ISLAMIC RETAIL BANKING A Response Toward
Microfinance Development Case of Indonesia
Fleming Gulf Conferences
Dubai, 9-10 October 2012
Associate Professor Rifki IsmalAssistant Director
Islamic Banking Department – Bank Indonesia
The Indonesian Economic Authorities
Fiscal Authority
Government
Economic Development
Bank Indonesia
BankingNon Bank Financial
InstitutionsFinancial Markets
Financial Sector
Authority
Monetary Authority
OJK
USD83B
USD441B
USD371B
Banking
Non Bank
Financial MarketsGovernment conducts fiscal policiesOJK conducts financial sector policiesBank Indonesia conducts monetary policies
More than USD900 billion funds managed by OJK
IIFSA: Authorities & Players
AUTHORITIES
Indonesia Capital Market and Financial Institutions
Supervisory Agency(Bapepam-LK, MoF)
Ministry of Cooperatives &Small Medium Enterprises
Bank Indonesia(banking supervision functions)
National Amil Zakat Body
Capital Market
Insurance
Pension Funds
Finance Companies
Cooperatives
Pawn Shop
Zakah Fund Institutions
Banking
FINANCIAL INSTITUTIONS
Financial Services Authority (2013)
4
Retail Konsumtif
Retail Produktif (SMEs)
Corporate
Business Model of the Indonesian Islamic Banks
Business Model
Corporate/Wholesale Banking
Infrastruktur Banking
Commercial Banking Retail Business Banking
Consumer Banking Retail Banking
Products
Retail Produktif (SMEs)
RetailKonsumtif
Corporate
• Saving deposit, time deposit
• Transfer
• Wealth Management
• E-Channel (Internet banking, Mobile banking ATM)
• SDB
• KPR, KKB,
multifinance• Pawn shop
• Demand deposit
• Time Deposit
• Mutual funds
• Gold Investment
• Working capital
financing
• Credit card
• Pawn shop
• Cash Management
• Electronic payroll
• Tax payment
• Collecting
• Financing with
small margin
(special rate)
• Investment and
working capital
financing
• Leasing
Type of Business
Criteria (MSMEs Act No.20/2008)Number of
Units
MICRO- Asset < IDR 50 mio (USD 5,500)
- Ann. Revenue < IDR 300 mio (USD 33,000)50,70 million
(98,9%)
SMALL- Asset: IDR 50 mio – IDR 500 mio (USD 5,500 – USD 55,000)- Ann. Revenue: IDR 300 mio – IDR 2,5 bio (USD 33,000 – USD
278,000)
0,52 million(1,01%)
MEDIUM- Asset: IDR 500 mio – IDR 10 bio (USD 55,000 – USD 1,1 mio)- Ann. Revenue: IDR 2,5 bio – IDR 50 bio (USD 278,000 – USD
5,5 mio)
0,04 million(0,08%)
BIG- Asset > IDR 10 bio (> USD 1,1 mio)
- Annual Revenue > IDR 50 bio (> USD 5,5 mio)0,004 million
(0,01%)
Type of Business based on MSMEs Act No.20/2008
IIFSA: Islamic Microfinance Services
Insurance
Finance Companies
Cooperatives
Pawn Shop
Zakah Fund Institutions
Banking
INSTITUTIONS/PLAYERS Services
As an APEX for IRBs & BMTsProducts: auto/motorcycles
financing
Products: microinsurance
Products: funds for start-up/existing micro business
ICB/IBU’s: microfinancing
Microfinance Institutions: Islamic Rural Banks
(BPRS)
Microfinance Institutions:
BMTs
Empowerment Programs
Poorest of the Poor
Islamic Life Insurance 3
Islamic Non Life Insurance 2
Sharia Unit of Life Insurance 17
Sharia Unit of Non Life Insurance
18
Sharia Unit of Reinsurance 3
TOTAL 43
Islamic Finance Co. 2
Sharia Unit of Finance Co. 12
Finance Co. Offer Islamic Prod
2
TOTAL 16
Islamic Com Bank 11
Islamic Windows 24
Islamic Rural Bank 156
Offices 2408
Islamic Cooperatives (BMT) > 5,500Conventional Cooperatives
(Financial Sector) 71,365Conventional Cooperatives
(Total) 187.598
Zakat Fund Institutions >500
MICRO BUSINESS
IIFSA: Major Players of Islamic Microfinance
Cooperatives
Banking
ICB/IBU’s: microfinancing
Microfinance Institutions:
Islamic Rural Banks (BPRS)
Microfinance Institutions:
BMTs
Banking ProfilesNumber of institutions: 11 Islamic Commercial Banks, 24 Islamic Banking Units, 156 Islamic Rural Banks (1,820 total Rural Banks)Assets ICB: IDR 156 tr (USD 17 bio) or 4% Market shareAssets IRB: IDR 4.2 tr (USD 466 mio) or 6.3% market shareAnnuall Growth: 45–50% (ICB); 25–30% (IRB)Total Customers: 9.5 mio (ICB); 728,908 (IRB)
BMT ProfilesNumber of Institutions: More than 5500 BMTs (Conventional Cooperatives 71.365 units)Assets: IDR 3,5 tr (USD 389 mio)Annuall Growth: 30 – 40%Number of Employee: 5 – 10 (average)Total members: 10 mioNon-Performing Financing/Loan: 4-5 % (average)Mostly initiated by group of people in particular community; Islamic Mass Organization, Mosque Comm.
