MICRO FINANCE - Ministry has high hopes for sharia microfinancing

The government forecasts a rapid growth in assets managed by Indonesian sharia-based microfinancing institutions, or baitul maal wat tamwil (BMTs), on the back of rising public trust, a minister said.

Speaking at the BMT Summit last week, Cooperatives and Small and Medium Enterprises Minister Syariefuddin Hasan said popular awareness of the benefits of sharia-based microfinancing had grown rapidly after the Asian financial crisis in the late 1990s.

“[BMTs] offer fairer financing schemes because all its obligations are arranged purely based on a profit-and-loss sharing basis,” Syarief said.

According to the ministry, there are presently 3,307 BMTs in Indonesia with assets of Rp 3.6 trillion (US$403.2 million). BMT serve 2.5 million of the nation’s 39 million small and medium enterprises (SMEs) and control about 6 percent of total SME credit, Syarief said.

Syarief said many BMTs had started business with less than Rp 50 million in assets and fewer than 500 customers. Many of those companies now managed assets worth more than Rp 10 billion and served more than 3,000 customers each, he said.

BMT Center chairman Juliarso, said Friday that Islamic microfinancing institutions had developed dramatically, gaining momentum after the 1997-1998 Asian financial downturn forced the closure of several private banks.

Juliarso said that there were 4,000 BMTs serving at least 3 million people currently operating in Indonesia.

“They have a tremendous ability to collect public funds since most of their members and customers are micro-scale business players usually excluded by the banking sector,” he told journalists.

Since the BMT Center’s creation in 2005, its member microfinancing institutions have grown to manage Rp 1.6 trillion in assets as of the end of 2009, up 60 percent from Rp 1 trillion in the same period of the previous year. The assets included about 50 percent of total Islamic microfinancing institution assets that reached more than Rp 3 trillion.

Islamic microfinancing institution, he said, have strengthened people’s readiness for emergencies and calamities by increasing personal savings.

“Their good financing-to-deposit ratios [FDR], which have almost reached 100 percent, show that they can fully channel funds collected from members and customers,” Juliarso said. (ebf)

Source : http://www.thejakartapost.com/news/2010/10/25/ministry-has-high-hopes-sharia-microfinancing.html  - Oct 25, 2010