Indonesia

Roadmap to boost Islamic financing

Recognizing the huge economic opportunities of Islamic financing, the Peace and Equity Foundation (PEF) in partnership with Al Qalam Institute, Cordaid and World Bank (WB) Philippines, is gearing up for drafting of the 21-year roadmap to attain compliance to Sharia'h-based financing industry.
Islamic Financing is touted as a growing "$2 trillion" global industry,
The roadmap will be patterned from the Southeast Asian countries like Indonesia, one of the leading countries in adopting Islamic Finance in the global scale. It will be divided into three stages with seven years each of realization.
Ricardo Torres, PEF's Partnerships and Program manager, in a press conference Wednesday, told reporters this 21-year journey will commence next year.
Torres was in Davao City for the three-day Sharia'h conference dubbed as “Islamic Financing in the Philippines: A Step towards the First Seven years,” at the Ritz Hotel and Garden Oases, "The first seven years will be the first step and we intend to implement it starting 2016. After this Sahria’ah conference which will be attended by some 200 stakeholders we intend to craft fully the whole roadmap,” Torres said.

Banks pledge to support green finance

The nation’s eight largest banks, representing 46 % of national banking assets, have committed to implementing sustainable financing as part of global environment goals.

Bank Mandiri, Bank Rakyat Indonesia (BRI), Bank Central Asia (BCA), Bank Negara Indonesia (BNI), Bank Muamalat, BRI Syariah, Bank Jabar Banten (BJB) and Bank Artha Graha Internasional signed the commitment with the Financial Services Authority (OJK) and the World Wildlife Fund (WWF) Indonesia on Monday. The commitment was manifested in a pilot project called “first step to becoming a sustainable bank”, marking a big move taken by the banks less than a year after the OJK launched the 2014-2019 Sustainable Financial Roadmap, according to OJK head Muliaman D. Hadad.

“I hope these eight banks, which are the prime movers in this project, can encourage other banks and financial institutions to join the country’s implementation of sustainable finance,” Muliaman said in his speech. Through the green banking pilot project, Muliaman said participating banks were expected to balance their pursuit of profits with willingness to conserve the environment, serving as examples to their peers.

UPDATE 1-MOVES-Standard Chartered appoints CEO for Islamic banking business

Standard Chartered has appointed Rehan Shaikh as chief executive of its global Islamic banking business, it said in a statement on Wednesday.
Shaikh moves to Standard Chartered Saadiq from Dubai Islamic Bank, where he was senior vice president and business head, private sector and transaction banking. He previously worked for StanChart in Pakistan from 1998 to 2007, the statement said.
He takes over from Sohail Akbar, who was interim chief executive of the Islamic banking operation after the departure of Afaq Khan earlier this year.
StanChart remains committed to the business despite a period of hiatus across other parts of the bank as global chief executive Bill Winters moves to restore profitability. It announced plans this month to reduce costs by $2.9 billion by 2018 and cut 15,000 jobs.
"Islamic finance is an integral part of the business at Standard Chartered and we continue to see growing demand from clients in many of our markets," said Sunil Kaushal, the bank's regional chief executive for Africa and the Middle East.

Aberdeen Eyes Offshore Islamic Fund in Q1 of 2016

Aberdeen Asset Management plans to launch a new Islamic compliant fund to invest in overseas assets in the first quarter of next year, president director Sigit Pratama Wiryadi said on Thursday.
Aberdeen, a local unit of the Scottish fund manager of the same name, will be among the first funds in Indonesia to take advantage of recently loosened Financial Services Authority (OJK) rules allowing local fund managers to include foreign assets in portfolios. An OJK regulation issued last week announced managers are now permitted to invest between 51 and 100 % of shariah mutual fund products in overseas securities — from bonds, to stocks and currency.
Bharat Joshi, investment director at Aberdeen, said the fund manager would look for assets in Asia Pacific, the United States and Europe to include in the new fund. Aberdeen currently manages around Rp 2 trillion ($147 million) of the country's equities and bonds. The fund has previously said it is looking to increase assets fivefold over the next five years.

