Sharia banking records show impressive growth in Indonesia
Islamic banking has recorded impressive growth in Indonesia since it was introduced 17 years ago and Bank Indonesia has set a goal to make the country an Islamic financial hub in Asia, even in the world.
Central bank data reveal that assets of the Indonesian sharia banking industry has risen more than 35 times from Rp 1.79 trillion in 2000 to Rp 66.089 trillion at the end of 2009, with an impressive average growth of 53.32 percent per year over the past eight years.
In the period of 2008-2009, the industry's assets grew by an average 33.4 percent per year, well above the growth recorded by the sharia banking industry of the Southeast Asian region in the same period, which stood at 15 to 20 percent per year.
Bank Indonesia is optimistic that the industry will grow more impressively in the future as a result of the enactment of Law No. 21/2008 on sharia banking, which regulates all matters related to sharia banking. This has been indicated by, among other things, the fact that financing provisions by Islamic banks grew by an average of 22.8 percent per year and fund collection from the public by 37.7 percent per year in 2008-2009.
Meanwhile, financing to deposit ratio (FDR) of the industry reached 90 percent over the past five years - an indication that Islamic banks have been actively supporting the growth of the real sector, the bank said.
The sharia banking network has also been widely expanded throughout the country. As of December 2009, the network included 1,140 offices and 1,805 sharia services in 32 provinces. The sharia service is also supported by a network of 6,000 Joint ATMs and 7,000 BCA ATMs. The sharia banks have also utilized mobile banking technologies, allowing customers to do transactions via mobile text, phone or the internet. This is part of their efforts to provide services that fit the modern and mobile lifestyle of their customers.
The industry has recorded a relatively high growth of profitability with return on equity (ROE) reaching 25.22 percent a year in the period of 2008-2009.
"All of the above descriptions indicate that sharia banking in Indonesia is a financial industry based on the real sector and is a promising business sector for investors, entrepreneurs and the public," the bank said.
The bank added that the development of the Islamic banking system in the framework of a dual-banking system within the Indonesian Banking Architecture presents a more complete banking service to Indonesian people. Together, the Islamic banking system and conventional banking system can synergically support a greater mobilization of public funds to increase financing capability to boost the country's economic development.
"With the human resources and the natural resources potential that we have, Indonesia has an opportunity to become the platform of an Islamic financial center or Islamic financial hub in Asia, even in the world.
"The realization of Indonesia as the world center of the Islamic economy is expected to open wider opportunities for financing sources from the international Islamic financial markets to make investments in many potential sectors in Indonesia.
"To materialize this vision, the President of the Republic of Indonesia has put Islamic banking and financial development on the national agenda," the bank added.
Citing the positive characteristics of Islamic banking, Bank Indonesia said Islamic banking put emphasis on fair transactions, ethical investments, togetherness and brotherhood in production and avoidance of speculative activities. All these benefits are "available not only to Muslims but to all Indonesian people without exception."
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