The Islamic financial industry faced challenges in 2020. This year, the industry, together with conventional financial services, is expected to become a catalyst for economic recovery.
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Sharia Economy
·5 minutes read
JAKARTA, KOMPAS - The sharia financial industry has the potency to become a catalyst for economic recovery after the Covid-19 pandemic. However, relevant parties and policymakers should cooperate and issue innovative policies to maximize potential.
The chairman of the Financial Services Authority (OJK), Wimboh Santoso ,said the strength of the sharia economy as an engine of economic growth can be seen from the resilience of the Islamic financial industry throughout the pandemic in 2020. "The Islamic financial industry was able to grow and surpass the achievement of conventional financial services although the pandemic has resulted in the stagnation of economic activities, which caused monetary difficulties over the past year, "he said in a webinar titled “Outlook for Indonesia\'s Sharia Economy 2021" held in Jakarta on Tuesday (19/1/2021).
Based on OJK data, the assets of the Islamic financial services reached a total of Rp 1.77 quadrillion (US$125.30 billion) as of November, 2020, which reflected a 21.48 percent increase compared to the figure recorded at the end of 2019. This number includes assets owned by the Islamic banking industry of Rp 593.35 trillion, sharia assets in the capital market of Rp 1.06 quadrillion and the assets worth Rp 113.16 trillion owned by sharia-based non-bank financial institutions.
The Islamic banking industry also recorded positive growth throughout 2020. Last year, the funds channeled by Islamic banks grew by 9.5 percent on an annual basis, far above the growth in the conventional banks which fell by 2.41 percent in the year.
We are confident that we will be in a better position in 2021.
The positive performance of Islamic banking over the past year, Wimboh said, was supported by a fairly good capital adequacy ratio (CAR) of 21.59 percent, gross non-performing financing (NPF) ratio of 3.13 percent, and the ratio of financing to financing (FDR) of 76.35 percent
"With these indicators, we are confident that we will be in a better position in 2021. We also welcome that in the Islamic Finance Development Report 2020, Indonesia was ranked 2nd in the development of Islamic finance in the world," he said.
According to Wimboh, to maintain last year\'s positive achievements, the country’s Islamic financial industry players need to further improve cooperation so that the market share of the Islamic financial industry can be increased by about 20 percent. In July 2020, the market share of the Islamic financial services was only 9.68 percent.
Efforts to increase market share must also be supported by the improvement in inclusion and Islamic financial literacy. The market share will increase if the Islamic financial industry offers more Islamic-based products.
"All of such activities must be supported by the technology and strong human resources so that the access to Islamic financial services will be massive, extensive, cheap and accurate," said Wimboh.
Real sector recovery
Meanwhile the chief of OJK’s bank supervision department, Heru Kristi Yana, said that in the short term, the OJK would push both conventional and Islamic banks to expand their financing to help restore the real sector. The OJK has recently issued a 2020-2025 Indonesian Banking Development roadmap as a guide for banking actors to become a catalyst for economic growth. "Through this road map, banks are directed to be resilient and able to absorb reserves as a result of the ongoing credit restructuring," he said.
Meanwhile, the executive director of the National Committee for Sharia Economics and Finance (KNEKS), Ventje Rahardjo, said sharia economic development in the 2019-2024 Indonesian Sharia Economic Master Plan was focused on four sectors, which included the development of the halal industry, finance, social funds, and expansion of sharia business activities.
Meanwhile the chairman of the Project Management Office for Integration and Value Improvement of State Owned Sharia Banks, Hery Gunardi, confirmed the planned merger of three state-owned Islamic banks, namely PT Bank Syariah Mandiri , PT BNI Syariah, and PT Bank BRIsyariah Tbk into PT Bank Sharia Indonesia. The merger is expected to be completed in Feb. 1, 2021.
The merger of the three banks will form a core capital of Rp 20.4 trillion. In early 2022, Bank Syariah Indonesia\'s core capital is targeted to reach Rp 30 trillion through retained earnings and issuance of new shares.
Bank Syariah Indonesia, continued Hery, has a vision to become a global player and a major player in the global Islamic banking industry in the next three to four years. Its services will focus on the micro, small and medium business (MSME), retail, and consumer segments, combined with the ability to manage corporate customers.
Senior researcher at the Center for Sharia Economics and Business, University of Indonesia, Banjaran Surya Indrastomo, said that one of the major tasks of the Indonesian sharia banks was to attract funds from the Middle East through a number of corporate actions, such as the plan to open a branch in Dubai, United Arab Emirates. The funds can be used to support Indonesia\'s economic growth.
This article was translated by Hendarsyah Tarmizi.