IIUI holds international moot on Islamic finance

Speakers at a conference have urged the financial institutions and civil society to play their role by supporting an inclusive financial sector policy framework for equal access to financial services.
The workshop, which was attended by the scholars of Indonesia, Nigeria, Kenya, Kingdom of Saudi Arabia, Uganda, Sudan and US, is focused on bringing forth recommendations that will help in devising sustainable strategy for development of inclusive finance.
The two-day moot is jointly organised by International Institute for Islamic Economics of IIUI in collaboration with Islamic Research and Training Institute, Islamic Development Bank, Jeddah.
Speaking on the occasion as the chief guest, Islamic International University Islamabad President Dr Ahmed Yousif Al-Draiweesh stressed on the Muslim economic researchers to work for devising strategies for an interest-free transparent economic system. He was of the view that financial issues be observed in the light of Islamic teachings. The IIUI president hoped that conference would bring beneficial and significant recommendations pertaining to the financial and economic issues.

i-VCAP introduces MyETF-AGRI to tap into long-term potential of agribusiness

The launch of MyETF-AGRI, the firm’s second Islamic ETF issued this year, brings the number of Shari’ah compliant ETFs in Malaysia to four and 18 in total in the world.
The global ETF market has closed in on the $3 trillion mark with Shari’ah-compliant ETFs only registering about $320 million of that total. In Malaysia, Shari’ah-compliant ETFs make up of over 30 % of the ETF market.
Malaysia does lead the pack, however, with the most Shari’ah-compliant ETF products in the world. Malaysia’s four Shari’ah-compliant ETFs account for some $75 million or 23 % of the global Shari’ah-Compliant ETF segment.
The launch of this landmark Fund represents many firsts for the industry including being the first agricultural-related Islamic ETF globally and the first sectoral Islamic ETF in the region while reinforcing Malaysia’s position as the global hub for Islamic finance and investment products.
MyETF-AGRI will look to invest in the 30 constituent companies that make up the Thomson Reuters Asia Pacific ex-Japan Islamic Agribusiness Index and in substantially the same weightings as they appear on the benchmark index.

Indonesian philantropists are changing lives

Channel NewsAsia is shining a deserved spotlight on individuals and organizations dedicated to charitable giving with a new program aptly called "Changing Lives," which celebrated its launch on Tuesday with the support of several billionaire philanthropists from Indonesia.
"The idea for the program came from my conversation with pak Tahir," said Debra Soon, head of news and premier segments at MediaCorp, the parent company of Singapore-based Channel NewsAsia.
Soon was referring to renowned Indonesian businessman and founder of the Mayapada Group, Tahir, who was present at the launch in Fairmont Jakarta.
"We talked about what we can do to promote philanthropy. I said, 'Why don't we organize events [and] have a program, because as a channel, we should be raising awareness of issues that matter to Asia.'"
The event included a gala dinner and talk show which featured Tahir as well as Maritime Affairs and Fisheries Minister Susi Pudjiastuti, who is known as a prominent business owner in her own right.

Islamic Bank May Support Green Sukuk for Renewables Projects

The Islamic Development Bank indicated that it may issue green sukuk bonds compliant with religious law and increase lending for climate-related projects with an announcement at the United Nations global warming conference in Paris at the end of the year.
“Estimates for the 2030 agenda indicate that we need to move from billions to trillions of dollars of support annually for sustainable development,” Savas Alpay, chief economist of the IDB, said in a phone interview. “Traditional sources of development finance will not be enough. We must also look at non-traditional sources. We will be using Islamic finance to bring new resources to the table.”
Khazanah Nasional Bhd, Malaysia’s state-owned sovereign wealth fund, issued green sukuk last November after introducing guidelines for socially responsible debt in August 2014. It was the second entity after the London-based International Financial Facility for Immunization announce plans to sell ethical-based sukuk.
Green Sukuk

