BNI Negotiating Capitalization of New Shariah Bank with ICD

Jakarta, (ANTARA News)-

Bank BNI is currently negotiating the capitalization of a new shariah bank it has agreed to set up in Indonesia in partnership with the Islamic Corporation for the Private Sector (ICD), the bank`s chief said. Bank BNI`s target in the talks was for the planned shariah bank to be capitalized at US$500 milllion or Rp4.5 trillion with BNI holding only a minority stake, Bank BNI President Director Gatot M Suwondo said here Friday.

"If the negotiations are successful, the shariah bank`s capital will reach US$500 million or about Rp4.5 trillion. Thereby it will be the shariah bank with the largest capital in the country," he said.Bank BNI and ICD signed a Memorandum of Understanding (MoU) in October 2007 to study the possibility of establishing a shariah bank as a joint venture with Bank BNI`s shariah unit serving as the embryo.

The shariah bank would be co-owned by the Islamic Development Bank (IDB) and was therefore expected to generate benefits for BNI and the Indonesian public in general. Suwondo said BNI had decided to be just a minority shareholder in the joint shariah bank so that BNI would not need to spend too much on its participation in the bank and more foreign capital could be attracted.

"I hope the negotiations with ICD can be finalized this month so that we can proceed to implement the next phase of the plan," Suwondo added.(*)

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HOUSE ENDORSES ISLAMIC BANK LAW

Aditya Suharmoko , The Jakarta Post , Jakarta
Wed, 06/18/2008 10:44 AM
Headlines

The House of Representatives on Tuesday passed the Islamic banking law aimed at accelerating growth in the industry, while failing to address the issue of double-taxation.
Nine of the 10 factions at the House agreed to pass the law, aiming to provide certainty for investors in an industry that has grown rapidly in the past two years.
Sharia bank lending increased by 30 percent in 2007, higher than the 25.5 percent lending growth of conventional banks.

Melchias Markus Mekeng, a member of the House's Commission XI overseeing financial affairs, said after the session that the commission would try to address double taxation in later discussions with the director general of taxation.
"It (the double taxation issue) is complicated. Investors may retreat from injecting funds into sharia banks if the tax is higher than the amount of return they receive," Markus said.
"Perhaps we will insert it in the value-added tax (VAT) bill."

In an Islamic bank, interest payments are forbidden.
A bank customer can obtain profit in an exchange transaction called murahaba in which a buyer (bank) purchases items from a seller (customer) at a specified profit margin payable to the seller.
However, as the transaction involves the buying and selling of items, it will be subjected to value-added tax twice, both when the items are bought and sold.

The Finance Ministry's head of fiscal policy Anggito Abimanyu said the ministry would try to solve the double taxation matter through existing instruments.
"Actually, there is not a buying and selling of items as they are used only as underlying assets. It is a matter of interpretation," Anggito said.
He agreed with Markus that the government might include the double taxation matter in the value-added tax bill, which would be discussed with Commission XI.

The Islamic banking law also stipulates that conventional banks hosting sharia units must separate the business if its capital reaches 50 percent of the bank's total capital, to further expand the sharia banking industry.
Bank Indonesia (BI) aims to increase the market share of sharia banks to 5 percent by 2010. The sharia banking industry accounted for only 1.98 percent of the total market as of February, a small increase from 1.64 percent a year earlier.

Indonesia has three commercial sharia banks -- Bank Syariah Mandiri, the largest sharia bank by assets, Bank Muamalat Indonesia and Bank Syariah Mega Indonesia.
Numerous conventional banks, meanwhile, have established sharia units to tap into the industry.

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DEFINITION

Ijara
Ijara is a form of leasing. It involves a contract where the bank buys and then leases an item – perhaps a consumer durable, for example – to a customer for a specified rental over a specific period. The duration of the lease, as well as the basis for rental, are set and agreed in advance. Islamic Bank of Britain retains ownership of the item throughout the arrangement and takes back the item at the end.

Ijara-wa-iktana
Ijara-wa-iktana is similar to Ijara, except that included in the contract is a promise from the customer to buy the equipment at the end of the lease period, at a pre-agreed price. Rentals paid during the period of the lease constitute part of the purchase price. Often, as a result, the final sale will be for a token sum.

