Presentation on theme: "RECENT DEVELOPMENT OF ISLAMIC BANKING IN INDONESIA"— Presentation transcript:
1 RECENT DEVELOPMENT OF ISLAMIC BANKING IN INDONESIA By: Dr. Mulya E. SiregarDirectorate of Islamic Banking - Bank IndonesiaIslamic Finance News RoadshowJakarta, 22nd March 2011
2 Presentation AgendaIslamic Banking System in Indonesia.Government Commitment.Islamic Banking Main Indicators.Islamic Banking Performance.Engine of Growth of Islamic Banking.Blue Print of Islamic Banking Development.Islamic Banking Expansion.IB Campaign StagesBranding: Beyond Banking.
3 Islamic Banking System in Indonesia Regulatory Based :Central Bank Act No. 23 of 1999 (amended by Act No. 3 of 2004).Banking Act No 7 of 1992 (amended by Act No. 10 of 1998).Deposit Insurance Act No. 24 of 2004Islamic Banking Act No. 21 ofIslamic Sovereign Bond (Sukuk) Act No. 19 of 2008.Bank Types:Conventional Banks: Commercial Banks and Rural Banks.Islamic Banks: Islamic Commercial Banks (BUS), Islamic Banking Units (UUS)and Islamic Rural Banks (BPRS).
4 Islamic Banking System in Indonesia International Standard adoption (with national condition adjustment):IFSB (CAR, GCG, Risk Management, Transparency and Market Discipline, Shariah Governance).AAOIFI (Islamic Banking Accounting Standard, Islamic Banking Accounting Guidance).Islamic Financial Markets Infrastructures:Islamic Interbank Money Market (PUAS).Bank Indonesia Sharia Certificate (SBIS).Islamic Government Securities (SBSN).Deposit Insurance Insitution:Indonesia Deposit Insurance Corporation (LPS).Deposits in Islamic banks are guaranteed by LPS (max IDR 2 billion).
5 Institutions Related to Islamic Banking Activities NationalShariaBoardSharia EconomicCommunity(MES)IndonesianAccountingAssociationIslamic BankingActivitiesIndonesian Expert inIslamic Economics(IAEI)Indonesian ShariaBanks Association(ASBISINDO)Sharia NationalArbitrageInstitutions(BASYARNAS)
6 Government Commitment “Indonesia has opportunity to be a focal point of Islamic finance within the region even in the world, by which we could have a wider opportunity for tapping source of financing from the global Islamic finance to support national development program. In line with this, I request all related ministers and other national institutions to perform concerted efforts to develop national Islamic finance industry and put up the development of Islamic finance industry as a national agenda”. (President Susilo Bambang Yudoyono, at the opening speech of the Indonesian Islamic Economic Expo, 16 January 2008)Islamic Banking should stand in the first line because it does not affected by the global economic crisis.(President Susilo Bambang Yudoyono, at the opening speech ofthe World Islamic Economic Forum (WIEF), 2 March 2009)
7 Islamic Banking Main Indicators Islamic Comm BanksIslamic Banking UnitsIslamic Rural BanksNumber of OfficesTotal AssetsTotal DepositsTotal FinancingDeposit Accounts2381962.7 T1.8 T2.0 T52713195151.3 T36.8 T38.2 T6251391.22368.2 T52.27 T46.8 T11231501.763100.8 T76.0 T68.18 T2001200820092010
8 Islamic Banking Performance 20092010Islamic BanksBUS611UUS2523BPRS139150BUS & UUS Offices1.2231.763Offices Growth19,5%44,5%Office Channeling of Islamic Bank ( )Marketing & Promotion Grand Strategy (2008)Islamic Bond (Sukuk) Act (2008)Islamic Banking Act (2008)Tax Neutrality Act (2009)The growth of Islamic banks is higher than conventional banks!!
9 Islamic Banking Performance Consistent Growth in the Market Share of Islamic BankingIncreasing Trend of Financing, particularly the Equity based Financing.