Cobalt targets Sharia-compliant demand

The Islamic countries of South-East Asia represent a rich potential area of growth for insurers, especially those able to offer Sharia-compliant products, Richard Bishop, chief executive officer of Cobalt Underwriting, told SIRC Today. Bishop said that counties such as Indonesia, Malaysia and Pakistan offered a plentiful source of potential business for insurers, especially those familiar with and able to offer Sharia-compliant insurance.
Cobalt Insurance Holdings and its two specialist operations, Cobalt Underwriting Services and Cobalt Advisory Services, were formed in 2012 with the objective of establishing London as a leading global centre for Sharia-compliant insurance capacity.
“When we started we principally focused our efforts on the Middle East as a market,” Bishop said. “We do business in the UK, or inward investment into the UK via Islamic investors, but we wanted to make our product available in the Islamic markets, and the closest Islamic market to the UK is the Middle East. It’s worked quite well for us as a starter market.”

Bank Indonesia says Islamic banking can help SMEs compete

Bank Indonesia (BI) has acknowledged a new challenge for the national economy – the rise of global small and medium enterprises (SME) and their increased penetration of the local domestic market. According to BI, in order to compete, local SMEs need to be strengthened through massive financing, including through Islamic banking. The challenge is getting more serious as the economy opens up with developments like the Asean Economic Community (AEC) agreement, which will come into effect soon, leading to massive corporate foreign investments that will bring foreign SMEs to Indonesia, BI deputy governor Perry Warjiyo said.

Indonesia hopes for an Islamic banking boom

Indonesia's regulators have launched a plan aimed at growing the sector, which currently accounts for less than five percent of banking assets. It is modelled after similar bodies in other countries, such as the International Islamic Financial Centre in Malaysia. In addition to the OJK roadmap, the government has announced plans to merge the Islamic banking subsidiaries of four state-owned banks to create an Islamic mega-bank, which should be able to provide better services than the current Islamic lenders. Authorities believe it is a good moment, with many Indonesians getting wealthier after years of strong economic growth and an increasing trend towards piety across broad sections of society.

INDONESIA PRESS-Dubai Islamic Bank to increase its stake in Bank Panin Syariah to 40 pct - Investor Daily

Dubai Islamic Bank PJSC has reportedly obtained an approval from Indonesia's Financial Services Authority to increase its stake in PT Bank Panin Syariah Tbk to 40 percent from 24.9 percent currently, according to chief executive of Dubai Islamic Bank, Adnan Chilwan.

Indonesia exploits Malaysia shutdowns to lure Islamic investors

Indonesia is drawing interest from Middle Eastern banks seeking to tap the world’s biggest pool of Shariah-compliant investors as some Islamic lenders wind down or close operations in Malaysia and Singapore. Emirates NBD PJSC wants to invest at least US$300 million in a new Shariah lender or acquire a stake in an existing one. The investments would be a boost for Indonesia in its ambition to become an Asian hub in the US$2 trillion industry. Emirates NBD’s plan comes as Kuwait Finance House prepares to close its Islamic operations in Malaysia, while Bahrain’s Elaf Bank BSC has already done so. DBS Group Holdings Ltd is winding down its Singapore arm catering to Muslims.

Indonesian regulators plan to boost Islamic banking boom

Indonesian regulators have launched a plan aimed at growing the sector, which currently accounts for less than five percent of banking assets, compared to a quarter in Malaysia and around half in Saudi Arabia. Authorities believe it is a good moment, with many Indonesians getting wealthier after years of strong economic growth and an increasing trend towards piety across broad sections of society. The Financial Services Authority (OJK) is spearheading the drive, and unveiled a five-year roadmap earlier this year that included plans to educate the public about Sharia’h lenders and the establishment of an Islamic finance committee to better manage the sector.

