Indonesia

Vice President Ma’ruf can ‘do more’ to develop sharia economy

As a respected elder figure among the Muslim grassroots, Indonesian Vice President Ma’ruf Amin was initially expected to play a significant role in enacting policies that could benefit the country’s majority-Muslim population. But analysts have suggested that Ma’ruf could still do more to promote the sharia economy and finance. The government launched a masterplan for the sharia economy last year, which provides a five-year development roadmap. The plan hopes to transform Indonesia into a net producer of halal goods and services, instead of merely being a big market for them. According to analysts, Ma’ruf should encourage the state to focus more on developing the sharia economy, particularly in providing stimulus programs among sharia-based businesses and strengthening sharia institutions.

Indonesian personal finance portal Finansialku eyeing more investors with new Islamic feature

Indonesian personal finance assistant PT Solusi Finansialku plans to launch a dedicated Islamic feature to capture a broader base of investors. Finansialku currently has more than six certified financial planners focused on Shariah-compliant investing but lacks a dedicated Islamic section on its app and platform. Its app has been downloaded 203,000 times since April 2017 and it is targeting 4 million downloads by 2022. Finansialku started in 2013 and only digitalised in 2016, moving its services online and to an app. Its advisors are CFPs certified by the national authority the Financial Planning Standards Board (FPSB).

Government to raise $343m from retail sukuk SR013

Indonesia's government launched retail sukuk SR013 to raise Rp 5 trillion (US$343 million) to fund the state budget in the face of the COVID-19 pandemic. The tradable debt papers, set to mature on Sept. 10, 2023, offer a fixed annual yield at 6.05%. Investors can buy the bonds for Rp 1 million to Rp 3 billion from Aug. 28 and Sept. 23 at 31 partnering distributors, which include conventional and sharia-compliant banks, as well as online investment platforms. As of Aug. 6, the government has issued Rp 236.82 trillion in domestic sukuk, which nearly topped last year’s issuance of Rp 258.28 trillion. The government raised in July Rp 18.33 trillion from government retail bond issuance ORI-017, the highest proceeds ever recorded in an online bond offering by the country.

#Indonesia’s #sukuk issuance to rise to $27b to finance COVID-19 battle: Moody’s

Credit rating agency Moody’s Investors Service expects Indonesia’s sukuk issuance to increase to US$27 billion this year from $16 billion last year. Lead analyst Thaddeus Best said on Tuesday that he expected Indonesia’s sukuk issuance to increase by about 68.75% as the government unveiled a Rp 695.2 trillion (US$47.3 billion) stimulus package to fight the pandemic. To help fund the package, the government is planning to raise Rp 900.4 trillion in the second half of this year to cover for a widening budget deficit of 6.34% of gross domestic product (GDP) this year. The option-adjusted spread of Indonesia’s US dollar-denominated government sukuk had fallen to almost 150 basis points (bps) as of July compared to its highest spread of 400 bps in March.

VP seeks greater digital literacy among Islamic economic actors

Vice President Ma'ruf Amin has appealed to Islamic economic and financial actors to hone their digital literacy skills to survive amid the changes arising from the COVID-19 pandemic. He gave a speach at the virtual opening of the 2020 Sharia Economic Festival and Indonesia Sharia Economic Festival (ISEF) in Jakarta. Amin affirmed that digitalization was conducted in the wake of the changes in the current life order, including shopping for basic necessities online or through social media with the use of the internet. Amin noted that in terms of products, health and hygiene aspects were of absolute importance and offered enormous opportunities for the halal product industry. Not only for sharia economic players, but this year's ISEF was also held virtually to adjust to the current conditions to thwart the transmission of COVID-19.

#Indonesia is finally waking up to Islamic finance

Despite its potential in sheer numbers of underbanked Muslims, Indonesia has been a slow starter in Islamic finance and is about a decade behind Malaysia. Only in the last few years, there have been some visible steps to support Islamic finance and lift its market share in terms of asset volume beyond the current 6%. The government of Indonesia on June 17 issued its latest Islamic bond, a $2.5bn global sukuk, amid strong interest from investors especially from other Asian countries and the Middle East. The sukuk was issued in three tranches, one of which was a five-year green sukuk worth $750mn. Thomson Reuters sees high future potential for foreign direct investment in Indonesia’s Islamic banking industry, for both the retail and the corporate sector.

