Category

News

Low level of Islamic banking literacy barrier to Indonesia’s Islamic finance growth: survey

JAKARTA – The financial literacy index for Islamic banking in Indonesia that stands at 6.63 percent is lower than the 9.61 percent for the sector\'s inclusion, revealed the 2016 National Survey on Financial Literacy and Inclusion (SNLIK) by the country’s Financial Services Authority (Otoritas Jasa Keuangan, OJK). The literacy index measures how well Indonesians understand the sector and its products and services, and the inclusion index measures their access to and use of Islamic banking. Deden Firman, Director of Research, Development, Management and Licensing of Islamic Banking at OJK told Salaam Gateway the gap between Islamic banking inclusion and literacy is an opportunity for the sector. “This could be an opportunity for Islamic banking to offer more products. Currently most customers only use basic products including savings and micro-financing but they are still unfamiliar with more advanced products like deposits and bank notes,” said Firman. He hopes customers can understand and access more Islamic banking products to boost the market share of Islamic financial assets. According to latest estimates form OJK, total Islamic banking assets currently stand at 340 trillion Indonesian rupiah ($25.5 billion), equal to just over 5 percent of the country’s total banking assets. This is still far from the 9 to 12 percent government target in the mid-term. Overall, the Islamic literacy index was 8.11 percent, while Islamic inclusion stands at 11.06 percent. Islamic banking scored highest on the Islamic literacy index at 6.63 percent followed by takaful at 2.51 percent, Islamic pawnbroking at 1.63 percent and other Islamic non-banking financial institutions at 0.19 percent. On inclusion, Islamic banking also scored highest at 9.61 percent followed by takaful at 1.92 percent, pawnbroking at 0.71 percent and other Islamic non-banking financial institutions at 0.24 percent. East Java scored highest in literacy at 29.35 percent. Aceh scored highest for inclusion at 41.45 percent followed by North Maluku at 24.73 percent. OJK will use the findings from the survey to better map the national education program for Islamic finance across Indonesia’s cities and villages. “It doesn’t mean regions with higher literacy will perform better on the inclusion index. Regions with the highest concentration of Muslims, such as Aceh and North Maluku tend to have more financial institutions so they perform better on the inclusion index,” he added. Overall, more Indonesians have access to and are aware about financial services. The overall literacy index jumped to 29.66 percent from 21.94 percent in 2013 and the inclusion index reached 67.82 percent from 59.74 percent in 2013. OJK aims to improve inclusion to 75 percent by 2019. 2016’s survey was the first to include Islamic finance inclusion and literacy. The National Survey on Financial Literacy and Inclusion (SNLIK) 2016 involved 9,860 respondents in 64 regions and 34 provinces. Each respondent answered questions on both conventional and Islamic financial products. OJK used 47 questions, based on OECD and World Bank standard templates. Started in 2013, the national survey is conducted every three years. © SalaamGateway.com 2017 All rights reserved   Photo: A man walks past a poster of a one hundred thousand Rupiah banknote inside Indonesia\'s central bank, Bank Indonesia, in Jakarta, November 17, 2016. REUTERS/Beawiharta
NIFTI
February 21, 2017
sticky

