www.thejakartaglobe.com - The country’s central bank will soon issue a regulation requiring Shariah banks to toughen down payments on housing and automotive loans, a deputy governor said on Sunday.
The requirement will be similar
to the implementation of the loan-to-value level applied to
conventional lenders for housing and vehicle loans issued on March 15
and took effect on June 15.
Under the new regulation, down
payments of 25 percent for two-wheeled vehicles are required and 30
percent for four-wheeled vehicles. There were no rules before, but
sellers often asked for about 15 percent. Loans typically account for 70
percent of car purchases in Indonesia.
Shariah lenders were excluded from the regulation as in Islamic finance, lending does not require down payments. (source)
Halim Alamsyah, a deputy governor at Bank Indonesia, said on Sunday
that the first installment of Islamic loans for the automotive sector
would be regulated.
“We have decided that the first installment of Shariah credit for goods without down payments will be regulated,” he said.
did not specify the down payment size, despite saying the upcoming
regulation was a precaution against a potential increase in
non-performing loans amid the ongoing threat of global financial crisis.
Bank Indonesia has sent signals to the market that it is
cautious that credit expansion could grow too quickly in the future and
may exceed local lenders’ financing capacity.
The bank was
worried of a bubble forming in the sector. Shariah banks comply with
Islamic requirements, such as banning interest payments, providing no
financing for alcohol and sharing profit and risks with customers.
Bank Indonesia did not include Shariah lenders in the down-payment
regulation, many banks are bolstering their Shariah financing arms to
avoid it as much as possible, exploiting a loophole in the rules.
LTV and down-payment regulation [on Shariah lenders] needs to be made
effective soon. More meetings, however, are still needed,” Halim said on
Automotive retailers have posted record car sales for
July despite the introduction a month earlier of new rules requiring
purchasers to make higher down payments, industry data show.
sales in July hit 103,219 units, beating the previous monthly sales
record of 101,743 units in June last year, data from the Association of
Indonesian Automotive Manufacturers (Gaikindo) showed.
figure was 16 percent higher than that for the same month in 2011 when
89,056 vehicles were sold. The latest figure brought total sales for
this year to 638,264 units, up 26 percent from the same January-July
period in 2011.
Gaikindo chairman Sudirman Maman Rusdi said the
increase in sales last month was due to customers anticipating Idul
Fitri, which marks the end of the Muslim fasting month.
sales in Indonesia are forecast to reach 875,000 units this year,
similar to the figure last year but well below the original target of 1
Additional reporting from Antara
Source: http://www.thejakartaglobe.com/business/shariah-included-in-indonesian-bank-rule/537844 - Aug 13, 2012