Indonesia & Malaysia Colloborate To Boost Islamic Banking

The Indonesian and Malaysian central banks have agreed to improve cooperation to boost the development of Islamic finance in the two nations.

“Islamic finance like Shariah banking is no longer just complementary but has now become a genuine alternative financing option,” said Darmin Nasution, the governor of Bank Indonesia. “So there is a strong need for Islamic banks in Malaysia and in Indonesia to improve their cooperation and develop the Islamic finance market.’’

Darmin was speaking at the opening of a two-day conference on Islamic finance, which was also attended by Vice President Boediono and the governor of Malaysia’s central bank,Zeti Akhtar Aziz.

Darmin said Indonesia’s Shariah banking sector should learn from Malaysia, which has become the center of Islamic finance in Asia. Total assets of Islamic banks in Malaysia stood at $116 billion as of the end of 2010, according to data from its central bank.

“Islamic finance in Malaysia has developed extremely quickly, while Indonesia has a huge potential market given that it has the largest Islamic population,’’ Darmin said.

Assets of Shariah banks in Indonesia totaled Rp 104 trillion ($12.2 billion) at the end of last year. Indonesia has 11 banks that offer Islamic finance options, including Bank Syariah Mandiri, Bank Muamalat Indonesia, Bank Mega Syariah, BRI Syariah and BCA Syariah.

Separately, Zeti said that Malaysia and Indonesia should improve cooperation in Islamic finance and help to develop the sector in the global market.

“Islamic finance will continue to play an important role in the global economy,” he said. “So it’s important for us to grab this opportunity, not only for Malaysia and Indonesia but also for other Asian countries. Islamic finance will help improve welfare and boost economic growth.”

Halim Alamsyah, a Bank Indonesia deputy governor, said the bank wanted to discuss the technical aspects of Shariah banking with its Malaysian counterpart in greater detail. “This will help to create added value in the Shariah banking sector,’’ he said.

In the banking sector overall, Bank Indonesia forecast lending by the country’s 120 commercial banks would rise 24 percent this year, slightly higher than the 23.8 percent gain in 2010. In the first half, loans climbed 24 percent to Rp 372.8 trillion from the same period last year.

Last year, banks’ combined net profit rose 26 percent to Rp 57.1 trillion from a year earlier, according to central bank data.