The Jakarta Post
The Financial Services Authority (OJK) is encouraging sharia-compliant lenders to improve their standard of service to increase their competitiveness alongside conventional banks that have greater experience.
Citing a 2008 Bank Indonesia (BI) survey, OJK sharia banking head Ahmad Buchori said customers were mostly concerned about the benefits offered by the lenders when choosing who to bank with.
'Customers take into account a bank's service excellence so we encourage sharia banks to offer good products that are modern and comprehensive ' equal to those offered by conventional lenders' he told reporters recently.
The 2008 survey also shows that sharia lenders' use of verses from the Koran to market their products is not effective despite the fact that more than 80 percent of Indonesians are Muslim, he added.
The central bank conducted the survey to find out the public's motivations when picking sharia banking. Many said they picked sharia lenders because interest rates were haram (not allowed) according to Islam. Others said they were just following the example of influential people they knew or that they were required to open sharia accounts by their employers.
Some respondents said they would only ever choose conventional banking but most of those surveyed said they would choose whichever bank gave them the most benefits.
These public opinions explain why there was no massive funds withdrawal from conventional banks when the ulema council declared bank interest haram, he added.
In addition, OJK deputy commissioner Mulya E. Siregar said without service excellence, sharia banks could not compete against conventional ones even though Indonesia was the most populous Muslim-majority country in the world.
'Also, we just started sharia banking in 1992 when Bank Muamalat was established, compared to in 1983 in Malaysia,' said Mulya, who deals with banking supervision.
Bank Muamalat retail-banking director Purnomo B. Soetadi said the public still saw sharia financial services as old-school, having limited services and lagging behind conventional lenders.
'We launched a mobile-banking service so that people could see that banking with us was as convenient as [banking] with conventional lenders,' he said.
The mobile service, which works together with a smartphone app, targets young customers.
Mulya said it would take some time to develop the industry amid a lack of regulation and coordination of regulators due to the bottom-up approach in Indonesia's sharia financial services industry. However, he expressed hope that the establishment of the National Sharia Financial Committee (KNKS), the presidential regulation for which is in deliberation now, would strengthen the country's sharia financial industry.
OJK data shows that the sharia financial industry accounted for just 4.87 percent of the total market last year, down a fraction from 4.89 percent in 2014. This year, the OJK is aiming for that figure to become 5 percent.
The OJK's efforts will involve holding a Sharia Financial Fair (KSF) in several cities nationwide. The first event will be held in Jakarta from March 3 to 6 at the Gandaria City shopping mall in South Jakarta and will feature 16 sharia banks, 10 sharia stock-market institutions and 10 non-bank sharia financial institutions.
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