Indonesia prays for Islamic banking boom

AFP, JAKARTA: Indonesian teacher Nina Ramadhaniah hopes for “blessings from Allah” by opening a sharia bank account—the sort of pious customer the world’s most-populous Muslim-majority country is praying for as it launches an Islamic finance drive. Indonesia, Southeast Asia’s biggest economy, has a Muslim population of around 225 million but this huge number of faithful has not translated into success for sharia banks, institutions required to do business in line with Islamic principles. Now regulators have launched a plan aimed at growing the sector, which currently accounts for less than five per cent of banking assets, compared to a quarter in neighbouring, more developed Muslim-majority Malaysia and around half in Saudi Arabia. Authorities believe it is a good moment, with many Indonesians getting wealthier after years of strong economic growth and an increasing trend towards piety across broad sections of society.
Many of those without bank accounts, estimated at about 40 per cent of the population, are soon expected to open one.
“The situation is an opportunity for the Islamic banking business to get bigger,” said Nasirwan Ilyas, a senior official from the Islamic banking division of the Financial Services Authority (OJK).
The OJK is spearheading the drive, and unveiled a five-year roadmap earlier this
year that included plans to educate the public about sharia lenders and the establishment of an Islamic finance committee to better manage the sector.
Key features of sharia banking include
the prohibition of interest on loans or
customer deposits, and a ban on investing in “non-Islamic” businesses, such as those involving pork or alcohol.
For teacher Ramadhaniah, who has an account with Indonesia’s biggest Islamic lender, Bank Syariah Mandiri, the ban on interest is a key attraction. “Charging interest is haram (against Islam), ill-gotten gains that will not bring me any blessings from Allah,” the 44-year-old told AFP. “I don’t want to live in sin.”
Sharia accounts often work on a “profit-and-loss sharing” model, meaning customers get a windfall when the bank does well but can lose out when it does badly.
There are obvious disadvantages. Sharia lenders generally offer lower returns on investments and their modest size often means they provide fewer services than larger, conventional peers—many shops are not equipped to accept their debit cards.

 

Indonesia prays for Islamic banking boom

AFP, JAKARTA: Indonesian teacher Nina Ramadhaniah hopes for blessings from Allah by opening a sharia bank accountthe sort of pious customer the worlds most-populous Muslim-majority country is praying for as it launches an Islamic finance drive. Indonesia, Southeast Asias biggest economy, has a Muslim population of around 225 million but this huge number of faithful has not translated into success for sharia banks, institutions required to do business in line with Islamic principles. Now regulators have launched a plan aimed at growing the sector, which currently accounts for less than five per cent of banking assets, compared to a quarter in neighbouring, more developed Muslim-majority Malaysia and around half in Saudi Arabia. Authorities believe it is a good moment, with many Indonesians getting wealthier after years of strong economic growth and an increasing trend towards piety across broad sections of society. Many of those without bank accounts, estimated at about 40 per cent of the population, are soon expected to open one. The situation is an opportunity for the Islamic banking business to get bigger, said Nasirwan Ilyas, a senior official from the Islamic banking division of the Financial Services Authority (OJK). The OJK is spearheading the drive, and unveiled a five-year roadmap earlier this year that included plans to educate the public about sharia lenders and the establishment of an Islamic finance committee to better manage the sector. Key features of sharia banking include the prohibition of interest on loans or customer deposits, and a ban on investing in non-Islamic businesses, such as those involving pork or alcohol. For teacher Ramadhaniah, who has an account with Indonesias biggest Islamic lender, Bank Syariah Mandiri, the ban on interest is a key attraction. Charging interest is haram (against Islam), ill-gotten gains that will not bring me any blessings from Allah, the 44-year-old told AFP. I dont want to live in sin. Sharia accounts often work on a profit-and-loss sharing model, meaning customers get a windfall when the bank does well but can lose out when it does badly. There are obvious disadvantages. Sharia lenders generally offer lower returns on investments and their modest size often means they provide fewer services than larger, conventional peersmany shops are not equipped to accept their debit cards.