Indonesia

Islamic #cooperatives can help alleviate poverty

According to the Central Statistics Agency, Indonesia’s poverty rate is at 10.70% as of the second half of 2016. The rapid growth of Islamic finance presents an opportunity to address the social and economic gap. However, behind the success of Islamic finance is the reality that this development is diverting from the fundamental goal of Islamic law. Mehmet Asutay, a professor in Islamic finance at Durham University, argues that the development of Islamic financial institutions have neglected Islamic social goals. The Baitul Maal wat Tamwil (BMT) can be one solution in empowering the poor. As a microfinance institution, the BMT may provide better outreach as it is more accessible to the poorest people. The small amount of credit may encourage them to engage in financing activity. BMT lacks formalization and supervision, the government is expected to strengthen Islamic microfinance by linking BMT to robust capital injectors.

#Indonesia aims to have world largest #haj #fund in 10 years

In Indonesia the newly established Haj Fund Management Agency (BPKH) has pledged to match the performance of its Malaysian counterpart Tabung Haji. The BPKH will manage Rp 99.3 trillion in haj funds, gathered from 3.4 million people who have paid deposits to go on the haj, by investing in sharia-compliant instruments. BPKH chairman Yuslam Fauzi says the agency aims to be the world’s largest haj fund manager within 10 years through diversified investment with an 8 to 10% annual return. President Joko Widodo inaugurated the executive board of the BPKH, which is taking over management of the haj fund from the Ministry of Religious Affairs. Indonesia has sent more than 200,000 people to Mecca on the haj. The waiting list for the haj is 15 to 20 years.

#Indonesia takes big step towards #boosting I#slamic #finance industry

Indonesia, that is so far a behind in developing a comprehensive Islamic finance industry, has taken a big leap towards the creation of a supportive framework for Shariah-compliant banking end of July. On that day, the country’s President Joko Widodo inaugurated the National Committee for Shariah Finance, as part of the government’s push to make Indonesia a global hub for the Islamic financial industry.
It has been tasked to accelerate, expand and develop Shariah-compliant financial services to support the country’s development, National Development Planning Minister Bambang Brodjonegoro said in a statement. The ministry is the one that introduced its master plan for the development of the country’s Islamic finance future last year.

New #Efforts to #Boost #Sharia #Banking in #Indonesia

Although between 85 and 90 % of the Indonesian population is Muslim, Islamic banking, also known as sharia banking, remains underdeveloped in the country. In 2016 sharia banking assets only accounted for 5.3 % of total assets in Indonesia's banking sector. But at the same time in countries like Saudi Arabia and Malaysia these figures are much higher at 51.1 % and 23.8 %, respectively.
In order to boost Islamic banking in his country, President Joko Widodo formed the National Committee for Sharia Finance. This institution was installed to investigate and tackle the challenges surrounding sharia banking in Indonesia. Together with the Indonesian Islamic Economy Expert Association, KNKS is tasked to unite the vision and strategy of all stakeholders in this industry and turn the country into a global center for Islamic banking.
General Chairman of the IAEI Bambang Brodjonegoro said, the challenges in Indonesia's Islamic banking industry involve both the supply and demand side. The lack of business sectors that are based on Islamic banking makes it tough for the industry to develop, he added.

Fitch Rates Bank Jambi's First #Sukuk Issuance 'A(idn)'

Fitch Ratings Indonesia has assigned a National Long-Term Rating of 'A(idn)' to PT Bank Pembangunan Daerah Jambi's proposed Sukuk issuance. The proposed issuance is the bank's first sukuk with a total amount of IDR 120 billion and a maturity of three years from the issuance date. 'A' National Ratings denote expectations of low default risk relative to other issuers or obligations in the same country. Bank Jambi's rating reflects Fitch's view that the bank is important to the regional government of Jambi province on Sumatra island. Bank Jambi is owned by the government of Jambi province and by the governments of various municipalities. Although Bank Jambi is a small bank in the Indonesian banking industry, it has a strong franchise and has an important role in supporting development in the region.

Green #sukuk an option for #sustainability

The government of #Indonesia recently offered retail sukuk to the public to raise funds to help plug a gap in the state budget. From 2008 to 2017, the Indonesian government issued retail sukuk to tap into the country's growing middle class. In 2017, Indonesian retail sukuk became the highest sukuk issuance in the world, with a total value of Rp 31.5 billion (US $2.37 million). Despite its success, the total value of retail sukuk, corporate sukuk and conventional bonds is still considered small compared to the amount needed to finance priority infrastructure development projects. With the lack of a government budget, specified portfolios need to be explored. Green sukuk is a subset of sukuk that finances green assets. As green projects are relatively new in Indonesia, they need time to set up and engage with the nation's development plans.

