Flipping Up the Pyramid:
The Issue of Enhancing iB Competitiveness
Yuslam Fauzi
CEO
Bank Syariah Mandiri
Presented in:
CEO Forum III
Masyarakat Ekonomi Syariah (MES)
+/- 15 menit
Contents
1
Reflections
a. Maqasid al Sharia
b. Human Capital Readiness
II
Characteristics & Prospects of Indonesia
a.
b.
Historical
Economic & Business
III
What Islamic Bank Should Do?
IV
Expectations
2
I. Reflections
a. Maqasid al Sharia
Menurut Imam Al-Syatibi:
Tujuan syariah adalah terciptanya kesejahteraan manusia
Al Muwafaqat Fi Ushul Al-Syariah, 2:8
Firman Allah SWT:
“Dialah (Allah) yang telah menciptakan kalian dari Bumi (tanah) dan
telah meminta kalian untuk memakmurkannya (Bumi)” Q.S. Hud: 61
3
I. Reflections
a. Maqasid al Sharia
Contoh dari ayat Quran:
“Bukanlah menghadapkan wajahmu ke arah timur dan barat itu suatu
kebajikan, akan tetapi sesungguhnya kebajikan itu ialah beriman kepada Allah,
hari kemudian, malaikat-malaikat, kitab-kitab, nabi-nabi dan memberikan
harta yang dicintainya kepada kerabatnya, anak-anak yatim, orang-orang
miskin, musafir (yang memerlukan pertolongan) dan orang-orang yang
meminta-minta; dan (memerdekakan) hamba sahaya, mendirikan shalat, dan
menunaikan zakat; dan orang-orang yang menepati janjinya apabila ia berjanji,
dan orang-orang yang sabar dalam kesempitan, penderitaan dan dalam
peperangan. Mereka itulah orang-orang yang benar (imannya); dan mereka
itulah orang-orang yang bertakwa. ” (QS. Al-Baqarah [2]: 177.)
4
I. Reflections
a. Maqasid al Sharia
Al Fajr (15 – 20)
Verses
Translation
Arabic
15
16
17
18
19
20
5
I. Reflections
a. Maqasid al Sharia
Affluent
Poor
Middle Class
At least, 4 billion people live on less
than $2 a day
Source: CK Prahalad, 2004.
The Fortune at The Bottom of The Pyramid
Sharia banks should become the locomotive
in flipping up the economic pyramid
The flipped economic pyramid once
occurred in caliphate of `Umar ibn `Abd al`Aziz, where it was very difficult to find zakat
beneficiary (mustahiqq)
6
I. Reflections
a. Maqasid al Sharia
In BSM
66.4%
63.4%
61.9%
61.5%
56.7%
55.8%
53.6%
46.4%
44.2%
36.7%
43.3%
38.6%
38.1%
33.6%
Jun-05
Des-05
Des-06
Korporasi
Des-07
Des-08
Des-09
Des-10
UMKM (Non Korporasi)
Financing composition changed from corporate majority to non
corporate majority
7
I. Reflections
a. Maqasid al Sharia
Daftar 42 Negara Muslim (Majority)
