CMEA for Sharia Seminar UGM

8/11/2019 CMEA for Sharia Seminar UGM

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Development ofIslamic Economy in

Indonesia:Opportunities and

Challenges

The International Seminar The Role of a New Goverment to the

Development of Islamic EconomicsYogyakarta, 4 October 2014

Dr. Edi Prio PambudiAssistant Deputy Minister for Monetary, Balance of Payment and Job Expansion

Coordinating Ministry for Economic AffairsRepublic of Indonesia


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The largest Moeslem population in theWorld, most are modernist, inherited a

culture of tolerance and GotongRoyong (mutual cooperation)


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Halal Food

Finance

Fashion

Travel /Tourism

Media /

Recreation

Pharmaceutical

/ Cosmetics

The development of IslamicEconomy has the potentialto make Indonesia asproducer rather than justmarket


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197100

9388

77

Halal Food Marketbillion US$

Source: Global Islamic Economy Report, 2013

17.3

14.4

12.3

11.8

8.5

Food Exportersto OIC

billion US$

2.28

1.47

1.41

0.95

0.8

OIC Food Importersbillion US$


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Islamic Banking249 Banks

Assets $985 bil.

Sukuk1899 Outstanding

Assets $251 bil.

Islamic Fund636 Islamic Fund

Worth $44 bil.

Takaful Insurance216 Corporates

Assets $26 bil.

Microfinance1.28 million Consumers

Assets $628 mil.

Moslem population influences thedevelopment of Islamic FinancialIndustries and targeted beingthe center of Islamic Finance


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24.920.5

16.8

16.2

15.3

Moslem Clothing

ConsumptionUS$ bil.

7.18

2.992.34

1.680.72

0

1

2

3

4

5

6

7

8

UEA SaudiArabia

Turkey Kyrgyztan Iraq

(bio

US$)

OIC Clothing Importer CountriesThe total of

searching result for

muslim fashion on

Google, 77%-of the

results are from

Indonesia, 16%-

from Malaysia, and

2% from UK and

India


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Factors to Push the Development of Islamic Economy in Indonesia

External

1 The external factor is the development of Islamic economy in both

Moslem-majority and non Moslem-majority countries.

Internal

2 The fact that Indonesia is the country with the largest Moslem population

in the world.

Awareness among scholars and economic practitioners about the

importance of economy that is suitable with the Islamic values held by

Indonesian Moslem.

Political

Factors

3

The stable political state has bring about positive impact on Islamiceconomy.

Diversity

4

Increasing educated middle class Moslems triggers demand on Islamic

financial industry

Experiences

5 Islamic financial system has experienced stability in 1998 monetary

crisis shown by the existence of Islamic banks during that period.

Rationality

Factors

6 Economic motives is the key driver for those without personal

attachment to the Islamic value to get involved in the Islamic financial

industry.


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Society

1 As a Moslem-majority country, the involvement of Indonesian Moslem

(approximately 85%) in Islamic financial system is still low.

Human

Resources

2 The amount of human resources in Sharia system is still struggling to

keep up with the dynamic of Islamic economic system and products Increasing the quality and capacity of the human resources

More universities open Islamic Economics study program.

Government

3 Enhancing the existing regulations on Islamic financial system and

products.

The Challenges.


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Real Sector

1 The Islamic financial system that limits speculative actions has led more

flows of fund to the real sectors.

Investment

2

Attracts investors from Middle East countries.

Economic

Behavior

3 The development of Islamic financial system is in line with the

improvement of the ethical practices among society since it promotes

Islamic value in the economic activity.

Social

Welfare

Government uses Islamic practices to improve social welfare (ex: Zakat

law).

4

Role of Sharia System in Indonesian Economy


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Support on

Education

1 Islamic economy has developed since 1970s and reached its peak in 1990s.

Therefore, many Islamic Economics have been included in the study

programs of many universities.

Institutional

Support

2 The fast development of Islamic economy in 1990s was shown by the

development of Islamic banking products and real sector businesses that

include Sharia in its system and operational (ex: Hotel, MLM, book publisher,restaurants, educational institutions)

Regulation

31992 Islamic banking is regulated through Law No. 7/1992

Bank Muamalat was established as the first Islamic Banking

1998 Conventional banks are permitted to open Sharia Business Units (regulated

through Law No. 10/1998)

Bank Indonesia officially permits the existence of Islamic banks on dual banking

system

1999 Law No. 23/1999 concerning on BIs responsibility to develop, regulate and

supervise Islamic banks

Law No. 38/1999 concerning on Zakat

2004 Law No.3/2004 to strengthen the role of BI

Law No 41/2004 concerning on wakaf

Support from the Government to DevelopIslamic Economy


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High Moslem population benefits to the growth of

Islamic financial industries.

