Syariah Banking Sector in Indonesia grows at 40 percent
May 7, 2012
Indonesia's syariah banking sector has been growing 40.2 per cent annually over the last five years, outpacing conventional banking's annual growth of 16.7 per cent over the same period.
Halim Alamsyah, deputy governor of the central bank, Bank Indonesia, expressed confidence that syariah banking would comprise 15 to 20 per cent of the country's banking industry in 10 years, from 4.1 per cent currently.
"We are confident syariah finance will stimulate economic growth to a higher level and enhance the stability of the financial system," he said at the opening of the second Bank Indonesia International Seminar on Islamic Banking in Bandung Monday.
The country's syariah finance assets as of 2011 totalled Rp214 trillion (about US$23.8 billion), comprising 69.5 per cent syariah banking assets and 18.7 per cent sukuk (Islamic bonds).
Indonesia has 11 syariah-based commercial banks, 24 syariah bank business units and 155 syariah-compliant rural banks (Bank Perkreditan Rakyat) with total assets of Rp152.3 trillion (about US$16.6 billion).
Halim said Bank Indonesia is very serious in its efforts to expand the syariah finance system, especially syariah banking, and is confident that it could contribute greatly to economic growth, financial system stability and social well-being.
Syariah banking has a connection with the real sector and its effects can be clearly seen in economic growth, besides reducing the impact of speculative risks in the finance sector as its products are transparent and more able to withstand a financial crisis, he said.
Syariah finance also ensures fairer profit and income for certain groups like fund owners, borrowers and banks, he added.
Halim said more efforts are needed to raise syariah finance's contribution to the global financial market from the present 0.6 per cent.