Emirates NDB Plans $300m Venture Into Indonesia's Islamic Banking Sector

Dubai-based bank Emirates NDB has expressed interest in spending $300 million to establish Islamic banks in Indonesia as it seeks to tap into the archipelago's underdeveloped financial sector. Emirates NDB would join Middle Eastern banking rivals Qatar's Masraf al Rayan and Dubai Islamic Bank in its quest to set up shop in the nation. Emirates NDB will have to team up with local partners in order to fulfill its aim of establishing a new bank as a current government regulation limits foreign ownership to 40 percent, said Dhani Gunawan, OJK director of Islamic banking research and development, supervision and licensing. Meanwhile, Al Rayan seeks to acquire shares in existing Islamic banks, he added.

Jokowi Discusses Infrastructure Funding, Shariah Banking with Islamic Development Bank

President Joko Widodo has laid out his invitation for increased foreign investment in Indonesia before the Islamic Development Bank, which already has sizeable interests in the country. Joko, on a tour of the Middle East, met with Jeddah-based IDB president Ahmad Mohamed Ali to discuss a wide range of topics, from ways to finance infrastructure projects and increase investment by Middle East countries into Indonesia, to expanding the nation’s Islamic banking industry. The IDB currently finances nearly $4.2 billion in development projects in Indonesia. The group is also processing a member-country partnership strategy with Indonesia for the 2015-2019 period.

Indonesia celebrates listing of largest sovereign Sukuk issuance in Dubai

Bambang Bodjonegoro, the Indonesian Minister of Finance, today rang the market-opening bell to celebrate the listing on Nasdaq Dubai of four Sukuk valued at six billion US dollars (AED 22 billion), issued by the Indonesian government under its Trust Certificate Issuance Programme since 2012. The Islamic bond listings are the largest ever carried out by a sovereign issuer in Dubai. Indonesia’s four Sukuk listings comprise one issuance of two billion USD dollars AED 7.3 billion), two of 1.5 billion US dollars (AED 5.5 billion) each, and one of one billion USD dollars (AED 3.7 billion). All listed on Nasdaq Dubai on May 31, 2015.

Islamic Banks Can Survive Further Rupiah Decline: OJK

Indonesian Islamic banks would survive a rupiah drop to as low as 16,000 against the US dollar, thanks largely to low levels of bad loans, a senior official at Indonesia's Financial Services Authority said. The banking industry's non-performing financing ?? bad loans in sharia banks ?? reached 1.3 percent as of July 2015, still lower than the 5 percent benchmark set by the OJK. In comparison, bad loans among conventional lenders stood at 2.5 percent of total loans at the end of July, according to OJK data. The rupiah has fallen 15.13 percent so far this year, trading at 14,322 against the greenback on Monday, according to the Jakarta Interbank Offered Rate.

Using Islamic Bonds to Boost Infrastructure Development in Indonesia

In 2016 investors will be able to purchase about IDR 13.7 trillion (approx. USD $1.4 billion) worth of Islamic bonds to be issued by the Indonesian government. Indonesia will use proceeds from next year's bond sales to boost the nation’s infrastructure development. Government-led infrastructure development is regarded as key to overcome the current process of slowing economic growth that has been plaguing Indonesia since 2011. Demand for Islamic bonds may in fact be stronger than demand for conventional bonds. Indonesian sukuk is also less volatile compared to conventional bonds as investors tend to hold sukuk until maturity.

Asia Islamic bonds turn to losses as the confidence in leaders ebbs

Dollar sukuk returns are turning into losses in Asia’s biggest Islamic finance markets as confidence in government leaders sours amid a regional sell off. Indonesia’s Shariah-compliant sovereign bonds due in 2024 have dropped 3.8% since April and the 2025 Malaysian debt lost 2.6%, compared with a 2.4% decline in a Bloomberg index of emerging-market conventional government notes. In that period, the rupiah plunged 6.4%, and the ringgit 13%. Both countries are grappling with an economic slowdown, falling commodity-export prices and capital outflows as the US prepares to raise interest rates. The reality is, investors have had to resign themselves to stagnant growth, so they were let down after buying into the story.

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