Indonesia’s rapidly growing Islamic banking eyes global partners
Indonesia, is seen as a highly potential and growing market for Islamic banking and finance industry. Enjoying fast growth of an average of 34 percent during the last five years, the country’s Islamic banking and finance, better known as “iB finance”, is now eyeing partnerships with financial institutions with global coverage, to build strong grounds to become the hub of iB finance in Asia. A recent seminar on iB finance jointly organized by Bank Indonesia (BI), UK Trade and Investments, and HSBC Amanah, reveals that Indonesian iB finance continues to show strong performance. The business volume has reached over US$7.4 billion, though it only accounts for a 2.7 percent share of the national banking industry.
In his opening address at the seminar titled “Sharing Experiences of Indonesia-UK in Developing Islamic Finance”, BI deputy governor Muliaman Hadad said the central bank had developed the Islamic banking sector to support a sustainable economy and social prosperity, by promoting a market-based system as well as prudent banking practices. The Islamic banks are encouraged to always improve their performance and service while maintaining compliance to sharia principles.
Indonesia is indeed a big and potential market for the iB industry, but it has not been fully developed. Therefore, Indonesia needs to learn from successful partners, to build resources and expertise to be able to expand in the business. London is a world leader in Islamic finance and we can share significant future growth in this area by working together to develop the infrastructure — both financial and physical — required by Indonesia.
On the other side, Indonesia as the largest Islamic market in the world has unique strengths to offer the international finance community. Indonesia has developed equal, strategic partnerships on iB finance with other organizations, including with Asia Pacific Rural and Agricultural Countries (APRAC), which has appointed Bank Indonesia as the Center of Excellence for Islamic Banking, and Asia-Middle East Dialogue (AMED) for training providers of Islamic finance. In efforts of bringing the Indonesia-UK business ties to the next level, BI’s sharia banking director Mulya Effendi Siregar emphasized the importance of sharing common interests between regulators, players and stakeholders of the sharia banking industry of both countries.
The basic principle of investing in Sharia-compliant based on the fact that when they have no influence, which is funding that exploit is compatible. This means you can not receive or pay interest on loans money.it rational international financial institutions continue to grow, taking advantage of market opportunities in Islamic banking despite the financial crisis.
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