#Indonesia's GDP Growth Curtailed by High Non-Performing Loan Ratio

Indonesian banks are expected to be cautious boosting credit disbursement because the non-performing loan (NPL) ratio is currently high with the gross NPL ratio hovering above 3% since mid-2016. Banks are now more selective in terms of credit disbursement, but this undermines the pace of the nation's macroeconomic growth. Although Indonesia managed to end the five-year economic slowdown in 2016, it is still far away from Indonesian President Joko Widodo's ambitious 7% GDP growth pledge. In fact, he revised his projection for Indonesia's 2018 GDP growth to 5.6% from a previous projection of a 5.4 - 6.1%. Thus, it should basically be impossible to see a 7% growth rate by 2017.

#GCC sovereigns to lead emerging market #bond issues in #2017

GCC is expected to account for about 31% of sovereign bond issuances from emerging markets this year. The expected 2017 sovereign issues will be distributed among GCC, Eastern Europe Middle East Africa and Latin America, according to forecasts by Bank of America Merrill Lynch.
Issues from the GCC has been increasing rapidly mainly due to low oil prices, with some new issuers in 2016, and analysts expect the 2017 issuance to continue to be high. Among those, Kuwait inaugurated the external sovereign debt market with $8 billion (Dh29.3 billion) to finance a budget deficit resulting from low oil prices. Sovereign issuance for 2017 is forecast to be 6% higher compared to the previous year. In 2016, sovereigns issued $135 billion, mainly from Latin America, while corporates issued about $300 billion, mainly from Asia. Analysts expect gross sovereign external issuance to come in at $144bn in 2017.

#Malaysia's Maybank Islamic looks to home markets to drive growth

Maybank Islamic is turning to its home markets for growth, in particularly Indonesia where it manages $2 billion worth of assets and is aiming to compete with domestic Islamic banks. According to CEO Mohamed Rafique Merican, the bank could grow beyond its core markets of Malaysia, Singapore and Indonesia, but expansion in other markets would be opportunistic. Indonesia remains a key market for the bank, after Malaysia which accounts for 90% of the bank's business. As part of the ASEAN banking integration framework (ABIF), Indonesia and Malaysia have agreed in August to give their banks greater access to each other's markets. The move would give Malaysia's Islamic banks a potential lead to tap into the world's biggest Muslim-majority country, and one that continues to restrict to foreign lenders.

CORRECTED-#Indonesian global #sukuk may be issued this week -minister

Indonesia's finance minister Sri Mulyani Indrawati announced the government plans to issue a global sukuk this week. Indrawati did not give further details on the planned issuance. An official has previously said the government will issue global sukuk in the first half of 2017. According to Thomson Reuters, Indonesia has given initial yield guidance of 3.75% for a five-year tranche of the U.S.-dollar sukuk and 4.5% for 10-year tranche.

'Waqf' the next best thing in finance

Bank Indonesia (BI) announced recently its plan to issue waqf based bonds as a social welfare mechanism. The Indonesian Muslim Intellectual Association (ICMI) will also launch the very first waqf venture bank this June. Waqf may become the new trend in Islamic banking for several reasons. Waqf funds can be utilized for equity-based financing, a financial structure considered ideal for Islamic values, but undervalued in the current Islamic banking and finance architecture. The nature of longterm waqf funds for investment will make a good source of funding for venture capital and private equity. The amount of money potentially generated under a waqf system is indeed huge. The value of waqf land is estimated to reach Rp 300 trillion. This highlights the need for a professional and well-governed management to create a waqf bank that functions well and is successfully implemented.

New Sharia-Compliant Government Retail #Bonds Sale in #Indonesia

The government of Indonesia plans to sell another series of sharia-compliant government retail bonds (Sukri). The offering period is planned for 4 February-2 March 2017. In last year's Sukri issuance the Indonesian government set an indicative target of IDR 30 trillion (approx. USD $2.2 billion) for its SR-008 series. However, due to robust demand authorities raised a total of IDR 31 trillion. The three year SR-008 bonds carry a fixed coupon of 8.3% per year. It was the government's biggest ever sale of Sukri bonds. In 2017 the Indonesian government plans to sell IDR 597 trillion worth of bonds, mostly rupiah-denominated government bonds. Robert Pakpahan, Head of the Debt Office within Indonesia's Finance Ministry, earlier said Indonesia will offer retail bonds twice this year, consisting of Sukri and Indonesian Retail Government Bonds.

#Sukuk #loan mix for #Felda’s #Indonesian #Eagle High stake buy

The Federal Land Development Authority is set to raise funds for its 37% stake acquisition in PT Eagle High Plantations Tbk via a mix of loans and sukuk issuance.
Sources familiar with the matter said that 50% of the acquisition figure of RM 2.26 bil would be financed through a loan with a major European banking group. The remaining funds will be raised through a sukuk issuance.
“The sukuk issuance could be announced as early as late January. The debt will be serviced by the cashflow generated by Felda Investment Corp’s (FIC) assets,” said a source. It is probable that the sukuk would come with an explicit government guarantee, given that Felda is a government-backed agency. This is because most institutional funds – which are the likeliest parties to subscribe to the sukuk – can only purchase high-rated bonds as part of their investment mandate. A guarantee would ensure that the bonds are rated at or close to the top investment grade.

