Islamic finance in Indonesia: Cautiously optimistic?

Rapids • Deals • News • Takaful • Asset Management • Ratings • Moves
29th April 2015 (Volume 12 Issue 17)
Against all odds An integral part of success is the hard work it takes to get there – nothing that comes easy is ever worth as much as something you have to struggle for. Achievement comes through the surmounting of obstacles, the circumvention of challenges, the beating of the odds. Islamic finance is no stranger to the role of underdog, and is still fighting its way out of its niche into the mainstream with significant structural challenges to surmount, despite its exceptional progress over the past few years. This week we take a look at one of the industry’s biggest potential game-changers, with our cover story bringing you an in-depth analysis of the challenges and opportunities facing Indonesia’s Islamic financial institutions – and what is needed to finally set the sector soaring. Our IFN reports continue the theme: with an exploration of the urgent need to focus on developing the financial sector in the UAE to avoid missed opportunities, along with a look at Russia. Our IFN correspondents bring you news from Bangladesh, Pakistan, Singapore and cover the sectors of trade finance and real estate; while our in-house analyses look at Egypt and human capital development in Islamic finance. Our special reports focus on Qatar by Amjad Hussain of K&L Gates and on debt by Hussain Kureshi of Millenia Global Research House as well as on the banking sector from Yasir Wani; while we also offer you features on the Philippines by Rafael A Morales of Salazar Hernandez & Gatmaitan and on human capital by Azhar Mirza of Jardine Human Capital. Frederick Nietschze once said: “He who would learn to fly one day must first learn to stand and walk and run and climb and dance – one cannot fly into flying.” Islamic finance may be ready to spread its wings – but it will need continued commitment, consistency and confidence in order to truly take flight. Cover Story Islamic finance in Indonesia: Cautiously optimistic? The Islamic finance sector in Indonesia has long been hailed as one of the biggest potential success stories of the industry — and one of its sleeping giants. With the world’s largest Muslim population and an unbanked segment of over 75% the opportunities are enormous — and with a new government prioritizing Islamic finance, the prospects are theoretically good. But progress is slow, legislation is lagging and structural challenges continue to impede development. Is Indonesia really ready to take the next step, or is it all just talk? LAUREN MCAUGHTRY speaks to the industry. IFN Reports • Dubai missing out on capital markets opportunity? • PMB Tijari — reaching out to the pre-bankable • Islamic banking industry gains IMF-inspired financial indicators • Promising first quarter for Islamic banking • Sovereign Sukuk: Indonesia and Ivory Coast • Indonesian opportunities abound, but structural challenges remain a barrier • IFN Global Trendswatch • IFN Weekly Poll: With Russia developing and promoting its Islamic finance capabilities, would you consider investing in Shariah compliant products in Russia while sanctions are in place? IFN Country Correspondents • Islamic crowdfunding in Singapore gaining momentum • Another good year for Islamic banking in Pakistan • Islami Bank Bangladesh tops in credit disbursement in 2014 IFN Sector Correspondents • The Salam concept of Islamic trade finance • Capital is a coward IFN Country Analysis • Egypt: Political will paramount IFN Sector Analysis • Human capital development in Islamic finance Shariah Pronouncement Sometimes the Islamic bank receives request from some of its customers to include in Murabahah financing some components other than the cost of the goods, such as shipping charges, import duty, inspection charges, etc Case Study London Central Portfolio’s second Shariah compliant fund: LCA II This week IFN takes a look at one of the promising funds from the UK. Recently launched, the London Central Apartments II (LCA II) is London Central Portfolio (LCP)’s second Shariah compliant offering. Special Reports Death by debt Getting laid off from one’s job has its advantages, provided one has sufficient funds to carry over until the next opportunity arises. Having time to reflect and reanalyze makes one feel a little like Gordon Gekko, re-emerging from prison to write his memoirs and with a feeling “has the world gone quite mad”. Sabotaging Islamic banking Recently in India the Shariah-based SBI mutual fund which was scheduled to be launched in December 2014 was deferred with the motives noticeably seeming to be political, though the reason conveyed was that the Shariah fund will be offered in a better and more attractive format in the future. K Rahman Khan, a congress member, had alleged in Rajya Sabha that the deferred plan was taken due to political reasons. The momentum continues in Qatar Qatar’s economy grew by more than 6.7% in 2014 and, despite the fall in oil prices, it is expected to continue this growth trajectory for the next two to three years. The banking sector grew by more than 11% last year and growth in the Islamic banking sector outstripped the growth of the conventional banks. Features Promising developments in the Philippines Islamic banking and finance will get a boost from the anticipated passage of the Bangsamoro Basic Law, which will be the legislative charter of the autonomous region in southern Philippines resulting from the agreement between the Philippine government and the Moro Islamic Liberation Front that hopefully will end the armed conflict and bring peace in the country. Obstacles to human capital in the Islamic finance space The continuing rise of the Islamic banking sector is well documented, enough has been said and countless words are available to be read every day by the very best in the field, whether they are bankers, journalists or industry experts.  CONTACTS Editorial: Sasikala Thiagaraja Direct Line: +603 2163 7800 ext 34 Finance: Faizah Hassan Direct Line: +603 2162 7800 ext 26 Sales: Dubai: Geraldine Chan Direct Line: +971 4 427 3628 Kuala Lumpur: Steve Stubbs Direct Line: +603 2162 7800 ext 55 Subscriptions: Dubai: Mithun Gangolli Direct Line: +971 4 427 3638 Kuala Lumpur: Siti Amilia Amir Amzah Direct Line: +603 2162 7800 ext 27