PT Bank Muamalat Indonesia, the country’s oldest Shariah- compliant lender, said consumer loans jumped 40 percent in 2010 after taking part in exhibitions last year. PT BCA Syariah, the Islamic unit of Indonesia’s biggest financial services company by market value, offers a rate of 11 percent on a five-year car loan. PT Bank Syariah Mandiri also attends the shows.Tapping Indonesia’s burgeoning consumer loan demand will help the country’s Islamic finance industry catch up neighboring Malaysia, the world’s largest sukuk issuer. Shariah banking assets in Indonesia, home to the world’s biggest Muslim population, make up 3.2 percent of the total, compared with about 20 percent in Malaysia, after the government lagged behind in changing tax laws and offering incentives to spur growth. (source)
“The retail market is where banks are focusing as the margins are good and it is profitable,” Adrian Gunadi, the head of retail banking at Bank Muamalat in Jakarta, said in a Jan. 22 interview. “The sukuk market will take time to pick up because of regulatory challenges.”
Islamic banking assets in Indonesia, Southeast Asia’s biggest economy, grew to 100.2 trillion rupiah ($11 billion) as of Nov. 30 from 67 trillion rupiah at the end of 2009, Mulya Siregar, the head of Shariah banking at Bank Indonesia, said in an interview on Jan. 20. The central bank aims to increase the amount to 130 trillion rupiah this year, he said. Banks that offer Shariah-compliant services have to look for “creative ways” to grow their businesses, Siregar said.
Car Sales Jump
Consumer financing made up 32.4 percent of the total of 65.9 trillion rupiah of Shariah-compliant loans disbursed in the first 11 months of last year, according to central bank data.
Automotive sales surged 57 percent last year and Indonesia may overtake Thailand as Southeast Asia’s biggest car market by 2014, said Jody Jodjana, chief executive officer at Toyota distributor Auto 2000, Indonesia’s largest car dealer.
Indonesia passed a law in July 2008 to allow financial institutions to offer services that comply with Shariah principles, 25 years after Malaysia. Indonesia now has 11 Islamic banks.
Sales of sukuk, which pay asset returns to comply with Islam’s ban on interest, rose 56 percent in Indonesia to 26.2 trillion rupiah in 2010, according to data compiled by Bloomberg. Global sales fell 15 percent to $17.1 billion last year.
Sale Next Month
Indonesia will sell three-year Islamic bonds to individual investors next month, Rahmat Waluyanto, director general at the finance ministry’s debt management office, said on Jan. 14.
The government failed to raise the targeted amount in 12 consecutive local-currency sukuk auctions in 2010 as investors demanded higher yields than it was willing to offer, saying the debt was riskier to hold because of a lack of secondary-market trading volume.
“Expanding our retail sector through consumer financing will help banks to grow, and when banks are more profitable they will demand more sukuk to park their funds,” said Soegiarto Pribadi, the Jakarta-based head of business at BCA Syariah.
Global Shariah-compliant bonds returned 12.8 percent last year, the HSBC/NASDAQ Dubai US Dollar Sukuk Index shows. Debt in emerging markets gained 12.2 percent, according to JPMorgan Chase & Co.’s EMBI Global Diversified Index
.
The difference between the average yield for emerging- market sukuk and the London interbank offered rate narrowed three basis points this month to 287, according to the HSBC/NASDAQ Dubai US Dollar Sukuk Index.
Growing Economy
The yield on Malaysia’s 3.928 percent dollar sukuk due June 2015 rose one basis point to 2.87 percent today, according to prices provided by Royal Bank of Scotland Group. The extra yield investors demand to hold Dubai’s government sukuk rather than Malaysia’s widened two basis points today to 341, data compiled by Bloomberg show.
Bank Indonesia forecasts the economy will expand as much as 6.5 percent this year from an estimated 6 percent in 2010.
“The Indonesian economy is expanding and gross domestic product per capita has surpassed $3,000,” said Winang Budoyo, an economist at PT Bank CIMB Niaga in Jakarta. “Demand for non- food items, including cars, will be trending up.”
Shariah-compliant auto financing in Indonesia is offered using a murabahah contract where the bank buys the car from the dealer and sells it at a mark-up, roughly equivalent to current interest rates, to the customer.
Financing Rates
Car financing currently makes up 35 percent of Bank Muamalat’s total consumer loans, up from only 20 percent in 2009, Gunadi said. “Car sales are rising, and that has helped banks increase consumer loans,” he said.
BCA Syariah, which started operations nine months ago, set up its first motor show booth in November, said Pribadi. The company offers five-year car loans, compared with three-year non-Shariah-compliant loans offered by parent, PT Bank Central Asia.
“We offer a slightly higher rate of 11 percent, compared with the 10.5 percent that BCA offers, but we offer a longer tenor and during the road show we shortened approval to four days from the normal five days,” he said. “Before the road show we had no customers applying for our car loans. Now, 15 percent of BCA Syariah’s consumer loans are for cars.”
To contact the reporters on this story: Suryani Omar in Jakarta at somar6@bloomberg.net; Soraya Permatasari in Kuala Lumpur at soraya@bloomberg.net.
To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net
Source : http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aRnzCyiWq.i8 - Jan 25, 2011
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