Islamic Capital Market a Unique Source of Capital

THE Securities Commission’s (SC) advocacy for regionalisation of Asean’s 10 capital markets is rather timely as keynoted at the recent Asean Fixed Income Conference 2017. In 2013, according to SC, Asean’s total capital markets stood at US$3 trillion (RM13 trillion) and the saving rate was around US$800 billion in 2015. As an add-on, capital market players may look towards the Islamic Capital Market (ICM) as a new Blue Ocean Wave for Asean capital markets. ICM plays a supporting role to the Islamic Banking and Financial (IBF) system in the enhancement of Islamic financial markets in Malaysia. The advantages of ICM were emphasised in the “Islamic Capital Market Task Force of the International Organisation of Securities Commissions” report, which confirmed the role of ICM in the diversification of conventional capital market dimension at global platforms. ICM is anticipated to strengthen Asean in propelling collective regional financing, especially in the Asean Economic Community (AEC). Developing new ICM initiatives will therefore buffer Asean from Brexit, the United States’ protectionism and the European Union’s economic volatilities. In realising this initiative, there is a need to relook Islamic Banking Education and IBF as the twin towers of ICM growth. ICM has all the ingredients to create innovation in the AEC capital market, catering to real economic progress and regional trade integration. ICM, through innovative products, will not only supplement conventional capital market but will also provide a unique source of capital in AEC’s economic development agenda in terms of liquidity, scale and capacity. This will generate capital market diversification and maintain stability in terms of global shocks. In Malaysia, ICM has seen enormous expansion in the Islamic equity sector and fixed income. According to a report, at the end of 2014, the total value of ICM was about RM1.5 trillion, accounting for 57 per cent of the total market capitalisation in Malaysia and represented a 10-year compound annual growth rate of 11.3 per cent. On Bursa Malaysia, more than 70 per cent of the stocks are classified as syariah-compliant by the Syariah Advisory Council of SC, and there are about 200 unit trust funds across asset classes. Notable innovative products of global sophistication are Malaysia’s first Islamic real estate investment trust (i-REIT), first Islamic stapled REIT, Asia’s first Islamic exchange-traded fund (i-ETF) and Asia’s first exchange-traded sukuk. Perhaps it is time for a wider diffusion and adoption of ICM by setting up an AEC Islamic Capital Market as a new capital space for AEC. JEONG CHUN PHUOC Shah Alam, Selangor Read More : http://www.nst.com.my/news/2017/02/213362/islamic-capital-market-unique-source-capital
NIFTI
February 20, 2017

Russia seeks to implement Islamic finance in its banks

THE global Islamic finance industry, which is witnessing phenomenal growth rates with expansions in Europe and sukuk listings, will see a new entrant in Russia that hopes to cash in on the substantial Muslim population in the European country.   They have already started the process of getting acclimatized with the Islamic finance industry by learning from the established model of the Islamic Development Bank (IDB), headquartered in Jeddah. “Russia is hoping to implement Islamic Finance system in its banks,” said a member of the Russian delegation that was paying a visit to the IDB.   He said, “Our principal goal is to get acquainted with the Islamic finance system and implement it later in Russia where there are 25 million Muslims living,” Abubakar Arsamaskof, president of Moscow Industrial Bank told Saudi Gazette. Islamic banking refers to a system of banking or banking activity that is consistent with the principles of the Shariah and its practical application through the development of Islamic economics.   Asked if Russia is ready for such a move, he said that though there is an absence of some legislations that would facilitate Islamic banking, the president and the government are ready to implement Islamic finance at the earliest and, added that they as banking officials have been asked to provide the government with needed mechanisms.   “Hence the need for us to study a successful role model and that’s the IDB,” he said. Arsamaskof noted that they want to develop a partnership with the IDB to develop and implement Islamic finance in Russian banks.   He said that their industrial bank has 7,000 employees working in 260 branches that provide different products and services. He added that their main focus is on industry, construction and agriculture. He also highlighted that they issue Muslim debt card to those wanting to perform Haj.   He also indicated that Russian companies are moving towards the Halal industry in a big way and have investments that are estimated at $100 million. “Halal products,” said Arsamaskof, “are popular also among non-Muslims who buy these products with pleasure because they are sure about their high quality.”   Sheikh Roshan Abasof, the first vice president of the Shoura Council of Muftis for the Muslims of the Russian Federation Administration, explained that in 2000 a regulatory body to certify, control and monitor was established under the name to International Center for Halal Standardization and Certification (ICSC).   Till date 200 companies have been given the ICSC certification and their products are being exported to five different countries, including ones in the Gulf region.   Abasof said, “Russia and the IDB already have collaboration in different sectors — mainly the philanthropy sector, Waqf, and education. And this cooperation in the Islamic banking system will further boost relations.”   He added that more than 70 students have benefited from IDB scholarships in completing their university education.   The Russian delegation was visiting the IDB to collaborate with regard to Awqaf and enhance the Islamic finance system in Russia. Other negotiations include collaboration between IDB and Moscow Industrial Bank to find investment opportunities and create jobs for youth.   IDB President Bandar Hajjar said “The bank is studying methods by which it can take part in Islamic banks in Russia after the completion of legal and organization measures in cooperation with the Russian Central Bank.   He added that they have witnessed a real will in the Russian government and in the Russia Central Bank to provide a suitable environment for Islamic finance that he said encouraged the IDB to train banking officials in this regard and provide scholarships that may train Russian nationals and prepare them to work in the Islamic finance sector.   Meanwhile, IDB has approved the participation in 29 projects in Russia valued at $7.4 million. These projects include: Islamic University in Moscow, Islamic University in Kazan, an Islamic Institute and a Medical polyclinic in Saratov and Islamic Institutes in Dagestan.   The IDB has also provided urgent aid to Chechniya, which was devoted to construction of schools and vocational and training institutes.   © The Saudi Gazette 2017 19 February 2017 Russians invest $100 million in halal food sector By Fatima Muhammad
NIFTI
February 20, 2017