Relatively high economic growth projection

(around 5.0% - 6.5%) is supported by solid

economic fundamental.

Increasing investors involvement in Islamic

financial industries

However, market share of Islamic financial

industry is still low (5-7%)

Asset growth rate reached 37.4% in the last five

years with the total of USD 21 billion.

Islamic banking industry has around 13 million

saving accounts and supported by 3000 office

networks in Indonesia

2012 2013 2014*

Islamic Bank

Amount of Bank 11 11 11

Amount of Office 1745 1858 2139

Islamic Business Unit

Amount of Conventional Banks that

have Islamic Business Unit 24 24 24


Islamic People Credit Bank (BPRS)

Amount of Bank 158 159 163


Islamic Banking Network

Source: OJK

The amount of workers in Islamic financial

industry reached 43.351 workers

Composition of Third-party Funds (DPK) on

Islamic Enterprises (BUS) and Islamic Business

Unit (UUS) until June 2014 is IDR 185,5 trillion

and DPK on BPRS is IDR 3,6 trillion

Indonesia IslamicFinance


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0

10

20

30

40

50

60

70

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Sukuk Emission (IDRBillion)

outstanding Emission

Amount of SukukEmission

Amount of outstanding

Emission

Sharia Stock in the list of Islamic Securities /Daftar Efek Syariah (Des)

Value and Emission of Sukuk andOutstanding Sukuk

Until June 2014, there has been 307

issuers with the total emission of

IDR 2.959,2 trillion. During the first

quarter of 2014, Sukuk has 64

emission with the value amounting

to IDR 11,9 trillion.


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Regulations on Islamic Economy in Indonesia

ISLAMIC BANKING

1. FSA Regulation (Peraturan Bapepam-LK) No II.K.1

Criteria and Issuance of the List of Sharia Securities2. FSA Regulation (Peraturan Bapepam-LK) No IX.A.13

Issuance of Sharia Securities

3. FSA Regulation (Peraturan Bapepam-LK) No IX.A.14

Contracts used in Issuance of Sharia Securities in Capital

Market

4. Fatwa MUI:

* Fatwa No. 20: Guidelines of Sharia Mutual Fund Investment* Fatwa No. 40: the Capital Market and the General Guidelines

for Implementation of Sharia in the Capital Market

* Fatwa No. 65: Sharia Preemptive Rights (ER)

* Fatwa No. 66: Sharia Warrants

* Fatwa No. 36: Certificate of Wadiah Bank Indonesia (SWBI)

* Fatwa No. 63: Certificate of Bank Indonesia Syariah

* Fatwa No. 64: Certificate of Bank Indonesia Syariah Jualah

* Fatwa No. 32: Sharia Bonds

* Fatwa No. 33: Shariah Mudharabah Bonds

* Fatwa No. 41: Sharia Ijarah Bonds* Fatwa No. 59: conversion of Sharia Mudharabah Bonds

Fatwa No. 69: the Government Sharia Securities (SBSN)

* Fatwa No. 70: the method of SBSH Issuance

* Fatwa No. 72: SBSN Ijarah Sale and Lease Back

ISLAMIC CAPITAL MARKET

1. Law No. 21/2008 : Islamic Banking

2. Bank Indonesia Regulation No. 15/14/PBI/20133. Bank Indonesia Regulation No. 15/13/PBI/2013

4. Bank Indonesia Regulation No. 14/20/PBI/2012



7. Bank Indonesia Regulation No. .13/14/PBI/2011



10.Bank Indonesia Regulation No. 11/33/PBI/2009


12.Bank Indonesia Regulation No. 11/29/PBI/2009

13.Fatwa MUI

* Fatwa No. 01: Checking Account

* Fatwa No. 02: Savings

* Fatwa No. 03: Term Deposit

* Fatwa No. 24: Safe Deposit Box

* Fatwa No. 08: Musyarakah Financing* Fatwa No. 55: Musyarakah Bank Statement

* Fatwa No. 73: Musyarakah Mutanaqisah

* Fatwa No. 29: Hajj Financing

* Fatwa No. 30: Sharia Bank Statement

* Fatwa No. 44: Consumer Loan

* Fatwa No. 45: Line Facility (At-Tashilat As-Saqfiyah)