Number of IRB Asset Volume
3 < 1 Billion
25 1 up to 5 Billion
39 >5 up to 10 Billion
89 > 10 Billion
156 Total
Islamic Microfinance Services: ISLAMIC BANKING
Islamic Com Bank 11
Islamic Windows 24
Islamic Rural Bank 156
Offices 2.408
Banking
ICB/IBU’s Products: microfinancing
Microfinance Institutions: Islamic Rural Banks
(BPRS)
Micro-Small Enterprises
ICB/IBU’s Services: Special Division for
microfinancing
ICB/IBU’s Strategy: Linkage to MFIs
Microfinance Institutions:
Islamic Rural Banks (BPRS) & Baitul Mal wa Tamwil (BMT)
Islamic Rural Banks (BPRS): Infrastructures
National Sharia Board
National Islamic Arbitrage Board
Indonesian Institute of Accountants
Certification Institutions for Microfinance Professionals
BPRS
BANK INDONESIA
Fatwas
Regulations: licensing & supervision
Capicity Building
TA, advocacy & Participation in Policy
Dialogue
Statement of Financial Accounting Standard
Dispute Mediation
A wholesale Apex for Financing MSMEs Projects
Certification for BoD
Deposit Insurance Corporation
10
118.95%20% 9%2.44% ACEH12.70%
98.97%15% 9%2.72% SUMUT5.63%
157.35%32% 25%1.93% RIAU4.09%
187.04%45% 40%0.72% KEPRI6.59%
85.78%28% 25%6.57% BABEL0.01%
113.48%25% 28%3.83% SUMBAR2.61%
FDRGrowth
DPK
Growth
PYDShare PROVNPF
Growth
Asset
12%
17%
22%
44%
25%
31%
152.43%21% 31%2.21% BENGKULU3.98%30%
115.70%13% 21%0.22% SUMSEL3.73%5%
146.71%40% 35%3.72% LAMPUNG3.43%34%
385.455%34% 25%0.90% DKI9.42%25%
117.291%18% 25%9.80% BANTEN7.85%15%
137.40%25% 24%29.27% JABAR5.49%24% 116.38%26% 31%2.93% NTB2.24%31%
110.60%29% 27%0.25% BALI8.29%27%
350.56%-265% -43%0.03% PAPUA42.23%-47%
95.77%24% 29%4.74% YOGYA5.05%25%
117.32%30% 31%8.81% JATENG5.88%28%
152.24%22% 22%14.85% JATIM4.86%20%
180.88%-11% 3%3.21% SULSEL11.44%9%
SULUT0
93.08%12% -23%0.29% KALTIM39.56%-15%
81.16%3% -7%0.59% KALSEL*9.76%-11%
0 0 0 0 0
GORONTALO0 0 0 0 0 0
IRJABAR0 0 0 0 0 0
SULTENG0 0 0 0 0 0
MALUT0 0 0 0 0 0
MALUKU0 0 0 0 0 0
Islamic Rural Banks (BPRS) Map
DESEMBER 2011
SULTRA0 0 0 0 0 0
SULBAR0 0 0 0 0 0
NTT0 0 0 0 0 0
KALTENG0 0 0 0 0 0
KALBAR0 0 0 0 0 0
JAMBI0 0 0 0 0 0
* Prov KALSEL data Oktober 2011
Challenges
Skill & Competency of Human Capital
MSMEs & MFIs Study Center in Major Universities
TA & Capacity Building by Regulators, Agencies or Local/Regional Associations
APEX Institutions: i.e PNM, Regional Association, Regional Champion
Programs (Local State Own Banks)
Linkage Programs: i.e ICBs, IBUs or IRBs
Self-regulations & Supervisions by Regional Association or Agencies
Financial Sustainability
Lack of prudential Regulation & effective Supervision*
Harmonizing Policy & Regulations between Banks and Cooperatives
*) especially for BMTs
Financial Inclusion OptimizationIslamic Banks and BMTs
LINKAGE PROGRAM MODEL by Bank IndonesiaIslamic Commercial Bank – Islamic Rural Bank
Executing
ICB
IRB
MSMEs MSMEs MSMEs
Joint Financing
ICB IRB
Channeling
ICB
IRB
Based on Mudharaba
Based on Wakala Based on
Musharaka
LINKAGE PROGRAM MODELIslamic Commercial Banks/ Islamic Rural Bank – Islamic Microfinance
Executing
ICB/BPRS
BMT
MSMEs MSMEs MSMEs
Joint Financing
ICB/BPRS BMT
Channeling
ICB/BPRS
BMT
Based on Mudharaba
Based on Wakala Based on
Musharaka
Associate Prof. Dr. Rifki Ismal is both a
central banker and lecturer. He earned
bachelor degree in economics from University
of Indonesia, master in economics from
University of Michigan, ann arbor (USA) and
PhD in Islamic economics and Finance from Durham
University (England). An Associate Professor in Islamic
Banking and Finance is from the Australian Government
(Australian Center for Islamic Financial Studies)
SHORT BIO