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Thursday, 2 August 2007

Indonesia Islamic bank assets to triple by end-2008


Total assets of Islamic banks in Indonesia are likely to more than triple by the end of next year because of growing demand for Islamic financing instruments, the central bank said. Total assets of Islamic banks are expected to rise to 91.57 trillion rupiah ($9.95 billion) by the end of 2008, or 5.25 percent of the domestic banking industry's total assets, the central bank said in a statement. In June, the total assets of Islamic banks amounted to 29.2 trillion rupiah, or around 1.7 percent of the domestic industry's total assets, up from 1.55 percent at the end of 2006 and 1.42 percent at the end of 2005. "The Islamic banking sector has the opportunity to grow rapidly in Indonesia, since it provides alternative financial instruments to the economy and Islamic products to Muslim customers in the largest Muslim population in the world," central bank deputy governor Siti Fadrijah said in the statement. Under Islamic or Sharia law, interest is banned and income must instead be derived from a fundamental economic transaction such as trade in goods and services, direct investment in a business or renting out a property. Analysts say Indonesia has the potential to become a major player in global Islamic finance because around 85 percent of its 220 million people are Muslim. But it lags neighbouring countries like Malaysia and Singapore as the country is still in the process of adjusting its legal, tax and accounting framework, which could enable Muslim investors to tap into Islamic financing. ($1 = 9,205 rupiah). - (Reuters, 31 July 07)

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