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Jakarta Post

Other challenges of sharia banking in Indonesia

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Jakarta   /   Fri, December 27, 2019   /  08:21 am
Other challenges of sharia banking in Indonesia Money counts: A teller counts money at Mandiri Sharia Bank branch office in Menteng, Central Jakarta. Sharia banks face a lack of risk culture in competing with conventional banks. (Antara/Audy Alwi)

The case of Bank Muamalat that failed to meet its minimum capital requirement of 12 percent reveals several structural issues eroding sharia banks in Indonesia. In my previous article, "Challenges of sharia banking in Indonesia", in The Jakarta Post, on Nov. 25, I observed that the most detrimental challenge faced by sharia banks is the lack of a risk culture. In addition to this issue, sharia banks also need to improve their competitiveness to keep up with conventional banks. This can be achieved mainly through improvements in business efficiency and a focus on well-known business segments. First, sharia banks need to improve their business efficiency. In September, sharia banks’ return on assets (ROA) and net operating margin (NOM) stood at 1.66 and 1.84 percent, respectively. Meanwhile, conventional banks’ ROA and net interest margin (NIM) stood ...

Disclaimer: The opinions expressed in this article are those of the author and do not reflect the official stance of The Jakarta Post.