Malaysia Seeks to be Global Islamic Wealth Management Centre

With Islamic assets under management of some Rm132.4 billion (US$29.66 billion), Malaysia is well on its way towards establishing itself as the international centre of Islamic wealth management services, notwithstanding the ongoing 1MDB scandal. The country’s aim of cementing its position as the Islamic wealth management capital of the world received a boost recently with the launch of a five-year Islamic Fund and Wealth Management Blueprint. Unveiled by second finance minister Johari Abdul Ghani, the 51-page document focuses on three areas towards solidifying Malaysia as the centre of Islamic wealth management services globally. Specifically it will: strengthen Malaysia’s position as a global hub for Islamic funds establish the country as a regional centre for shariah-compliant sustainable and responsible investment develop it as an international provider of Islamic wealth management services. Mr Ghani said that the recommendations are made to “provide flexibility within the overall target of the blueprint” to enable suitable adjustments, adding that “a tremendous amount of work is, however, required to ensure that the Blueprint strategies are appropriately put into place”. Addressing the Securities Commission Malaysia (SC) International Fund Forum 2017, Mr Ghani said that with its comprehensive Islamic finance ecosystem and track record in innovation, Malaysia was in an “advantageous position to play a lead role in shaping the concept and driving the development of Islamic wealth management services”. The blueprint will be implemented over a period of five years and is drawn up with the aim of developing and growing Malaysia’s Islamic capital market. The first phase will focus on the formulation of a framework for issuance of SRI investment funds, the setting up of the global capacity building centre for Islamic Capital Market (ICM), and the establishment of digital investment services framework. Asean’s Burgeoning Muslim Middle-Class Malaysia’s interest in the rapidly growing Muslim middle-class, particularly in Asean where Muslims represent 42 per cent of the Asean Community’s (ACs) population is not without reason. Speaking at the 12th World Islamic Economic Forum (WIEF) in Jakarta last year, Malaysia Prime Minister Najib Razak said that in 2014-2015 the Islamic economy grew at almost double the global GDP growth rate, while Muslim consumer spending is forecast to reach $2.6 trillion by 2020 (See: Cambodia Aims For Share of Halal Market). The Islamic market in Malaysia is estimated to have been worth some $1.9 billion in 2013, with officials forecasting it to contribute about 5.8 per cent to Malaysia GDP by 2020. Malaysia is not the only nation hoping to capture a larger slice of the burgeoning Muslim middle-class. While Malaysia seeks to be the centre of Islamic wealth management services, Cambodia hopes that the introduction of a formal halal certification process for restaurants and food producers will attract more Muslim tourists to the Kingdom and also strengthen the growth of the Kingdom’s nascent halal certified food sector. Meanwhile, in Indonesia where the Islamic market is valued at more than $10 billion annually and growing at between 7-10 per cent,  the Islamic Development Bank (IDB) announced that to date it had approved $4.2 billion to support development projects. The Bank said money had been dispersed in the areas of education, health, transportation, communication, industries, mining, power generation, agriculture, water supplies, and Islamic banking, as well as financing numerous foreign trade operations between Indonesia and other IDB member countries. https://aecnewstoday.com/2017/malaysia-seeks-global-islamic-wealth-management-centre/
NIFTI
February 8, 2017