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Transcript of OUTLINE - iifm.?s Islamic Banking & Finance...  Basyarnas/Court Islamic Banking...





Edy Setiadi Executive Director, Islamic Banking Department, Bank Indonesia

IIFM Industry Seminar on Islamic Capital and Money Market

Bahrain, December 3th 2013


Indonesias Economic and Financial


Indonesia Islamic Banking Policy and


Indonesias Sovereign Sukuk

Indonesian Islamic Finance : Expecting

for the future


Indonesian Economy Strong & Stable Growth

Global economy recorded lower growth in 2012 compared to the previous year. However, the Indonesian economy recorded a robust growth (6.2%) and inflation remained well under control at a low level (4.3%). The economic resilience has been supported by macroeconomic and financial system stability as well as domestic demand.

However, Indonesia's economic growth in 2013 is revised down to 5.5-5.9% from 5.8%-6.2% previously as part of rebalancing the domestic economy with the global economic downturn and the impact of rising inflation. Looking forward, Bank Indonesia has also revised its economic growth projection for 2014 down from 6.0-6.4% previously to 5.8%-6.2% in harmony with the weaker global economic outlook.

GDP Growth Inflation Rate

Domestic Demand

Indonesia now the 16th largest economies in the world To be the 10th largest economies in the world by

2025 (Government Projection/MP3EI)

Indonesias competitive advantage increased by World Economic Forum (WEF) from 50 into 38 (2013)

Natural resources available major exporter of natural gas, worlds second largest of coal exporter, home to 40% of

geothermal worlds resources, and one of the world's largest exporter of crude palm oil

Indonesia has relatively stable sovereign rating: S&P affirmed Indonesias sovereign credit rating, at

BB+ level for long-term and B level for short-term and revised its outlook to stable from positive (May

2, 2013), Fitch Ratings affirmed Indonesia's sovereign credit rating at BBB- level with stable outlook

(November 21, 2012) and Moodys Investors Service upgraded Republic of Indonesias foreign and

local-currency bond ratings to Baa3 with stable outlook (January 18, 2012)

Economic growth relatively good compare to other emerging economies until Q2-2013 (5,81%) ,

while Russia (1,2%), India (4,4%), Brazil (3,28%), South Africa Afsel (2%) 2nd best after Cina

The 4th largest country in the world in term population ( 250 mio. with 85% Moslems) after China,

India, USA, with GDP per capita USD 3,500 and international reserves USD 92 billion (Aug 2013)

Indonesias economies still one of the best among emerging


International Reserve


Indonesian Islamic Banking: Global Picture

Year 2013 Picture (Aug2013) :

Indonesia has 11 full fledge

Islamic banks, 23 Islamic banking unit, and 160 Islamic rural banks. Office network has been rapidly increasing up to 16.7% yoy despite slow growth in number of banks.

Due to high GDP growth, Islamic Bank (BUS+UUS) assets grow as fast as 38.40% yoy due to higher financing demand. Total Asset is amounted to USD 22.4 billion with Financing up to USD17.45 billion.

Islamic Banks resilience is maintained as CAR keeps stable on 14.71% and ROA preserves at 2.01%.

FDR of Islamic banks is around to 102%, while NPF net reach 2.00%.

Islamic Banking Network

Islamic Banking Growth

Islamic Banking CAR

Islamic Banking Performance

Indonesian Islamic Finance : Global Picture

Corporate Sukuk

Outstanding USD0.81 billion

Government Sukuk

Outstanding USD9.88 billion

Takaful Asset

Outstanding USD0.69 billion

Islamic Mutual Fund

Outstanding USD1.31 billion

Financing Company

Outstanding USD2.26 billion

Government sukuk outstanding USD 16.7 billion (Incl. Non tradable Hajj Sukuk USD 3.15 billion) (Sept2013)

Year 2013 Picture (Q 2-2013)

With its impressive growth rate, Indonesia Islamic Banking industry has even extended its influence to other Islamic financial sectors

Islamic stock market capitalization value reach USD 275.14 billion (58% tot.market capitalization) with 307 stock.