Fatwa No. 11: Kafalah

Fatwa No. 74: Islamic Guarantee Scheme


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SHARIA INSURANCE

1. Regulation of the Minister of Finance No 11/PMK.010/2011

2. Regulation of the Minister of Finance No 18/PMK.010/20103. Regulation of Bapepam-LK Chairman No:PER-08/BL/2011

4. Regulation of Bapepam-LK Chairman No :PER-07/BL/2011

5. Regulation of Bapepam-LK Chairman No :PER-06/BL/2011

6. Fatwa MUI :

Fatwa No. 21: Guidelines of Sharia Insurance

Fatwa No. 39: Hajj Insurance

Fatwa No. 51: Akad Mudharabah Musytarakah in Sharia

Insurance Fatwa No. 52: Akad Wakalah bil Ujrah on Sharia Insurance

and Reinsurance

Fatwa No. 53: Akad Tabarru on Sharia Insurance

1. Regulation of Minister of Religious Affairs No 4 /20092. Regulation of Minister of Religious Affairs No 42 / 2006

3. Law No 41 / 2004: Wakaf

ZAKAT

1. Decision of Director General for Guidance of the Muslim

Community and Hajj No D / 291 year 20002. Decision of Minister of Religious Affairs No 373/2003

3. Decision of Minister of Religious Affairs No 581/1999

4. Law no 38/1999

WAQAF

Since 2002, the amount of zakat collected by Badan

Amil Zakat Nasional (BAZNAS) has been increasing.

The increase in the last five years is 24.56 %. Research by Baznas and the Faculty of Economy and

Management IPB in 2011 shows that the national

potential for zakat reach 3.4% of GDP which means

the zakat potential each year is about IDR 217 trillion.

ZAKAT IN INDONESIA

Source : BAZNAS

Regulations on Islamic Economy in Indonesia


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1,379,589Intl Pilgrims

240,000Indonesia 178,000

Pakistan

177,000

India

148,000Bangladesh

80,000Egypt

Housewife 27.8 %

Private Employees 22.8 %

Civil Servant 20.5 %

Farmer 12.5 %

Trader 7.7 %

SOEs Employees 2 %

Student 1.1 %

Indonesian Army/Police 0.8 %

Others 4.9 %

Indonesian Hajj Pilgrim 2013 by Occupation% of 156,466 pilgrims

Hajj Quota 2014

Source: Ministry of Religious Affairs 2014


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Islamic Economy Organizations/Communities in Indonesia

1. Masyar akat Ekonom i Syar iah (MES)/ Islamic Economic SocietyMES was established on 1 Muharram 1422 H or 26 March 2001 M. It was declared on 2 Muharram 1422 H in

Jakarta. The founders are individuals, financial institutions, educational institutions, research institutions and

businesses who want to develop Islamic economy.

2. Pusat Komun ikas i Ekonom i Syar iah (PKES) / Center of Islamic Economic CommunicationPKES is an independent institution established as an organization that socializes and communicates the Islamic

economy. On 14 May 2003, the charter of PKES establishment was signed

3 . Forum Si la tu rah im S tud i Ekonomi Is lam (FoSSEI) / Islamic Economy Study ForumThis student organization has faith in the glorious of Islamic civilization, including in the terms of Islamic economy. It

was established based on the result of Islamic Economic Study Group Congress attended by 70 University on 13

May 2000 in Semarang.

4. Ger ak an E konom i Syar iah (Gres) / Islamic Economy MovementThe high interest on Islamic financial portfolio is related to the fact that Indonesia is a Moslem-majority country. This

becomes the basis of the Gres establishment.

5. Indonesia Islamic Economic Expert Association / Ikatan Ahli Ekonomi Islam Indonesia (IAEI)This association consists of academics practitioners who review, develop, educate and socialize Islamic economy.

IAEI was declared on 3 March 2004 at Universitas Indonesia.

6 . Asos iasi Aku tans i & Keuangan Syar iah Indones ia (AASI) / Indonesia Islamic Finance & AccountingAssociation

7. Asos ias i Bai tu l Mal wa Tamw i l (BMT) Sel ur uh Indones ia (ABSINDO) / Indonesia Baitul Mal wa TamwilAssociation


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THANK YOUwww.ekon.go.id

Deputy for Fiscal and Monetary CoordinationCoordinating Ministry for Economic Affairs

Jalan Lapangan Banteng Timur 2-4Jakarta

Documents

CMEA for Sharia Seminar UGM