10 Islamic Banking Performance Active involvement of Islamic Banks in SBISModerate Activities in Islamic Money Market (PUAS)
11 Sukuk MarketVarious Issuances of Tradable Fixed Rate Government Sukuks (SBSN)Various Issuances of Non Tradable Government Sukuks (SBSN)
12 Engine of Growth Moslem Population: 237 million people (National Survey 2010).88% are Moslem.Economic Performance:GDP = Rp6,422 trillion or USD700 billion (the 18th highest GDP in the world – world bank report 2009).A single digit inflation in the last 2 years.A stable Rp exchange rate in Rp9,000-Rp10,000/USD.Islamic Banking Performance:A high growth of Islamic banking industry: 37.9% (the last 5 Y)A high Financing to Deposit Ratio (FDR): % (Dec 2010).A low Non Performing Financing (FDR): 3.02 (Dec 2010).Investment based financing is 34% while trade based financing is only 55% of the total financing.Islamic banking offices are available in all provinces.
13 Blueprint of Islamic Banking Development Development StrategiesCurrent StrategiesProposed StrategiesEqual regulatoryframework withfair treatment- Providing facilities andincentives- No incentives2010 – 2015
14 Policy DirectionsHuman capital investment; Supporting the development of human resources which have capability, competency and good moral.Expansive and prudent; Preparing the conducive regulatory which supports the development and complies with Sharia and prudential regulations and supervisions.Innovative, educative and comprehensive; Giving comprehensive banking services to all people with product development and proper public education;Internationally qualified and domestic oriented; Focusing on obtaining the domestic markets with the international quality in operation;Beneficial Investors; Supporting economic development by inviting both international and domestic investors while still maintaining equality principles.
15 ISLAMIC BANKING EXPANSION! Government commitment:The development of Islamic finance industry as a national agenda”.Proposed Development Strategies:Providing facilities andincentivesRegulatory Framework :Central Bank Act of 2004Banking Act of 1998Islamic Banking Act of 2008Sukuk Act of 2008Deposit Insurance Act of 2004ISLAMIC BANKING EXPANSION!ConduciveEnvironmentInternational Standard adoption (with national condition adjustment): IFSB and AAOIFILenientRegulationiB Campaign:Expansion Target 2010AgressivePromotion & Dev. under iB Campaign ProgramTax neutrality:Amended by Tax Law no. 42 of 2009.FutureCurrent
16 Attraction Strategy for Expansion To attract international investors and players in the Islamic Banking industry, Bank Indonesia has commitment to create:ConduciveEnvironmentLenientRegulationAgressivePromotion & Dev. under iB Campign ProgramEXPANSION!Creating a conducive environment to attract new players, promoting strategic alliance with other institutions to improve reach and outreach of Islamic Banking services, both domestic and international.Simplifying licensing procedures for a new banks while maintaining prudent measures and systemic stability concern.Maintaining sustainable growth of supply (bank) and demand (i.e. promoting and dissemination of Islamic mode of finance to address needs of business/ community).
17 Promotion & Dev. under iB Campign Program Priority AgendaBringing Islamic banking & finance development as a national agenda to support a strong and sound economic system.Strengthening Human Resource on Islamic banking industry and its supporting institutions.Need tax Incentive for Islamic Banking IndustryConduciveEnvironmentLenientRegulationRegulating Islamic banking products which fit with prudential aspects, customer needs and sharia principles.Strengthening Islamic banking structure and developing efficient services delivery channels.Research based regulation and risk based supervision implementation.AgressivePromotion & Dev. under iB Campign ProgramIntensify public awareness and education – incl. familiarization program on Islamic banking.Developing high competitive advantage of Islamic banking products
18 The iB Campaign Stages: 2011-20013 20122013Pairing and DistinctivenessShowing that the products, facilities and services of Islamic banks are complete and modern.Product distinctive: gold pownshop, IMBT KPR iB, etc.Universalities, inclusive, Logo iBVariety and CharacterBeyond banking: Varieties of products and financing schemes.Beyond banking: care of people, planet, ethical as Brand CharacterBeyond Banking: Varieties of products and financing schemes.
19 Branding: Beyond Banking POSITIONINGDIFFERENTIATIONContent: Varieties in Products and SchemesContext: Transparant to be equal to both parties.People: Competent in Finance & Ethical.Technology: Up dated IT system & user friendlyFacility: Expert in investment, finance and sharia“Banking which benefitsboth parties”BRANDLEBIH DARI SEKEDAR BANK(BEYOND BANKING)