BI to relax ruling to boost Islamic bank development<\/p>\n
Fitri Wulandari, The Jakarta Post, Jakarta<\/p>\n
Bank Indonesia plans to relax certain rulings that could help
\nexpand Islamic banking in this country, according to a central
\nbank official.<\/p>\n
\"Thus, services from sharia banks will be able to be enjoyed
\nwidely,\" Hatief Hadikoesoemo, the head of the Islamic banking
\nunit at Bank Indonesia, said during a press conference following
\nthe opening of a three-day international conference on Islamic
\nbanking. The conference was opened by Vice President Hamzah Haz.<\/p>\n
Under the planned changes, for instance, conventional banks
\nwishing to open an Islamic banking operation will no longer be
\nrequired to provide a separate building for the new business.<\/p>\n
Thus, the Islamic banking unit (or sharia bank) and the
\nconventional bank could share the same office, Hatief said.<\/p>\n
\"But they would have separate managements and financial
\nsystems,\" he said.<\/p>\n
With this strategy, conventional banks could easily open
\nIslamic bank branches throughout their network. Hatief did not
\nprovide further details about the planned changes to the
\nregulations.<\/p>\n
The Islamic banking system works in line with the principles
\nof Islamic sharia. While conventional banks receives interest
\nfrom borrowers, sharia banks take a part of the profits made by
\nborrowers under a profit sharing arrangement.<\/p>\n
For the past two years, Islamic banking in the country has
\nstrengthened its presence. It is not only aimed at Muslim
\nconsumers but also the wider community.<\/p>\n
At least one foreign bank -- the Hong Kong-based HSBC -- plans
\nto launch Islamic banking unit later this year.<\/p>\n
Data from the central bank shows that as of July 2003,
\nthe total assets managed by the country's sharia banks stood at
\nRp 5.6 trillion, or 0.48 percent of the total assets of the
\ncountry's banks, which amounted to Rp 1,111.68 trillion.<\/p>\n
Loans to deposit ratios are averaging 104.5 percent, double
\nthe 51.3 percent average of conventional banks. Meanwhile, the
\nnonperforming loan ratio stands at 3.9 percent, well below the
\ncentral bank's 5 percent limit.<\/p>\n
Currently, there are two dedicated Islamic banks in Indonesia,
\nseven conventional banks that also provide sharia products and 86
\nsmall rural Islamic banks.<\/p>\n
Bank Indonesia is now in the process of formulating a
\nblueprint for the development of Islamic banking in the country
\nuntil 2011, and expects the sector to have grown by 5 percent by
\nthat year.<\/p>\n
Meanwhile, Vice President Hamzah Haz said in a speech that the
\nIslamic banking industry had yet to avail of the full potential
\nof the Indonesian market.<\/p>\n
Hamzah said Indonesia represented a huge market for Islamic
\nbanks with some 40 million small entrepreneurs, 54,000 medium-
\nscale entrepreneurs and 2,000 large entrepreneurs.<\/p>\n
\"Unfortunately, Islamic financial institutions have yet to
\nfully expand their services to reach them,\" Hamzah said.<\/p>\n
The conference, titled \"Risk management, regulation and
\nsupervision to unify international regulation,\" is a
\ncollaboration undertaking between the Ministry of Finance, Bank
\nIndonesia and the Islamic Development Bank (IDB).<\/p>\n
Some 25 speakers from various international institutions such
\nas the IDB, International Monetary Fund, World Bank, and the
\nInternational Islamic Rating Agency participated in the event.<\/p>",
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"sponsor": "Okusi Associates",
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