The global economic recovery was getting stronger at the end of 2009, it has shown the optimism condition for the economic development of Indonesia in 2010. Although Greece faced an economic crisis in second quarter of 2010, Indonesia, with inflation rate reached 6.96 in 2010, the GDP Growth has returned to 6.10, from 4.58 in 2009. Then, this situation did not significantly influence the condition of Indonesia islamic banking. (source)
The development of islamic banking (Islamic commercial bank and Islamic business unit) has been influenced by the competition between islamic banking and conventional banking. If we compare the Third Party Funds (TPF), the TPF of islamic banking contributed only 3% of the total 2,500 trillion IDR. Then, in terms of financing, islamic banking has only 4% market share from the total financing 1,800 trillion IDR.Although islamic banking still has a very small market share, Indonesia islamic banking has a significant growth in recent years. The Cumulative Annual Growth Rate (CAGR) of TPF in the last 5 years (2005-2010) has increased by 37% with estimated value was 76 trillion IDR in FY-2010. The highest growth has occurred from 2009 to 2010 with 45% growth. (sources: Central Bank of Indonesia).
The reason behind was because of the Act no. 42 of 2009 governing the taxation that has been more conducive for islamic banking, since it has been enforced effectively on April 1, 2010. Another reason was the development of products and services that were more varied, without compromising the islamic principles (Source: ib.eramuslim.com).This growth is expected to continue in 2011, which until Q2-2011, the value of TPF has reached 87 trillion IDR. From the consumers perspective, islamic banking development in Indonesia was still influenced by the lack of education in Islamic economics and finance, although 85% of Indonesia's population is Muslim. From the total TPF (conventional banking and islamic banking) which was estimated by 2,500 trillion IDR, islamic banking contributed only 3.45%. In other words, this value can be estimated to reach 87 trillion IDR in Q2-2011.
In terms of -Number of Account Holders, it has been estimated that the account holder has reached 8 million account holders in Q2-2011, which has experienced 18% growth compared to FY-2010. In addition, this growth was resulted from government support in refining the Positioning-Differentiation-Branding (PDB), which refers to the Grand Strategy of Islamic Banking Market Development 2009-2012.
Therefore, it is a very big opportunity for the development of islamic banking, since the number of Indonesia's population with 18 years old or more, was estimated 70% of the total population.
II. COMPETITIVE LANDSCAPE
The competition of islamic banking players were more interesting and attractive, since the number of islamic banks has increased in recent years, and the foreign banks has entranced to the market of islamic banking in Indonesia.
Currently, the market leader of Indonesia islamic bank is Bank Syariah Mandiri (BSM), which is a subsidiary of Bank Mandiri, and Muamalat Bank in the second position, which is the first islamic bank in Indonesia.BSM is able to lead the market with a share of TPF by 38%, followed by Muamalat with a 24% share.
BSM can be a market leader; it was because of the support from the parent company (Mandiri Bank), with wide sales channels in all provinces in Indonesia. Moreover, several buildings of Mandiri Bank have been used as BSMs branches, in order to reach consumer broader. (Source: Investordaily)
Meanwhile, Muamalat Bank can be in second position was because of the first Islamic bank in Indonesia, which already has many loyal customers. In other words, Muamalat Bank is the oldest bank since its establishment in 1992, with loyal customers who made Muamalat Bank has a second position in the competitive landscape of islamic banks in Indonesia.
III. PRODUCT ANALYSIS
III.A. THIRD PARTY FUNDS
In this section, we can analyze the financial condition of the current islamic banking by observing the TPF and financing. In Q2-2011, the largest TPF has been contributed by Mudharabah Time Deposits, which reached 52 Trillion IDR. However, it has been collected from only 185,000 accounts. This means that the average TPF of Mudharabah Time Deposits per account is amounted to 281 Million IDR. It described that the reliance of islamic banking was skew to the captive market. Hence, the liquidity risk factor becomes a threat for islamic banking in Indonesia, especially when the economic conditions experienced instability.
Then the second-largest product is the Saving Deposits with Wadiah and Mudharabah contract. The TPF that has been collected from 6.7 million accounts were amounted to 25 trillion IDR.Thus, the average TPF of Saving Deposits was amounted to 3.8 million IDR. This indicates that the islamic banking still has a great opportunity to increase the TPF, from 6.7 million such accounts, by improving more innovative products.
The last TPF is Demand Deposits with Wadiah contract. The TPF has been collected from only 130,000 accounts, and islamic banking got 9 trillion IDR. The average TPF per account was amounted to 72 million IDR. When we compared to the two previous products, this product can be categorized as low risk TPF.
III.B. FINANCING
In this section, we will discuss the financing of islamic banking in Indonesia. By looking at the following chart, we can see one financing contract that has a good market penetration and one contract that was in an extreme position. Murabahah is a contract financing that currently can be said as a contract with high market penetration. With 660.000 accounts, islamic bank can finance their 46 trillion IDR funds through murabahah. In other words, the average financing per account was 69 million IDR.
Then, the contract that was in the extreme position is musyarakah. This musyarakah financing has a possibility to threat the islamic bank, with its high risk financing. It can be seen from the value of financing, which has reached 16 trillion IDR, from only 26,000 accounts. Therefore, the average financing per account was amounted to 626 million IDR.
IV. FINANCING SECTOR
Islamic banking is closely associated with the distribution of wealth to improve their standard of living adequate for the large community. Hence, the distribution of financing from islamic banks also need to be analyzed further. According to the data from Bank Indonesia, the five largest areas that absorb islamic financing are DKI Jakarta, West Java, East Java, Central Java, and North Sumatra.
DKI Jakarta was a largest financing opportunities for Islamic banks, that was amounted to 32 trillion IDR in Q2-2011. It was followed by West Java with 9 trillion IDR, East Java with 7 trillion IRD, Central Java with 4.5 trillion IDR, and North Sumatera with 4 trillion IDR.
The unique sectors are derived from Central Java and North Sumatera. Central Java was known as a tourism province, has resulted to the high demand of financing support for -Trade, Restaurant, and Hotels Sectors. For North Sumatera, Agriculture and Forestry is one of the largest sector that needs financing support from islamic bank, to develop their province.
About the Author
Rhesa Yogaswara, S.Si, MM, CIFP Candidate Islamic Business & Finance - Researcher & Consultant (rhesa@rhesayogaswara.co.cc)
Source : http://www.islamica-me.com/article.asp?cntnt=772 - Jan 16, 2012
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