review of syariah finance

Recent DevelopmentsAfter experiencing a slowdown in growth due to the crisis affected the United States in 2008/2009, the growth of Islamic banking industry in Indonesia showed a trend that continues to rise more rapidly, and at the end of September 2011 asset growth reached 47.8% (yoy) or Rp123.4 trillion, the highest since 2005. The growth of third party funds (DPK) and the financing provided (PYD) at the same time even more rapidly again, reaching respectively 53.0% (yoy) or Rp97.8 trillion and 52.3% (yoy) or Rp92.8 trillion, with FDR (financing to deposits ratio) was 95.7%. For comparison, conventional banking asset growth at the same time reaching 22.2% (yoy), or Rp3371.5 trillion, with the LDR (loan to deposits ratio) was 81.4%.
Performance of Islamic banking seen from BOPO (operating expenses divided by operating revenue), ROA (return on assets) and NPF (non-performing financing), also showed improvement. In late September 2011, BOPO, ROA and NPF each reaches 77.5%, 1.8% and 2.0%. Meanwhile, CAR (capital adecuacy ratio) are at a safe 15.3%, while ROE (return on equity) decreased to 17.1%. Performance of Islamic banking is better than the performance of conventional banking, except for ROA and ROE, as it is still rapid expansion.
Future ChallengesThe financial crisis that originated from the United States subprime mortgage crisis in 2007 has not ended, still leaves a protracted fiscal problems and a slow recovery process, so that the IMF World Economic Outlook in September 2011 lowered its economic growth forecast for 2011 and 2012 respectively to 1.5% and 1.8%.
Meanwhile, several European countries, like Greece, Portugal, Ireland, Spain and Italy, began to experience a debt crisis is more difficult because of the debt settlement, the number of countries involved and did not discipline the governments of the euro-zone countries in its obligations. The IMF also lowered its economic growth forecast for the European region in 2011 and 2012 respectively to 1.6% and 1.1%. In fact, according to ADB Europe can be in recession in 2012.
The two crises in the United States and Europe will color the economic development of the Global 2012, including Indonesia. Indonesia's economic growth in 2012 expected to slow because of slowing export growth which ultimately have an impact on slowing the growth of household consumption. ADB has also been lowered Indonesia's economic growth projections in 2012 from 6.8% to 6.5%, and can even be dropped again to 5.5% if the region the United States and Europe experienced a deep recession.
However, the Indonesian government is optimistic of economic growth in 2012 is estimated to 6.7%, because at least there are 4 things that support, namely: 1) Growth is still strong domestic consumption, 2) Interest of foreign investors are still increasing, including in the Industrial sector, due to economic fundamentals strong, improving the investment climate and Indonesia's sovereign credit rating that has been in the position of investment grade; 3) The government's efforts to improve infrastructure development with MP3EI (Master Plan and Accelerated Expansion of Economic Development of Indonesia), and 4) decrease in inflation, which provide space for lower interest rates. Two things to watch out for that could increase inflationary pressures in 2012 from the supply side is the rising price of fuel (fuel oil) and electricity (electric base rate). Indonesia's economic growth projection in 2012 is only surpassed by China (9.0%) and India (7.5%).
Macro Economic Impact of Islamic BankingCrisis the United States and Europe of course will impact directly or indirectly to the Indonesian banking, in terms of liquidity, capital, assets and credit / financing, because Indonesia's financial system is still dominated by banks. However, the direct impact due to foreign exposure that only about Rp100 trillion is not large because only about 3% of the assets of national banks, is expected to be relatively small. In general, the condition of the national banking system is strong enough reflected by the high ratio of customer funds by distribution use of credit to productive sectors. As already mentioned above LDR national banks reached more than 81% when FDR Islamic banking reached 95.7%.
Other conditions are expected to significantly influence the national banking sector in the coming year is the improved credit rating position of Indonesia which is now in the position of investment grade. This position is obtained Indonesia from international credit rating at the end of this year, although late, but still felt this condition is monumental as well as phenomenal for Indonesia. On the one hand, Indonesia is now the position of credit rating has been aligned with the developed countries and a more encouraging is the trend amid the global crisis in which many developed countries that have experienced decline in credit rating, Indonesia can improve the power position of its competitors. Generally this will increase the confidence of foreign investors towards the national financial sector especially the banking industry. This position is expected to lower the general costs to be borne by the national banks, including Islamic banking Indonesia.
Meanwhile, the direct impact of the crisis the United States and Europe to the Islamic banking portfolio financing are minimal because Islamic banking is still small (Rp92.8 trillion as of September 2011) and almost all of the financing portfolio exposure in the form of business financing in the domestic real sector, almost no exposure financing foreign trade business. Even if no impact is expected indirect (second round effects).
Projected Growth of Islamic Banking in 2012Based on the analysis of environmental conditions and macro-national Islamic banking industry, conducted the analysis of the projected national Islamic banking in 2012. Projection calculation using analytical approaches: (i) Econometric approach (time series model) with a historical series to capture the patterns of behavior and the pattern of Islamic banking, (ii) time series forecasting model to estimate the growth of total assets. Calculation of the projection is based on three assumptions: (i) where moderate growth in line with the development programs being carried out and efforts made Islamic bank, (ii) if the pessimistic scenario of moderate assumptions are not realized and, (iii) if the optimistic developments occur more promising than planned.
These assumptions in detail are as follows: (a) moderate: the number of Islamic banks has not increased but its performance continues to increase, the pattern remains dominated trade financing based financing, financing remains the main target SMEs. Domestic economic conditions are still stable and supporting the real sector performance, (b) pessimistic: the performance of Islamic banks experiencing a slowdown due to the impact of global crisis on domestic economy, the decline in financing and competitiveness of Islamic banks, (c) optimistic: the number of Islamic banks increased, the domestic economy is not affected by the global economic turmoil, the performance of the real sector remain positive and Islamic banks remain competitif with conventional banks.
Meanwhile, technical calculations carried out in outline is as follows: (i) Autoregressive Integrated Moving Average (ARIMA) with historical data from December 2000 until October 2011, (ii) the process of modeling conducted for the variables total assets of Islamic banks and national banks with stages: the identification of variables, model estimation, model evaluation and forecasting models; forecasting model produces future values ​​from October 2011 until December 2012 because the accuracy of the model time series is very high in the short term.
Based on the calculations carried out using assumptions were estimated to be moderate national Islamic banking will grow 36% in 2012. But if there are conditions that are not expected to occur as the impact of global crisis turned out to be worse than expected, then pessimistic next year's estimated growth of national banks by 29%. Meanwhile, on the contrary, if it turns out there are conditions that better happen in the next year as increasing the performance of Islamic banks and a strengthening domestic economy significantly, know ahead optimistically national Islamic banking will grow by 45%.
Beyond physical development, both currently under way or later, expected in the coming years the development of a national Islamic banking industry is also increasingly showing keberkahannya form of benefit to society of micro-small and too poor. Therefore, it should probably also introduced a variable or number of degrees of usefulness of this development as a parameter for the benefit of a national Islamic banking community that has not been reached by the banking industry is fairly well established. Need help contribute the other parties like academics in formulating these measures, as well as overseeing the role of a national Islamic banking in particular aspects like that. May the industrial development efforts by the parties, increasingly facilitated by Allah, so that a national Islamic banking could contribute significantly in the development of the national banking system and more broadly in support of the national economy.