No. Negara
% Muslim
1 Afghanistan
99,7
2 Tunisia
99,5
3 Iran (Islamic Republic of)
99,4
4 Azerbaijan
99,2
5 Yemen
99,1
6 Mauritania
99,1
7 Morocco
99,0
8 Iraq
99,0
9 Niger
98,6
10 Somalia
98,5
11 Maldives
98,4
12 Comoros
98,3
13 Jordan
98,2
14 Turkey
98,0
15 Algeria
98,0
16 Occupied Palestinian Territories
98,0
17 Saudi Arabia
97,0
18 Djibouti
96,9
19 Libyan Arab Jamahiriya
96,6
20 Uzbekistan
96,3
21 Pakistan
96,3
No. Negara
22 Senegal
23 Kuwait
24 Gambia
25 Egypt
26 Turkmenistan
27 Mali
28 Syrian Arab Republic
29 Bangladesh
30 Indonesia
31 Oman
32 Kyrgyzstan
33 Guinea
34 Tajikistan
35 Bahrain
36 Albania
37 Qatar
38 United Arab Emirates
39 Sudan
40 Sierra Leone
41 Brunei Darussalam
42 Malaysia
% Muslim
96,0
95,0
95,0
94,6
93,1
92,5
92,2
89,6
88,2
87,7
86,3
84,4
84,1
81,2
79,9
77,5
76,2
71,3
71,3
67,2
60,4
8
I. Reflections
a. Maqasid al Sharia
1. HDI negara-negara muslim lebih rendah dibanding dengan HDI negaranegara non-muslim.
Statistik:
Human Development
Index (HDI)
Negara Muslim
Bukan Negara Muslim
Rerata HDI
0,578
0,654
Top 30 HDI
0%
100%
Top 40 HDI
Top 50 HDI
8%
1. United Arab Emirates (rank 32)
2. Brunei Darussalam (rank 37)
3. Qatar (rank 38)
4. Bahrain (rank 39)
Penduduk Muslim: +/- 5,2 juta (0,37% dari
total muslim dunia)
10%
1. All above +
2. Kuwait (rank 47)
Penduduk Muslim: +/- 8 juta orang (0,57%
dari total muslim dunia)
92%
90%
Bandingkan dengan total
muslim di Eropa sebesar +/51,46 juta
9
I. Reflections
a. Maqasid al Sharia
2. Education Index negara-negara muslim lebih rendah dibanding dengan
Education Index negara-negara non-muslim.
Statistik:
Education
Index (EI)
Negara Muslim
Bukan Negara Muslim
Rerata EI
0,502
0,606
Top 30 EI
0%
100%
Top 40 EI
0%
100%
Top 50 EI
2%
98%
1. Bahrain (rank 49)
Penduduk muslim:
• +/- 642 ribu
• hanya 0,05% dari total muslim dunia
• lebih rendah dari total muslim di Jerman
sebesar 4 juta orang
Bandingkan dengan total
muslim di Eropa sebesar +/51,46 juta
10
I. Reflections
a. Maqasid al Sharia
3. Life Expectancy Index negara-negara muslim lebih rendah dibanding
dengan Life Expectancy Index negara-negara non-muslim.
Statistik:
Life Expectancy
Index (LEI)
Negara Muslim
Bukan Negara
Muslim
Rerata LEI
0,747
0,780
Top 30 LEI
0%
100%
Top 40 LEI
2%
1. Kuwait (rank 39) , penduduk 2,8 juta
(0,2% total muslim dunia)
Top 50 LEI
8%
1.
2.
3.
4.
Kuwait +
United Arab Emirates (rank 41)
Brunei Darussalam (rank 42)
Albania (rank 45)
Penduduk muslim:
• +/- 9,24 juta
• hanya 0,65% dari total muslim dunia
98%
92%
Bandingkan dengan total
muslim di Eropa sebesar +/51,46 juta
11
I. Reflections
a. Maqasid al Sharia
4. GNI pc negara-negara muslim lebih rendah dibanding dengan GNI pc
negara-negara non-muslim.
Statistik:
Negara Muslim
Bukan Negara Muslim
Rerata GNI pc
11.567
13.797
Top 30 GNI pc
8%
92%
Top 40 GNI pc
14%
86%
1.
2.
3.
4.
5.
6.
7.
Qatar (rank 2)
Uni Arab Emirate (rank 4)
Kuwait (rank 5)
Brunei Darussalam (rank 7)
Bahrain (rank 31)
Oman (rank 33)
Saudi Arabia (rank 36)
Penduduk muslim:
• +/- 35,5 juta
• hanya 32,51% dari total muslim
dunia
Top 50 GNI pc
8%
Bandingkan dengan total
muslim di Eropa sebesar +/51,46 juta
92%
12
I. Reflections
a. Maqasid al Sharia
5. Top 10 negara muslim adalah natural resource-based economy
Top 10 HDI of Muslim Country
Natural resource based-economy
No. Top 10 HDI in Muslim Country
1 United Arab Emirates
2 Brunei Darussalam
3 Qatar
4 Bahrain
5 Kuwait
6 Libyan Arab Jamahiriya
7 Saudi Arabia
8 Malaysia
9 Albania
10 Azerbaijan
HDI
% Muslim
0.815
76.2
0.805
67.2
0.803
77.5
0.801
81.2
0.771
95.0
0.755
96.6
0.752
97.0
0.744
60.4
0.719
79.9
0.713
99.2
Top 10 HDI in The World
Norway
Australia
New Zealand
United States
Ireland
Liechtenstein
Netherlands
Canada
Sweden
Germany
⃰
KEI*
6.66
N/A
6.15
6.02
6.01
N/A
5.15
6.06
4.04
3.81
1. Knowledge Economic
Index (KEI) rendah
2. Rerata KEI sebesar 5,49
Knowledge based-economy
Top 10 HDI of the World
No.