Ijara with diminishing Musharaka
The principle of Ijara with diminishing Musharaka can be used for home-buying services. Diminishing Musharaka means that we reduce our equity in an asset with any additional capital payment you make, over and above your rental payments. Your ownership in the asset increases and ours decreases by a similar amount each time you make an additional capital payment. Ultimately, we transfer ownership of the asset entirely over to you.

Mudaraba
Mudaraba refers to an investment on your behalf by a more skilled person. It takes the form of a contract between two parties, one who provides the funds and the other who provides the expertise and who agree to the division of any profits made in advance. In other words, Islamic Bank of Britain would make Sharia’a compliant investments and share the profits with the customer, in effect charging for the time and effort. If no profit is made, the loss is borne by the customer and Islamic Bank of Britain takes no fee.

Mudarib
In a Mudaraba contract, the expert who manages the investment is known as a Mudarib.
MurabahaMurabaha is a contract for purchase and resale and allows the customer to make purchases without having to take out a loan and pay interest. Islamic Bank of Britain purchases the goods for the customer, and re-sells them to the customer on a deferred basis, adding an agreed profit margin. The customer then pays the sale price for the goods over instalments, effectively obtaining credit without paying interest.

Musharaka
Musharaka means partnership. It involves you placing your capital with another person and both sharing the risk and reward. The difference between Musharaka arrangements and normal banking is that you can set any kind of profit sharing ratio, but losses must be proportionate to the amount invested.

Qard
A Qard is a loan, free of profit. We use this arrangement for our Current Accounts. In essence, it means that your Current Account is a loan to the bank, which is used by the bank for investment and other purposes. Obviously it has to be paid back to you, in full, on demand.
RibaRiba means interest, which is prohibited in Islamic law. Any risk-free or guaranteed interest on a loan is considered to be usury.

Wakala
Wakala is an agency contract, which usually includes in its terms a fee for the expertise of the agent. We may use it for our large Deposit accounts: you own the capital invested, you appoint us as your agent and pay a fee for our expertise.

www.islamic-bank.com

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Islamic Financial Institution is Not Ready with Net Income Profit Sharing Concept

Senin, 17 November 2008

Jakarta, 17/11. Islamic financial institutions (IFI's) in Indonesia are not ready with the concept of net profit sharing ratio of their shariah products based on the profit sharing principle. At the moment, the profit sharing ratio of IFI's in Indonesia is still using the concept of revenue sharing, or gross profit income, as explained by Hanawijaya, the Director of Bank Syariah Mandiri, at the luncheon of Annual meeting of the Nantional Shariah Board, last Saturday, November 15, at Taman Impian Jaya Ancol Jakarta.
The National Shariah Board has been recommended that IFI's should apply the net income profit sharing instead of the gross profit.

In respond to the National Shariah Board recommendation, Hana said that if it is become an obligatory to apply the net income profit sharing for IFI's , we are not ready since we are still lacking of the human capital and ICT. Therefore, he recommended that there is a necessary to adjust the infrastructure in creating the new system of IFI.

On the other hands, Hana wished that the collaboration between the National Shariah Board and the Islamic Bankers could be improved, and Hana hopes that the National Shariah Board could continuously monitoring the activity of Islamic bankers to ensure that IFI operation is shariah Compliant.

([hsn/Nibra www.pkesinteraktif.com]

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BRI Syariah to become full-fledged Islamic Bank

Kamis, 21 Agustus 2008

Jakarta (21/8). Islamic Bank will develop and growth in this country, apparently the Islamic commercial unit of BRI will become a full-fledged Islamic Bank, this year. There will a transformation of the 3 main Pillars which will be the leading edge for the BRI Syariah spin off.

Eko BambangThe above statement came from Division Head of BRI Syariah, Eko Bambang Suharno. The three main pillars are: Information and Technology, company’s Policy and Human Capital.

The Information and Technology enhancement will stress on the on-line networking system in all branches, including the Islamic windows, which BRI Syariah customers could use BRI conventional system of ATM. "When the spin of process is done, BRI Syariah will work on developing the IT network quality, to create value added," said Eko Bambang.
There will be some improvement in all branches in regard to the system of saving and financing services, with a better management of customer database.

