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Ada Pertanyaan? Hubungi Kami Marcell Sihombing, M. Agus Yozami
Sharia finance products. Photo by: SGP
As the country with the largest Muslim population in the world, Indonesia has naturally seen a rapid development in its sharia-banking and financing industries over the course of the last decade.
However, when viewed in terms of the overall size of the industry and the impact that it is having upon the national economy, the growth in sharia banking and financing industries in Indonesia remains insignificant when compared to conventional banking and financing industries.
According to Dhani Gunawan Idhat, the Financial Services Authorities’ (OJK) Director of Sharia Banking, at least seven main obstacles are preventing sharia banking from growing at an optimal rate. The first obstacle is the lack of coordination and agreement on goals that exists between the government and the relevant stakeholders.
Mr. Idhat admits that the OJK and various stakeholders need to implement a number of measures and commitments in order to ensure that the sharia banking and financing industries can flourish here. Currently however a lack of these measures, not to mention the absence of a national objective which can serve as a common goal, is hampering growth.
Mr. Idhat believes that the government needs involve itself more directly in order for sharia banking to develop further in Indonesia, through implementation of a policy of deregulation, for example.
“Let’s take Malaysia as an example. In Malaysia, the government implements supportive policies that include tax incentives, research assistance, and also the channeling of a portion of the state budget into the sharia-banking sector,” explained Mr. Idhat from Bogor on Saturday, 21 November 2015.
The second obstacle to sharia-banking growth in Indonesia is the fact that many sharia banks do not possess a sufficient level of capitalization. As a result of these limited funds, sharia banks have a limited business scale, as well as a low asset expansion rate.
Furthermore, insufficient capital funds are also hampering sharia banks as regards the establishment of branch offices, the improvement of infrastructure, and the development of service segments.
“Our capacity is limited and one can never be a major player with such measly capital funds,” asserted Mr. Idhat.
The third obstacle relates to high-costs, which are currently restricting the financing sector, while a fourth obstacle to growth is the small variety of products available, as well as a level of service which is far from consumer expectations.
According to Mr. Idhat though, in spite of these two obstacles, sharia banking is reasonably well-developed here, especially within the retail sector. However, to date, the response from the public has not been as enthusiastic as it’s been for more conventional banking products.
The fifth obstacle to sharia-banking growth here is a lack of capable human resources and advanced information-technology systems, which has led to an environment which is not conducive to the development of products and services. Mr. Idhat confessed that sharia banks are far behind conventional banks in these areas.
The sixth obstacle is the public’s low awareness of sharia banks. And last but not least, a seventh obstacle takes the form of ineffective regulatory systems and management.
Mr. Idhat revealed that his institution had already suggested that a massive merger of currently existing sharia banks was necessary in order to expand their markets. In line with this idea, the OJK has been encouraging state-owned sharia banks to merge into one entity as soon as possible, as it is believed that such a merger will be able to boost sharia-banking capital funds.
If the Ministry of State-Owned Enterprises (BUMN) agrees to this initiative, then a central sharia-bank institution can be established by the beginning of the following year. Unfortunately though, this suggestion has yet to bear fruit, in spite of the fact that the OJK has already sent a formal letter and has also been involved in discussions with the Ministry of BUMN. To date, the Ministry has yet to respond to the OJK’s suggestion.
“Merger is a good option in terms of expanding the sharia-banking market, as such an expansion will require a lot of capital funds,” Mr. Idhat concluded.
(sp)
Marcell Sihombing, M. Agus Yozami
Sharia finance products. Photo by: SGP
As the country with the largest Muslim population in the world, Indonesia has naturally seen a rapid development in its sharia-banking and financing industries over the course of the last decade.
However, when viewed in terms of the overall size of the industry and the impact that it is having upon the national economy, the growth in sharia banking and financing industries in Indonesia remains insignificant when compared to conventional banking and financing industries.
According to Dhani Gunawan Idhat, the Financial Services Authorities’ (OJK) Director of Sharia Banking, at least seven main obstacles are preventing sharia banking from growing at an optimal rate. The first obstacle is the lack of coordination and agreement on goals that exists between the government and the relevant stakeholders.
Mr. Idhat admits that the OJK and various stakeholders need to implement a number of measures and commitments in order to ensure that the sharia banking and financing industries can flourish here. Currently however a lack of these measures, not to mention the absence of a national objective which can serve as a common goal, is hampering growth.
Mr. Idhat believes that the government needs involve itself more directly in order for sharia banking to develop further in Indonesia, through implementation of a policy of deregulation, for example.
“Let’s take Malaysia as an example. In Malaysia, the government implements supportive policies that include tax incentives, research assistance, and also the channeling of a portion of the state budget into the sharia-banking sector,” explained Mr. Idhat from Bogor on Saturday, 21 November 2015.
The second obstacle to sharia-banking growth in Indonesia is the fact that many sharia banks do not possess a sufficient level of capitalization. As a result of these limited funds, sharia banks have a limited business scale, as well as a low asset expansion rate.
Furthermore, insufficient capital funds are also hampering sharia banks as regards the establishment of branch offices, the improvement of infrastructure, and the development of service segments.
“Our capacity is limited and one can never be a major player with such measly capital funds,” asserted Mr. Idhat.
The third obstacle relates to high-costs, which are currently restricting the financing sector, while a fourth obstacle to growth is the small variety of products available, as well as a level of service which is far from consumer expectations.
According to Mr. Idhat though, in spite of these two obstacles, sharia banking is reasonably well-developed here, especially within the retail sector. However, to date, the response from the public has not been as enthusiastic as it’s been for more conventional banking products.
The fifth obstacle to sharia-banking growth here is a lack of capable human resources and advanced information-technology systems, which has led to an environment which is not conducive to the development of products and services. Mr. Idhat confessed that sharia banks are far behind conventional banks in these areas.
The sixth obstacle is the public’s low awareness of sharia banks. And last but not least, a seventh obstacle takes the form of ineffective regulatory systems and management.
Mr. Idhat revealed that his institution had already suggested that a massive merger of currently existing sharia banks was necessary in order to expand their markets. In line with this idea, the OJK has been encouraging state-owned sharia banks to merge into one entity as soon as possible, as it is believed that such a merger will be able to boost sharia-banking capital funds.
If the Ministry of State-Owned Enterprises (BUMN) agrees to this initiative, then a central sharia-bank institution can be established by the beginning of the following year. Unfortunately though, this suggestion has yet to bear fruit, in spite of the fact that the OJK has already sent a formal letter and has also been involved in discussions with the Ministry of BUMN. To date, the Ministry has yet to respond to the OJK’s suggestion.
“Merger is a good option in terms of expanding the sharia-banking market, as such an expansion will require a lot of capital funds,” Mr. Idhat concluded.
(sp)