Published: 13:29 November 23,
2014
Sydney/Jakarta: Indonesia’s
regulator has issued revised Islamic banking rules covering asset quality and
capital adequacy to help clarify market practices, while industry growth has
now dropped to single-digits.
Authorities want to encourage a
wider product range to help Islamic banks grab a bigger share of the Indonesian
market, a sector which remains behind more mature markets in Malaysia and the
Middle East.
Indonesia’s financial services
authority, Otoritas Jasa Keuangan (OJK), announced the move on Wednesday as
part of a package of 20 new rules, which range from corporate governance to
microfinance.
Indonesia has the world’s biggest
Muslim population but its Islamic finance market only holds a 4.5 per cent of
total banking assets in the country as of September, the latest central bank
data showed.
Indonesia merupakan Negara dengan
populasi terbesar muslim, tetapi pasar keuangan syariah hanya memegang 4,5
persen dari total asset perbankan di Negara pada September, data terbaru BI
Authorities want Islamic banks to hold at
least 15 per cent of the market by 2023, but the sector’s growth is stalling.
As of September, there were 11 full-fledged
Islamic banks and 23 Islamic business units in Indonesia with combined assets
of 244 trillion rupiah (Dh74 billion, $20.1 billion), representing a 7.2 per
cent growth year-on-year.
This remains above the 3.7 per cent growth of
conventional banks, although the OJK had projected Islamic banking assets would
grow by 14.4 per cent in 2014 under a moderate scenario, down from 24.2 per
cent in 2013 and 34.1 per cent in 2012.
Requirements
Under the revised rules, Islamic banks must
hold increasing levels of capital depending on their risk profile, with
regulators outlining four such categories.
The previous capital adequacy requirement for
Islamic banks was 8 per cent, while the highest risk profile would require such
banks to hold as much as 14 per cent.
This requirements applies only to full-fledged
Islamic banks and not to the Islamic units of conventional banks.
The rules also detail the types of
capital-boosting debt that Islamic banks can issue, which must include a loss
absorption feature that allows regulators to convert such debt into equity if a
lender faces insolvency.
Asset quality requirements address profit-sharing
financing such as mudaraba and musharaka, common equity-like contracts used in
Islamic finance.
Banks must include the proposed profit sharing
ratio in the contract, which must be calculated based on a feasibility analysis
of a customer’s business and cash flows.
The rules also address issues such as the
separation of Islamic units from conventional parents and guidance for
conventional firms that want to become Sharia-compliant ones.
Last week, the OJK signed an agreement with
the country’s national sharia board to strengthen oversight of the Islamic
finance industry, supporting a centralised approach being favoured elsewhere
around the globe.
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