Corporate sukuk outstanding reach USD 0.75 billion (3.53% total corporate bond)

Islamic mutual fund NAV reach USD 0.94 billion (3.7% total)

Takaful asset reach USD 1.497 billion (Q 1, 2013)

Islamic Financing company reach USD 2.87 billion (May 2013)


Indonesian Islamic Financial Infrastructure (until 30 Dec2013)

National Sharia Board




Islamic Banking


Sharia Central Bank


Islamic Money Market

(Sukuk) Market

Sharia Supervisory



Islamic Financing Companies/Islamic Insurance /

Takaful/Islamic Capital Market/BMT

Indonesia Deposit



(Protect only Banks

Depositor) Islamic Capital Market


- Public

- Government

- Foreign (Limited)

Full Fledged iB

iB Unit/UUS

Islamic Rural Bank

BMT Real


Medium &



Micro & Small


Each sector regulator and supervisor need to establish intensive cross-sector coordination in order to create the sinergy of Islamic financial system.

Islamic Bank (iB)

Non Bank

Macroprudential Policies

MOF (Ministry of Finance)

Sovereign Sukuk Issuer

In order to narrow the supervisory gap and the variation in regulations, the implementation of cross-border (home-host) supervision is important. Regarding to this matter:

BI has enhanced cooperation between supervisory authorities, has actively involved in supervisory colleagues forum, has conducted regular home-host supervisory board meeting and has issued policy related to consolidated and cross-border supervision.

Bank Indonesia is on the track to fulfill the Basel requirements.

BI supports the FSAP implementation. The FSAP assessment results for Indonesia is encouraging whereas the banking sector, payment systems, and monetary policy is considered to have good adherence to international standards.

As Indonesia is a member of G-20 countries, BI has performed intensive monitoring on all regulatory reforms agenda set by Financial Stability Board.

BI has involved internationally to support islamic finance development through memberships in several international islamic organizations such as IFSB, IIFM and IILM and adopt the regulations standards set by international standard setter, such as IFSB, and AAOIFI.

From Cross-Sector to Cross Border Integration

In addition to effectiveness of cross-sector integration, the Islamic finance industry should also consider to strengthen the global interconnectivity. NEXT STEP


Indonesian Islamic Banks Policy Direction and Prospect

Maintaining Strong Growth

Innovation of genuine sharia Products and services : support the people need ,more broaden customer base and more productive activities

Strategic alliance and strong infrastructure support : i.e. Government support, Optimization synergy with iBs holding/Grup companies.

More professionals & qualified HRD

Intensified Education and Promotion

This strategy will attract more broaden

customers to use services from islamic

banks, and in the end this will have an

impact to strong growth

With Rp.228,8 trilion of iB (BUS+UUS+BPRS) asset in Aug13 (eq US$ 23 billion) we only account for 4.9% of Indonesian banking industry, but annual growth in last 5 yrs 40% which double from global Islamic finance growth


BI Policy: Emphasis Financing in Productive Sector and Financial


1. Bank Indonesia in its capacity will facilitate link and match program between islamic banks and industry which is prioritized by the government, such as infrastructure, agriculture, as well as others.

2. Focus Group Discussions and business match will be the main forum to match supply and demand between banks and productive sectors.

3. Linkage program and FINANCIAL INCLUSION program (i.e. branchless banking) for SMEs and productive sector

In return, this will help promoting resilience of islamic banks, as well as generate higher asset growth, so that asset share of islamic banks compared to that of in conventional will gradually increase projection of 15-20% in the next decade

BI Policy: Support Adequate iBs Liquidity


BI will support efforts to increase islamic money market transaction through enhancement the features of Interbank Mudharabah Certificate (SIMA) as underlying transactions,

We are introducing sharia commodity trading scheme to add islamic money market instruments, and to increase the role of money broker in islamic money market transaction.

Providing complete financial services to client, islamic banks can also provide financial services in the form of foreign currency , such as import payments or other foreign currency liabilities m