#Indonesia issues $2.5 bln global #sukuk including $750 mln green tranche

The government of Indonesia issued $2.5 billion in wakalah global sukuk in three tranches. The 5-year paper of $750 million was sold as a green sukuk, while the other two tranches consisted of a 10-year tenor of $1 billion, and a 30-year maturity of $750 million. The sale was welcomed by investors with an order book that reached $16.66 billion, nearly 6.7 times the target amount. This global sukuk will be listed on the Singapore Stock Exchange and NASDAQ Dubai and the settlement will be carried out on June 23, 2020, with yields of 2.30% for the 5-year tenor, 2.80% for the 10-year tenor and 3.80% for the 30-year tenor.

#Indonesia raises $681.74mln from Islamic bonds auction, above target

Indonesia raised 9.5 trillion rupiah ($681.74 million) from sukuk, more than the indicative target of 7 trillion rupiah. The weighted average yields for the sukuk sold on Tuesday were lower than comparable notes sold at the previous auction on May 18. Incoming bids reached 28.64 trillion rupiah, compared to 18.85 trillion rupiah in the previous auction.

The Majority of #Indonesia’s Shariah-Compliant Fintech Firms are Using the P2P Business Model

The steady rise and adoption in Sharia Fintech has transformed Indonesia’s trillion dollar economy. The majority of Shariah-compliant Fintechs in Indonesia use the P2P model, which usually works well with the profit-sharing model. Sharia Fintechs tend to focus on initiatives that support low-income and underserved segments of the population. Dody Dedy Waluyo, deputy governor of Indonesia’s central bank, says that there should be even more demand for halal or Islamic financial products. He notes that around 40% of the country’s GDP is generated from the Sharia economy.

#Indonesia government partners with biggest Islamic organization to set up 10,000 grocery stores

Indonesia’s Ministry for Economic Affairs is teaming up with the country’s largest Islamic organization Nahdlatul Ulama (NU) to set up 10,000 grocery stores in the next 4 years. The ministry’s vice deputy Gede Edy Prasetya estimates that it will cost around 40 million rupiah to establish a new grocery store under the new partnership. Amid the COVID-19 outbreak this year, the government is seeking new potential eligible beneficiaries for its micro credit schemes. This year, it aims to disburse 190 trillion rupiah ($13.6 billion) as part of the scheme. It has already disbursed 34.2 trillion rupiah in loans as at the end of April, with a non-performing loan rate of 1.23%.

#Indonesia’s BNI Syariah to expand international banking services

Indonesia’s state-owned BNI Syariah plans to add overseas representative offices to run trade finance, and financial institutions and remittance services. The Islamic bank will leverage the branch offices of its parent company, Bank Negara Indonesia, in Singapore, Tokyo, Seoul, Hong Kong, London and New York. The bank can now expand its international banking services after it received a non-cash capital injection of 255 billion rupiah ($17.5 million) in March. This moved it up to Tier 3, for banks holding core capital of 5 trillion rupiah (around $342.5 million) to 30 trillion rupiah. The lender is also eyeing markets outside its current geographies, such as Malaysia, Saudi Arabia and Taiwan. Alongside expanding its international presence, the bank is mitigating downside risks by optimizing its digital banking channels.

#Indonesia to Roll Out Relief Fund for Banks to Ease Impacts from Pandemic

The Indonesian government has issued a regulation for the relief fund to the banking sector to cope with the financial impacts of the Covid-19 outbreak. The regulation states that the government may channel fund to the so-called participating banks. The participating banks will in turn pass the fund on to the “executing banks”, smaller banks who meet certain requirements. President Joko Widodo has earlier urged banks to loosen their terms on debtors and restructure loans as many are unable to repay in time amid massive job losses or salary cuts due to the outbreak.

#Indonesia’s national Islamic economy committee budget slashed, plans suspended as gov't focuses on COVID-19

Indonesia’s National Sharia Economy and Finance Committee (KNEKS) will suspend non-urgent programs this year after its budget was slashed by a third as the government allocates resources to fight COVID-19. The committee will conduct a series of webinars focused on the impact of COVID-19 on the Islamic economy. KNEKS will also engage Indonesians to participate more in Islamic social finance by promoting Shariah-compliant fintechs such as LinkAja Syariah. Indonesia’s government has set aside 405.1 trillion rupiah ($24.65 billion) out of the state budget as a support and stimulus package to help the economy. It has re-allocated and re-focused 95.5 trillion rupiah from ministries and other government institutions as part of efforts to fund the package.

COVID-19: Indonesian banks face challenging time but hopes remain

The spread of COVID-19 is expected to hit Indonesian banks’ performance this year, but analysts remain hopeful that the industry will still be resilient. The Financial Services Authority (OJK) recorded gross non-performing loan (NPL) ratio at 2.79% in February, the highest level since May last year. Loan growth, meanwhile, stood at 5.93% in the month, reflecting the lowest expansion since November 2009, as demand plunged. The rise in bad loan ratio is also expected to increase pressure on banks’ profitability, even on Indonesian banks, which are considered to be some of the most profitable in the world. Although Moody’s expects bank profitability to decrease, vice president Alka Anbarasu also said Indonesian banks could still survive during the challenging climate as they could absorb the increase in credit costs.

