Islamic Bank profits up by nearly 70% : Report

Islamic Bank profits up by nearly 70% : Report

JAKARTA (JP): Bank Muamalat Indonesia, Indonesia's first Islamic bank, reported a nearly 70 percent increase in its profits, to Rp 6.02 billion (US$2.8 million) last year from Rp 3.71 billion in 1993.

The bank's president Zainulbahar Noor said yesterday that the substantial increase in the bank's profits was largely due to the sharp increase in its revenues from operations.

"The income from revenue-sharing businesses alone surged to Rp 27.80 billion last year from Rp 17.97 billion in 1993," Zainulbahar said in a hearing with the Banking, Insurance and Trade Commission of the House of Representatives.

The bank's problem loans, comprising of non-performing, doubtful and bad loans, amounted to 1.35 percent of its outstanding loans of about Rp 190.29 billion last year, he said.

"The bad loans represented only 0.56 percent of outstanding credits," he said.

Bank Muamalat Indonesia, which bases its operations on the Islamic banking principles, provides no interest for its clients but instead offers them a profit sharing arrangement.

However, Zainulbahar said the bank, being a unique bank, often faces difficulties in raising funds from the public as well as in channeling them as loans.

The bank was established in May 1992 to serve Moslems who consider that taking or paying interest in banking transactions prohibited.

Zainulbahar said the bank, which at present has four branches, will continue to expand its operational network to improve its market shares in Indonesia's banking industry.

"We also help the establishment of secondary Islamic banks to support the bank's operations at district levels," he said, adding that the increase in the number of secondary Islamic banks will make the transactions faster and more efficient.

According to the unaudited 1994 financial statement, ended in December, the bank's total assets as of last December reached Rp 245.82 billion ($113.95 million), an increase of nearly 50 percent form Rp 167.02 billion as of the end of 1993.

The bank, which is majority owned by the public, recorded a capital adequacy ratio of 41.9 percent in December last year, far above Bank Indonesia's minimum requirement of eight percent, with the loan to deposit ratio amounting to 80.90 percent, lower than the minimum 110 percent requirement.

In the same period, the bank's rate of return on asset was recorded at 2.44 percent and rate of return on equity at 5.78 percent, Zainulbahar said. (hen)