IDB maintains top credit rating from Standard & Poor's for 7th Consecutive Year

Monday, 05 January 2009

The Standard & Poor’s credit rating agency, for the 7th consecutive year, rated the future outlook of the Islamic Development Bank Group as “stable” in its annual report on international finance institutions issued during December 2008. The Standard & Poor’s credit rating agency, for the 7th consecutive year, rated the future outlook of the Islamic Development Bank Group as “stable” in its annual report on international finance institutions issued during December 2008.

The agency awarded IDB Group with its highest credit rating of (AAA) for the long term and (A-1+) for the short term, reporting that IDB’s “capital position is extremely strong and its liquidity ample.” According to the report released by Standard & Poor’s, the ratings on IDB were based on IDB’s strong capitalization, strong liquidity, a development-related asset portfolio that has performed well in relation to its large pool of borrowers, and an expected continued preferred creditor treatment.

Currently, IDB has successfully received the highest credit ratings from all three leading rating agencies in the world – Moody’s, Fitch, and now, for its seventh consecutive year, Standard & Poor’s. The strong ratings allow IDB to mobilize resources from international financial markets at low costs. President of IDB Group Dr. Ahmad Mohamed Ali reiterated that the high ratings of IDB for its seventh consecutive year is due mainly to the robust financial position of the Bank as well as the strong support of its member countries. The European Parliament and the Basel Committee on Banking Supervision have also confirmed IDB’s place in the list of zero-risk development institutions.

The top rating by Standard & Poor’s has had an enormous effect in consolidating confidence in IDB and its role in promoting the development process in member countries. The Standard & Poor’s report stated that IDB’s net income jumped by 32% during 1428H to SR 164 million from SR 123 million one year earlier, “mainly due to increased income from operation assets.”

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Islamic Banks need more funds to be mobilized

Selasa, 06 Januari 2009

Solo (06/1).

Although there is a great opportunity to expand the Islamic market share, unfortunately the growth was quite slow. It has something to do with the funds mobilization from the society less than expected.

"we have to realized that the working capital accumulation is less than what has been expected, spreading equally from and within the society," as explained by Muh Rudi Nugroho the general secretary for MES (shariah community) Solo. Therefore, a new strategy is needed to mobilized funds from the society and put it back into the circle in production sectors and then goes back to the society through Islamic banking services.

In practice, the Islamic banking system, has been successfully applied in non Muslim countries and runs by non Muslim people, it indicated that the Islamic finance system could be applied anywhere as Islamic banking service is universal or is a blessing for all men kind in the world.

(Amri Yahya/Nibra www.pkesinteraktif.com)

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BNI Syariah: To Launch Credit Card

Kamis, 15 Januari 2009

Jakarta (15/1) The shariah division head of BNI Ismi Kushartanto stated that BNI syariah will launch its new product, shariah credit card, there is other shariah credit card it called Dirham Card from Bank Danamon syariah.

“we are trying to improve our product and praise to Allah that in 2009 we will be able to launch our shariah credit card,” said Ismi Kushartato to pkesinteraktif.com. Aside from the sophisticated Technology, the credit card of BNI syariah comes with health and life insurance for the card holder. In line with BNI syariah business expansion, in 2009, Ismi Kushartanto set target to attract 10.000 BNI syariah credit card holders, which focus on middle and high class segments.

“There are three types of BNI syariah credit card, platinum, gold and regular, depend on the needs of each customer,” said Ismi. It is expected that with BNI syariah credit card, the community could fulfill their basic needs by using the benefit of shariah credit card.

(Agus Y/ Nibra www.pkesinteraktif.com)

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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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