sharia banks would continue to flourish due to the organic growth within existing banks and the establishment of new sharia banks and unit.

ADB, IDB setting up Islamic fund to finance infrastructure

To speed up the development of infrastructure projects, the Asian Development Bank (ADB) and the Islamic Development Bank (IDB) have agreed to set up Asia's first major multi-country USD 500 mn Islamic infrastructure fund.

The 12 targeted countries are Afghanistan, Azerbaijan, Bangladesh, Indonesia, Kazakhstan, Kyrgyz Republic, Malaysia, Maldives, Pakistan, Tajikistan, Turkmenistan and Uzbekistan.

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