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OJK relaxes rule to help Islamic banks develop
The Financial Services Authority (OJK) expects that its new relaxation on Islamic banking included in the governmentâs fifth economic policy package will help the industry grow better, its officials say
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he Financial Services Authority (OJK) expects that its new relaxation on Islamic banking included in the government's fifth economic policy package will help the industry grow better, its officials say.
OJK head of sharia banking department Ahmad Buchori said the agency was still expecting that the country's sharia banking industry could get away from its '5 percent trap' through more lenient policy in various aspects.
Buchori said Islamic banks, which still has market share below 5 percent of the total assets in the country's banking industry, grew constantly each year, even though some of them were consolidating their businesses due to negative effects of weak economy.
'Islamic banks face difficulties in growing their market share, because conventional lenders are also growing altogether. However, I'm quite optimistic that the target of above 5 percent market share this year can still be achieved,' Buchori told reporters on Friday.
As an effort to help Islamic banks grow their assets, Buchori said the agency decided to relax some rules, including a more lenient permit on new products through a comprehensive 'codification'.
With Islamic banking product codification, Buchori said sharia banks would be able to launch their new products without a requirement to submit for permit to the OJK and only need to report their plan and monitoring regularly.
'We will issue the codification before the end of this year and it will comprise many kinds of Islamic banking product as reference,' Buchori said.
Buchori said further that the OJK allowed conventional banks to sell their Islamic subsidiaries' products through their conventional branches, but would still only be limited on funding-related ones. The OJK also relaxed a rule on Islamic bank's gold pawn business and a 'discount' on required core capital when opening branches in certain zones, Buchori added.
'We want sharia banks to expand their coverage to the wider society. For instance, funds of haj pilgrims are now required to be placed in sharia banks, which will be allowed to receive the money through their mobile branches that can reach remote areas,' Buchori said.
On Thursday evening, the government announced its fifth economic policy package, which offers a number of tax facilities and relaxation on Islamic banking industry.
OJK chairman Muliaman D. Hadad said that the agency wanted to provide wider space for the country's Islamic banking industry to grow following major challenges faced in the past one year.
'Since August, we have issued stimulus packages, including the new one, which aims to push Islamic banking industry as there will be more room to grow,' Muliaman said.
Deputy OJK commissioner for banking supervision Mulya E. Siregar said recently that this year was bleak for the Islamic banking industry, which booked only 7.98 percent in asset growth as of July, a far cry from 49 percent in 2013 and an average 43 percent in the period of 2009 to 2013.
'There are five obstacles that triggered slow growth in sharia banking industry, namely small capital, expensive cost of funds, inefficient operating costs, inadequate services as well as low quality of human resources and technology,' Mulya said.
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