Poor performance of sharia unit in Indonesian banks
In the last few years, almost all major banks in Indonesia established sharia units. It's rather a kind of euphoria if we take a serious look on their performance.
Sharia unit at Bank Danamon, the second largest private-owned bank in the country, for example, booked net loss of Rp31.98 billion last year against net profit of Rp615 million in 2004. Temasek Holdings is the majority stakeholder of Danamon.
At Bank Tabungan Negara, a state-owned bank, the unit posts net loss of Rp1.17 billion. The sharia unit of Bank Negara Indonesia (BNI), the second largest state-owned bank, managed to book net profit of Rp6.8 billion, but heavily dropped from Rp32.94 billion in 2004.
Bank Permata, controlled by Standard Chartered, also recorded net loss of Rp6 billion at its sharia unit.
Bank Niaga posts net loss of Rp1.23bn from sharia unit despite huge jump in revenue. BII, also controlled by Temasek Holdings, managed to cut the loss at sharia unit from Rp30bn to Rp14.7bn, but revenue slightly reduced.
But Bank Muamalat, a bank with full sharia principle in its operation, managed to book net profit of Rp156 billion, doubled from Rp74 billion in 2004. Islamic Development Bank (IDB) owns 28% shares of Muamalat, followed by Boubyan Bank Kuwait (21.28%), and Atwill Holdings Limited (15.32%).
BRI, the second largest state-owned bank, recorded impressive revenue growth in its sharia unit, but the net profit of Rp1.96bn is surely too small for the unit with total assets of Rp663.93bn, right?
Sharia banking in Indonesia was formally introduced in 1992 by the issuance of Act Number 7 on dual banking system. To support network expansion and to better encourage the development of Sharia banking in the country, Act No.7 was further amended through Act No.10/1998. An important change in this Ac is the opportunity for conventional banks to open Sharia unit and implement the dual banking system.
It seems that these conventional banks should wait few more years to reap the benefit of the Sharia principle as proved by Muamalat even though some banks might have established the unit simply for 'political protection' or marketing gimmick in the world's most populous Moslem country.
But that's not going to stop Abu Dhabi Islamic Bank (ADIB) to enter the sharia banking business in Indonesia. ADIB announced recently its plan to acquire Indonesian bank and transform it to a full sharia bank.
At Bank Tabungan Negara, a state-owned bank, the unit posts net loss of Rp1.17 billion. The sharia unit of Bank Negara Indonesia (BNI), the second largest state-owned bank, managed to book net profit of Rp6.8 billion, but heavily dropped from Rp32.94 billion in 2004.
Bank Permata, controlled by Standard Chartered, also recorded net loss of Rp6 billion at its sharia unit.
Bank Niaga posts net loss of Rp1.23bn from sharia unit despite huge jump in revenue. BII, also controlled by Temasek Holdings, managed to cut the loss at sharia unit from Rp30bn to Rp14.7bn, but revenue slightly reduced.
But Bank Muamalat, a bank with full sharia principle in its operation, managed to book net profit of Rp156 billion, doubled from Rp74 billion in 2004. Islamic Development Bank (IDB) owns 28% shares of Muamalat, followed by Boubyan Bank Kuwait (21.28%), and Atwill Holdings Limited (15.32%).
BRI, the second largest state-owned bank, recorded impressive revenue growth in its sharia unit, but the net profit of Rp1.96bn is surely too small for the unit with total assets of Rp663.93bn, right?
Sharia banking in Indonesia was formally introduced in 1992 by the issuance of Act Number 7 on dual banking system. To support network expansion and to better encourage the development of Sharia banking in the country, Act No.7 was further amended through Act No.10/1998. An important change in this Ac is the opportunity for conventional banks to open Sharia unit and implement the dual banking system.
It seems that these conventional banks should wait few more years to reap the benefit of the Sharia principle as proved by Muamalat even though some banks might have established the unit simply for 'political protection' or marketing gimmick in the world's most populous Moslem country.
But that's not going to stop Abu Dhabi Islamic Bank (ADIB) to enter the sharia banking business in Indonesia. ADIB announced recently its plan to acquire Indonesian bank and transform it to a full sharia bank.
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posted by yosef at 9:40 PM
1 Comments:
I've read somewhere that Sharia banks are getting quite popular in UK. It's actually more like a global trend now. I think the disappointing results are more of a quick and dirty establishment of new business unit rather than some wrong idea of Sharia banking.
In Sharia banking the interest is actually there, yet it’s just organised bit different way. For instance a Sharia version of buying a car on credit would be organised in a way that banks buys the car, adds a profit margin to the price of the car and re-sells it to the bank client, then takes payment from the client on instalment basis. There is also a Sharia leasing version (called Ijara) and commodity murabaha (replaces traditional inter-bank deposits). Overall, everything is more based on a real property rather than electronic money.
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