For the company’s policy BRI Syariah will provide its own policy of long term business projection, in determining fund allocation to the potential sectors to increase company’s growth.
" For the Human capital, BRI Syariah will keep on develop its human capital competency, quality, and quantity by internal or external recruitment process” explained Eko.

(Nola/Nibra, www.pkesinteraktif.com)

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USD 196 million agreement between IDB and the Tunisian Company for Electricity and Gas.

IDB - News - 18 Nov 2008

The Islamic Development Bank Group will sign a USD 196 million (123 million Euro) agreement on Friday, 14 November 2008 with the Tunisian Company for Electricity and Gas (acting on behalf of the government of Tunisia). The project financing is described as the largest financial contribution made by the IDB Group to Tunisia to date, further confirming the remarks made by IDB President Dr. Ahmad Mohamed Ali that in the midst of the current international financial crisis, IDB Group remains unaffected by the crisis and is “financially strong and despite the current market conditions, it will be able to meet its commitment to member countries and conduct its normal operations.”

The agreement will deal with the extension of the Ferian and Thyna Power Plant in Tunisia and includes the financing of works related to the procurement and installation of two gas turbine units, including studies, civil works, and commission as well as supervision. IDB Group President Dr. Ahmad Mohamed Ali, Tunisian Minister for Development and International Cooperation Mohamed Nouri Jouini, and President of the Tunisian Company for Electricity and Gas Osman Ben Arfa will sign the financing agreement.

The proposed project joins an extensive list of 55 projects that the IDB Group launched in Tunisia since 1977 amounting to 534 million Islamic Dinars (or USD 759.8 million). Among the IDB Group modes of financing utilized in Tunisia include equity, loans, istisna'a (manufacturing contracts), and technical assistance (grants) targeted towards electricity, water, agriculture, social services, industrial and banking sectors. The cooperation between the Islamic Development Bank Group and the Republic of Tunisia is a unique model of human development for economic development beyond just direct technical cooperation. Through its partnership with Tunisia, IDB has carried out humanitarian operations such as restoring eyesight to more than 5000 blind men, women and children in more than a dozen African countries.

Tunisia is a beneficiary of the IDB’s Merit Scholarship Programme, by which, IDB provided scholarships to 20 Tunisian science and technology researchers at the doctoral and post-doctoral level to study at reputed institutions in the world. Also, Tunisia has supported the IDB’s Scholarship Programme for Muslim Communities in Non-Member Countries and the M.Sc. Scholarship Programme for LDMCs by helping to place 136 students from French speaking African countries under the Scholarship Programme for Muslim Communities and 19 under the M.Sc. Programme in various universities in Tunisia.

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BCA definitely will establish full-fledged Islamic Bank

Kamis, 30 Oktober 2008
Jakarta (30/10) Bank Central Asia (BCA) will certainly establish a full-fledged of Islamic bank by the acquisition of 100% ownership of PT Utama Internasional Bank (UIB).

The President Director of UIB D.E Sutijoso, has confirmed such acquisition will take placed on his press release in Jakarta yesterday, in 2009, the ownership of PT UIB will be officially transferred to BCA.

"Both parties has been signed an agreement under sale contracts on October 24 2008" said the President Director of P T UIB.

The business opportunity of UIB for BCA is quite promising since the UIB asset has a total amount of IDR 665.7 billions, with credit portfolio of IDR 462.2 billions and as of June 2008, the third parties funds has reached IDR 553.6 billions.

D.E Sutijoso said that UIB has five branch offices and 7 cashier's offices, the acquisition process will take about one year to be completed.

Islamic Finance observers, from Karim Business Consulting, Adiwarman Karim, said that the expected growth of Islamic banking business will be raised to 5%. As of July 2008, the Islamic banking total asset has reached IDR 43 Trillions and will increase to IDR 75 trillions which is about 4% by end of the year.

Moreover Karim said: "as a comparison of last year it needed 12 months to have IDR 10 trillion increment, but now it can be achieved by only seven months, it is easy to accomplished the 5% target. In order to achieve the 75 trillions or 4% by the end of the year is very easy and hopefully by 2009 it will pass beyond the 5%." The acceleration growth of Islamic banking business is because now we have Islamic banking act, we have issued sukuk and by next year double tax deduction is going to be removed.(Agus/Nibra www.pkesinteraktif.com)

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