Sharia banks’ assets
grow by nearly 45%

The total assets of sharia banks rose by nearly 45 percent during the first nine months of this year after several banks split their shariah banking divisions into separate banks.

Bank Indonesia (BI) director for sharia banking Mulya Siregar said Wednesday that up to September of this year, sharia banking assets reached Rp 85.9 trillion (US$9.6 billion), up 43 percent compared to that recorded in September of last year.

The central bank forecasts sharia banking assets would grow to Rp 97 trillion at the end of 2010, or a 43 percent increase year-on-year.

Mulya said that Rp 65.3 trillion of the assets recorded as of Sept. 20, comes from sharia banks, with
Rp 18.2 trillion and Rp 2.5 trillion from the sharia banking division of the existing banks and from rural sharia banks. “The current figure is in line with our moderate projection of 43 percent growth in sharia assets for the full year of 2010,” Mulya said.

Maybank Syariah, which just began its operation on Oct. 11, joined BCA Syariah, Bank Victoria Syariah, BNI Syariah and Bank Jabar Banten Syariah on the list of sharia banking newcomers this year.

According to Mulya, Maybank Syariah added about Rp 1 trillion in to the overall sharia banking assets to about Rp 87 trillion so far this year.

“If foreigners said there would be an expansion in sharia banking in Indonesia, that’s true,” he added, citing more banks spinning off their sharia units and establishing a sharia subsidiary as indicators.

At present, there are 11 sharia banks in Indonesia including the oldest, Bank Muamalat Syariah.

Mulya said from 2001 to 2008, sharia banking assets on average grew by Rp 161 billion monthly. Meanwhile, since the government announced a set of sharia banking regulations in 2008, the industry’s assets grew by Rp 1.5 trillion monthly. “In July and August of this year alone, the assets of sharia banks grew by Rp 3 trillion each month,” he added.

Mulya also attributed the existence of corporate and government Islamic bonds (sukuk) to the faster growth of sharia banking. “The availability of sukuk eases sharia banks’ assets and liability management, particularly to manage their liquidity,” explaining how the banking industry was attracted to penetrating the Islamic financial system.

However, although growing faster than commercial banks, sharia banking remains a small 3 percent fraction of overall banking assets in the world’s largest Muslim-populated country. Mulya cited insufficient human resources as the main factor hampering the sharia business from growing further to achieve more market share in the banking system. “The sharia business is growing faster than human resources,” he said. However, there has been widespread understanding that sharia banking expansion was hampered by clashing regulations.

On this, Mulya said that the central bank and the government were studying tax incentives for Islamic finance, which may be completed by the end of this year.

According to BI data, sharia financing reached Rp 61 trillion up to September of this year, and 1.8 percent of which, or Rp 1.1 trillion, went to the property sector. Islamic financing in sharia banks mostly went to the trade sector, or 60 percent of the total financing, Mulya said. (est)

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