More Islamic banks needed to promote Moslem entrepreneurs

More Islamic banks needed to promote Moslem entrepreneurs

JAKARTA (JP): Indonesia needs to set up more interest-free
Islamic banks to help promote Moslem entrepreneurs and allow them
to compete better with the powerful conglomerates, noted
economist Sri Bintang Pamungkas says.

Bintang, who is also a member of the House of Representatives
of the United Development Party (PPP) faction, accused the
government of neglecting the needs of Moslem entrepreneurs and
catering the needs of a few big businesses.

He suggested that to remedy this, the government needed to
convert up to five state banks to be ran along the Islamic
banking principles that do not charge interests on loans.

His proposal was made during a seminar organized by the
University of Attahiriyah to discuss alternative sources of funds
for Islamic activities, including for enterprises run by Moslems.

Seven government banks are among the largest in Indonesian
banking. They are BNI 1946, BDN, BBD, BRI, Bank Eksim, Bapindo
and BTN.

Bintang said some 200 conglomerates jointly account for around
80 percent of the country's gross national product.

Moslems, in contrast, play such a marginal role in the
country's economy that, even if they join forces, they will not
be able to compete against the big and powerful businesses, he
said.

"They will be like snails trying to compete against foxes," he
said.

Bintang said Moslem entrepreneurs either do not enjoy access
to state funds like the conglomerates do, or are reluctant to
avail themselves of them because they believe that interest
payments are illegal.

Chairman of the Jakarta Preacher Corps H.A. Sumargono during
the seminar said there is still a raging debate among Moslem
scholars about whether or not interest payments on loans are
haram (forbidden by religion). On the other hand, experts say
banks cannot run without charging interest on loans.

The Bank Muamalat Indonesia, founded three years ago, found a
way around this dilemma by introducing the profit sharing scheme.
It is the first Islamic bank set up in Indonesia.

Difficulties

Sumargono said that while Bank Muamalat's presence was
welcome, it has yet to reach the grassroots level of Moslems with
most of the funds going to medium and big enterprises. "When
small-scale entrepreneurs come to the bank, moreover if they wear
a sarong and Moslem cap, the bank's staff will look the other
way."

M. Syafii Antonio of the Bank Muamalat denied that there was a
policy of not helping the small entrepreneurs but he admitted
that his bank has had difficulties in channeling funds to small
companies because they are mostly incapable of managing the
money.

Syafii said his bank alone could not solve all the economic
problems of the Moslem community.

He stressed that the objective of the bank was to pave the way
for more banks operated along the Islamic profit-sharing
principles.

Bintang in his presentation proposed four schemes which can be
developed to promote the Moslem's economy. They are joint-venture
funding, muzarokah management, small and medium Business
Administration (SMBA) and profit-sharing banking system.

Joint-venture funding is a type of giving helping hands from
big companies to small and medium ones. Muzarokah is a system
allowing landowners, who are mostly poor, to own shares in
companies which use their plots for business sites.

"A clear example of this is when the people who owned plots
along Jl. MH Thamrin and Jl. Jend. Sudirman were forced to sell
their land cheaply. If the government had the political will to
defend the poor, it would have used muzarokah system by involving
them in the development of the city, so that they could also
enjoy the fruits of development," Bintang said.

SMBA is an institution to provide assistance to small and
medium business companies to find alternative funding. (11)