#Indonesia looks to Islamic schools to spur Sharia banking

In an effort to boost the industry, Bank Indonesia has decided to work with Islamic boarding schools known as pesantren. Anwar Basori, Bank Indonesia's head of Islamic Finance and Economy, said there is a lot of potential in the 27,000 pesantren, which have about 3.6 million students. The central bank said it is finalizing a roadmap for the program under which it will work with the Religious Affairs Ministry to help the business units of pesantren to become financially independent. The schools operate in various business areas, including mini-markets and cattle farms, and provide extracurricular entrepreneurship and Islamic finance education to students. Anwar said that the roadmap would be implemented in early 2017, starting with a pilot project.

Spotlight on #careers of #women in #Islamic #finance

Next week’s influential World Islamic Banking Conference in Bahrain will see a lot of interesting and highly relevant keynotes, debates and panels, but also a premiere that highlights a phenomenon not yet clearly studied in the industry: The role of women in Islamic finance and the opportunities that arise for them.
Simply Sharia Human Capital, a London-based recruitment and training center solely dedicated to Islamic finance, at the conference will unveil a report called “Women in Islamic Finance & Islamic Economy: Unlocking Talent,” one of the rare studies that actually look into roles, careers and achievements of women in the Islamic finance industry, and the job opportunities it holds for female career seekers from an educational perspective.

Sharia banks' assets reach Rp331 trillion

The total assets of the #Indonesian sharia banking industry in the third quarter of 2016 reached Rp331 trillion, accounting for 5.13% of the national banking industrys assets. Lukdir Gultom, Chief of the Indonesian Financial Service Authority (OJK), said the actual figure outstrips the target set by the OJK at 5%. He added that the OJK continued to encourage the sharia compliant financial service industry covering banks, non-bank financial institutions and the capital market. To date, Indonesia has a total of 13 sharia commercial banks, 21 sharia business units, and 165 sharia rural banks. The OJK will try to increase their number. Having a Muslim majority population, North Sumatra has the potential to become a hub for the Indonesian sharia banking industry.

Govt to establish committee for Islamic finance development

In #Indonesia high-ranking officials announced they were preparing to establish the National Committee of Sharia Finance (KNKS) that would be directly chaired by President Joko Widodo. Bank Indonesia Governor Agus Martowardjo noted that human resources quality would determine the success of the KNKS, including its system and management’s regulation. He added that the committee would be established this month and also aims to involve 22,000 Islamic boarding schools across the archipelago. Boarding school graduates will be expected not only to become knowledgeable in religious affairs, but also to understand sharia economics and develop their entrepreneurship skills.

Islamic finance to increase female economic participation: Minister

According to #Indonesian Economic Coordinating Minister Darmin Nasution, the development of the country’s sharia finance industry will increase female participation in the economy. He said Indonesian fashion and halal cosmetics were among the well-performing industries and most businesspeople in the two industries were women. Indonesia is one of the top five Islamic fashion industries in the world, with a total spending of US$12.7 billion annually. It is also in the world's top five regarding the sharia cosmetics/pharmaceutical industry with an average spending of $4.8 billion per year, according to data from Bank Indonesia (BI). BI deputy governor Hendar said inspite of the global slowdown, Indonesia's sharia industry was still giving positive signals.

#Indonesia unveils #waqf based #sukuk

Bank Indonesia (BI) unveiled a waqf-based sukuk, aimed at developing social property assets to be commercially self-sustaining. BI Deputy Governor Hendar said the sukuk could further finance the development of commercial buildings such as office towers or shopping centers over waqf land. The coupon will be paid from the recurring income of the assets. According to Muhammad Anwar Basori, BI head of the sharia economic and finance department, waqf land was traditionally used for social and public purposes such as cemeteries, mosques, or schools. Waqf-based sukuk could be a solution and could provide cash to cover maintenance costs. Basori added there are 400,000 hectares of waqf land in Indonesia, 90% of which are cost centers. In Kuwait and Singapore, they have built many productive assets on waqf land.

S&P's Not Yet Ready to Upgrade #Indonesia's #Rating from Junk

S&P Global Ratings may not be ready to upgrade Indonesia’s credit rating from junk, concerned by rising bad debts and risks to the growth outlook. Indonesia failed in June to win an upgrade from S&P, which rates the nation’s debt at BB+ with a positive outlook. S&P said at the time that while the country’s fiscal framework had improved, it still faced challenges on its budget performance. Josua Pardede, an economist at PT Bank Permata in Jakarta, said Indonesia still faces fiscal risks. He estimated the tax shortfall for this year will be more than 200 trillion rupiah ($15 billion), causing the budget deficit to widen to around 2.7% of gross domestic product. The government has a deficit cap of 3% of GDP. The ratings company will meet with Indonesian Finance Minister Sri Mulyani Indrawati within the next few weeks before it makes its next assessment due in December. S&P is the last of the three main credit-rating companies to keep Indonesia on junk status.

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