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East Java most promising for Islamic banking, says BI
TribunnewsBank Indonesia (BI) research suggests that East Java is the most promising market for Islamic banking in Indonesia, as 96
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Tribunnews
Bank Indonesia (BI) research suggests that East Java is the most promising market for Islamic banking in Indonesia, as 96.76 percent of its population, or 36.65 million people, are Muslim.
The central bank has launched a number of research and market education programs, especially in East Java, as part of an effort to make sharia-based financial services more prominent in Indonesia.
'BI has launched some programs to introduce sharia financial services to the broader community, and we are indeed very thankful for all the input we received regarding boosting Islamic banking,' BI's deputy governor Perry Warjiyo told reporters on Tuesday.
As the sharia economy develops and the world's interest in Islamic banking grows, he added, Indonesia has to take real steps toward developing the sharia economy through integrated policies between local and central governments.
Based on BI's latest research, Indonesia has been the world's biggest operator of Islamic banking since 2013, with 17.3 million clients and involving 1,267 sharia financial service groups, 2,990 branch offices and 43,000 employees.
Despite the large potential, the penetration of sharia banking in Indonesia is quite low, with a market share of 4.61 percent in 2015. Amid slowing gross domestic product (GDP) growth, the sharia financial sector has yet to prove optimal in driving the economic growth.
BI research shows two main drivers of the Islamic economy have moved in opposite directions recently. Sharia-based financial services in the capital market have rebounded, from 1.57 percent contraction in the second half of 2014 to 3.09 percent growth in the first half of the year.
In contrast, sharia-based financial services in the banking industry saw just 9 percent growth in the first half of this year, from 13 percent in the second half of 2014.
In the same period, Islamic banks' assets grew 9 percent, its third party funds grew 7.29 percent and its lending increased 6.66 percent.
In comparison, in the second half of 2014, Islamic banks' assets, third party funds and lending grew 13 percent, 11.41 percent and 8.76 percent respectively. (ags/dan)
