1. Islamic Financial Services Industry Development: Framework and Future Direction Indonesia Experience
Dr. Muliaman D. Hadad
Chairman of Board of Commissioner
Indonesia Financial Service Authority
The IDB Group 9Th Global Forum on Islamic Finance
Jeddah, Saudi Arabia June 2014

2. Content Global Islamic Finance and Indonesia’s Position1
Global Islamic Finance and Indonesia’s Position 2
Indonesia’s Islamic Finance Sector Recent Development 3
Policy Direction

3. Islamic Banking Global Growth and Indonesia Position
There’s decreasing trend of Islamic banking (iB) global growth (asset in 2012 < 24%) while in Indonesian iB in 2012 reach ± 34% (yoy)
Indonesian iB growth of financing in 2012 (± 44%, yoy)
Indonesia iB growth of deposits in 2012 (± 28%, yoy)
However in Dec 2013, there’s decreasing in Indonesia’s iB’s growth only reach ±24% (still higher than conventional bank & global Islamic bank)  rebalancing ..
Islamic Banking Global Average Growth Trends
Financing Growth Trend by Country
Deposit Growth Trend by Country
Source: IFSB Islamic Financial Services Industry Stability Report, 2014

4. Indonesia’s Islamic Finance Sector Recent Development

5. Milestone of Indonesia’s Islamic Finance
Islamic Bank
Takaful
Islamic Capital Market
1st Syariah Mutual Fund
Danareksa Syariah Berimbang
1st Bank Syariah
Bank Muamalat
1st Syariah Insurance
Takaful Keluarga
1st Islamic Banking Accounting Standard (2002)
Syariah Office Channeling
Syariah List of Share (DES)
Multifinance
1st Reinsurance Syariah
ReINDO Syariah
Regulation Syariah Capital Matket
ETF Syariah
Syariah Premier ETF JII
1st Finance Syariah
Amanah Finance
1st Corporate Sukuk
Mudharabah Indosat
Jakarta Islamic Index (JII)
Regulation related to Down Payment of Sharia Finance
Islamic banking act
Act No.21 year 2008
Regulation related to Insurance & Reinsurance Syariah
Act of Sovereign Sukuk (SBSN)
Act No.19 year 2008
Indonesia Sharia Share Index (ISSI)
Sharia Online Trading
IPOT Syariah
1st Sovereign Sukuk
IFR0001 & IFR0002
Syariah Interbank Money Market
Shariah Bank Reserve Requirement
Syariah Delivery Channel
Sharia Bank XBRL report
Syariah LOLR (2003)
Islamic Bank Blue Print (2002)
Act No.10 year 1998/Banking Act
Islamic business unit (UUS)
Cover by Deposit Insurance (LPS)
Masterplan Capital Market & NBFI (2005)
Act No.3 year 2006 Religius Court
Act No.42 year 2009 VAT (neutrality)
Other

6. Development of Islamic Banking (BUS+UUS)
Indicator
2009
2010
2011
2012
2013
Islamic Commercial Bank (BUS) 6 11
Islamic Business Division (UUS) 25 23 24
Islamic Rural Bank (BPRS)
138
150
155
158
163
Offices
998
1,477
1,737
2,262
2,588
Total Asset (IDR Trillion)
66.1
97.2
145.47
195.02
242.28
Growth of Asset (yoy)
33%
48%
49%
34%
24%
Market Share
2.61%
3.24%
3.98%
4,58%
4.89%
Deposit
52.3
76.04
115.41
147.51
183.53
Financing
46.9
68.18
102.66
184.12
CAR
10.77%
16.25%
16.63%
14.13%
14.44%
FDR
89.7%
89.67%
88.94%
100.0%
100.32%
NPF (gross)
4.01%
3.02%
2.52%
2.22%
2.62%
ROA
1.48%
1.67%
1.79%
2.14%
2.00%
ROE
25.81%
17.58%
15.73%
24.06%
17.24%
± 98% asset of Indonesian Islamic banking dominated by Islamic Commercial Bank (BUS) and Islamic business unit of Conventional Bank (UUS)

7. Islamic (syariah) Capital Market Development
Islamic Mutual Fund (reksa dana)
Corporate Sukuk
Sovereign Sukuk
(SBSN)

8. Islamic (Syariah) Non Bank Financial Industries (IKNB)
Development of Entity and Asset of Islamic IKNB
Asuransi = Insurance
Pembiayaan = Multifinance companies
Development of Islamic Multifinance and Venture Capital
Growth of Asset and Receivable (Piutang) of Islamic Multifinance (Pembiayaan)
2009
2010
2011
2012
2013
Full Pledge Finance Sharia 2
Islamic Business Unit Finance Companies 5 9 12 32 42
Full pledge Venture Capital - 4
Total 7 11 14 34 48

9. Policy Direction

10. Indonesia’s Islamic Finance Architecture : Future Direction
Urgency of Integrated and comprehensive Islamic finance Masterplan :
Indonesia FSA ’s mandate & authority to regulate and supervise Islamic finance industry in an integrated approach
The need of comprehensive framework of Islamic finance industry’s regulation and supporting infrastructure , which is better if it’s integrated in national policy agenda
Integrated supervision need harmonization of each masterplan/blue print
Reference :
i.e. IDB-IFSB 10 yrs Masterplan of IFSI :
Enablement : i.e. Policy Stakeholders Forum, IT support
Performance : i.e. efficient & competitive
Reach : i.e. broaden acces and financial inclusive
Challenge :
External  i.e. financial sector integration in ASEAN, global arrangement
Internal  i.e. priority economic sector financing, limited domestic support capital
Capital Market & Non Bank FI Masterplan 5 years (MoF)
Islamic banking blue print 10 years (BI)
Indonesia’s Islamic Finance Architecture (cooperation with IDB and Govt. of Indonesia)
Bigger role in supporting economic development particularly for priority economic sector
Integrated development  i.e. forum of policy authority in making policy and implementation
More efficient and competitive including strengthened capital and synergi
Broaden access and Financial inclusion
Impact to national plan of medium term development

11. Maintaining Indonesia’s Islamic Bank Growth
Steps Forward
Muslim population
Innovation of genuine sharia Products and services : support the people need ,more broaden customer base and more productive activities
Strategic alliance and strong infrastructure support : i.e. Government support, Optimization synergy with iB’s holding/Grup companies.
More professionals & qualified HRD
Intensified Education and Promotion
This strategy will attract more broaden customers to use services from islamic banks, and in the end this will have an impact to strong growth

12. THE END
THANK YOU
TERIMA KASIH