Time to mobilise #zakat, retail #sukuk for Indonesia’s COVID-hit MSMEs – KNEKS official

An official of Indonesia’s National Committee for Islamic Economy and Finance (KNEKS) says that Islamic finance instruments and domestic retail sukuk are more sustainable financial support alternatives for COVID-hit MSMEs than loans from multilaterals. Indonesia’s government last week announced a 405.1 trillion rupiah ($24.65 billion) financial package to support households and businesses affected by the coronavirus pandemic. The potential of zakat in Indonesia is valued at around 286 trillion rupiah a year, according to the national zakat body BAZNAS. But actual collection is a far cry, at around only 9.5 trillion rupiah ($577.3 million) in 2019. On the possibility of a domestic retail sukuk, there are ongoing discussions on the instrument’s structure and mechanisms.

Islamic fintech shows how inclusivity makes good business sense

Customers across the world are quickly taking to new mobile-based payment technologies; contactless and e-wallets taking the lead over cold, hard cash. But not every nation is moving quite as fast. In Indonesia there are some concerns about whether the adoption of digital payments and other fintech services are compliant with Islamic laws. Recently, the top Muslim clerical body in Indonesia has issued an edict deeming virtual money acceptable, as long as it meets specific conditions. GoPay has already partnered with the Indonesian Mosque Council to enable digital donations, including the practice of almsgiving, zakat. Islamic fintech is a good example of the business benefits of fostering inclusivity and acceptance among local markets. Inclusivity is not only the right thing to do, but it makes good business sense as well. Out of Indonesia’s 270 million population, half lack bank accounts but have mobile phones. As cash continues to become obsolete, Islamic fintech members will surely profit.

"Sharia fintech": Startups race to tap #Indonesia growth by aligning with Islam

Winning over conservative Muslims is both a challenge and multi-billion dollar opportunity for fintech firms in Indonesia. Questions about compliance with Islamic law are a significant hurdle for the adoption of digital payments and other fintech services. Indonesia's top Muslim clerical body has issued an edict deeming virtual money acceptable, as long it met specific conditions. To showcase the compliance of their services with Islam, fintech firms are organising forums with Islamic scholars and sponsoring religious festivals. GoPay has partnered with the Indonesian Mosque Council to enable digital donations, including zakat, or compulsory alms giving, in its 800,000 mosques. Some of the startups say they are finding their appeal extends beyond Muslims. One of them is peer-to-peer lender Alami, which has disbursed over $7.5 million in sharia-compliant financing to small and medium enterprises since May.

Indonesian Islamic P2P lender Ammana Fintek Syariah eyes international expansion starting with #Malaysia

Indonesian Islamic peer-to-peer lender Ammana Fintek Syariah is keen on entering international markets and is starting its expansion with neighbouring Malaysia. Ammana is also eyeing Brunei and Dubai as part of its international expansion. The Shariah-compliant fintech is in the process of applying to become a member of the international Islamic finance standards body the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI). Ammana Fintek Syariah was established in July 2017 and disbursed 17.6 billion rupiah ($1.29 million) in financing in 2019.

#Indonesia's financial inclusion index increased in 2019: Jokowi

President Joko Widodo (Jokowi) drew attention to Indonesia's financial inclusion index (FII) having risen from 67.8% to 76.19% in 2019. However, the index is yet below that recorded of neighboring countries in the ASEAN, with Singapore standing at 98%; Malaysia at 85%; and Thailand at 82%. Jokowi has highlighted the importance of prioritizing easy access to formal financial services for all people. He has called to develop internet-based digital financial services, as internet users in Indonesia had reached 170 million, or some 64.8% of its total population. He also called to expand access to formal financial services through non-banking services, such as insurance, stock market, and pension fund, to support funding from domestic investors.

Islamic Banking & Finance: What is Holding Back Sharia Finance in #Indonesia?

Despite having the world’s largest Muslim population and despite forming a dynamic emerging economy, Indonesia plays a small role only in the global Islamic banking industry. Islamic banking apparently has a hard time taking off in Southeast Asia’s largest economy. Despite the low penetration of Islamic finance in Indonesia, the country now ranks first in the Islamic Finance Country Index. The country has recently launched the Masterplan of Sharia Economy 2019-2024, with ambitious plans for the future.

Syndicate content