Diversification of Islamic Financial Insturments
55
over 20%. While for Indonesia, the growth is getting stronger every year, the impact of Islamic
finance industry on the national economy is still relatively small as compared to the
contribution of conventional finance industry. Likewise, Indonesian contribution to global
Islamic finance is also quite marginal, with a share of 1.6% of the global Islamic banking assets
(June 2016, IFSB 2017 report). In 2015, Indonesia contributed only 1.39% of global Islamic
finance asset (as compared to Malaysia 9.56%) (IFSB, IFSI Financial Stability 2015). This rose
to 1.6% by June 2016 (IFSB May 2017).
3.2.3. ISLAMIC BANKING IN INDONESIA
Industry Development
Islamic bank in Indonesia was established in 1992 through the establishment of Bank
Muamalat Indonesia (BMI). BMI was the single full-fledged Islamic bank until 2002, when the
second full-fledged Islamic bank was established - namely Bank Syariah Mandiri. In 2008, the
new law on Islamic Banking was tabulated. The Islamic Banking Act 2008 set a new direction
of the industry with a solid legal foundation and best approach in regulating and developing
Islamic banking industry in Indonesia.
Since then, the growth of Islamic finance industry in Indonesia has been impressive. The total
assets of Islamic banking industry in Indonesia reached IDR 356 trillion in 2015 (IDR 145
trillion in 2011) with CAGR 19.5%, as can be seen in the following table.
Table 21: Growth of Assets of Indonesian Islamic Banking Industry (IDR Billion)
2011 2012 2013 2014 2015 2016
Total Asset on Islamic
Banking Industry
145.466 195.018 242.276 272.343 296.262 356.504
Growth of Assets 49.17% 34.06% 24.23% 12.41% 8.78% 20.33%
Market Share of
Indonesian Banking
Industry
3.98% 4.58% 4.89% 4.85% 4.83% 5.12%
Source: OJK Statistic of Indonesian Islamic Banking Industry (December 2016)
The growth of the industry is also reflected in the increasing number of institutions that
provides Islamic banking services. The Islamic banking institutions in Indonesia are classified
into three types, namely: full-fledged Islamic bank, Islamic business unit, and Islamic rural
bank. At the end 2016, there were 34 Islamic banks with total branches more than 2.301
(previously 1.737 offices in 2011) representing 7% of the total banking branches in Indonesia,
as the following table demonstrates.