1
2
3
4
5
6
7
8
9
10
Economic Driver
Natural Resource-Based
Natural Resource-Based
Natural Resource-Based
Natural Resource-Based
Natural Resource-Based
Natural Resource-Based
Natural Resource-Based
Natural Resource-Based
Natural Resource-Based
Natural Resource-Based
HDI
% Muslim
0.938
1.0
0.937
1.7
0.907
0.9
0.902
0.8
0.895
0.5
0.891
4.8
0.890
5.7
0.888
2.0
0.885
2.0
0.885
4.0
Economic Driver
Knowledge-Based
Knowledge-Based
Knowledge-Based
Knowledge-Based
Knowledge-Based
Knowledge-Based
Knowledge-Based
Knowledge-Based
Knowledge-Based
Knowledge-Based
KEI*
9.27
8.89
8.87
9.08
8.92
N/A
9.32
9.21
9.52
8.87
1. Knowledge Economic
Index (KEI) tinggi
2. Rerata KEI sebesar 9,11
The Knowledge Economy Index (KEI) takes into account whether
the environment is conducive for knowledge to be used effectively
for economic development
13
I. Reflections
a. Maqasid al Sharia
6. Indonesian Prosperity
HDI Indonesia 2010
Indikator
Value
Ranking
HDI
0,600
108
Life Expectancy
Index
0,815
Kontribusi positif terhadap
HDI
Education
Index
0,539
Kontribusi negatif terhadap
HDI
Income Index
0,491
Keterangan
Kontribusi negatif terhadap
HDI
- Tahun 2009, dari 184 negara, Indonesia menempati peringkat 111 dengan HDI
Index: 0,734.
- Tahun 2010, dari 192 negara, Indonesia berada pada peringkat ke-108 mengalami
peningkatan dibanding tahun 2009.
- Faktor utama penyebab rendahnya HDI Indonesia adalah tingkat Income Indeks
dan Education Index.
14
I. Reflections
b. Human Capital Readiness
Islamic
Banking Asset
(IDR Trillion)
Human
Resource
(Thousand)
1.800*
101*
97.5
83 thousand
human resources
gap to be solved
18
2020
2010
* Assumption:
1. the ratio of asset per employee increases by
13% per year based on data 2007 to 2010
2. Asset growth 34% p.a.
1.
2.
3.
4.
Islamic banking growth must be supported by ......
thousands resources
All of them must have hi-competences and
unquestionable integrity
How can we deal with this challenge?
What kind of education we need to deal with?
15
Contents
1
Reflections
a. Maqasid al Sharia
b. Human Capital Readiness
II
Characteristics & Prospects of Indonesia
a.
b.
Historical
Economic & Business
III
What Islamic Bank Should Do?
IV
Expectations
16
II. Characteristics & Prospects of Indonesia
a. Historical: Growth Driver
to retain Petrodollar &
to reach int’l investment
Middle
East
Abundant
Petrodollars
Europe
Malaysia
Society–driven
iB
Indonesia
Islamic
Banking
Governmentdriven iB
1. Different country/nation has different characteristics in developing Islamic banking;
2. There is a need for developing nation-based iB product development.
17
II. Characteristics & Prospects of Indonesia
a. Historical: Growth Driving Factor in Middle East
Oil prices are rising; Islamic banks are
flush with funds and are driving growth on the back of
strong recent performances.
1. Propelled by rising oil prices and economic diversification,
GCC (Gulf Cooperation Council) countries are growing
rapidly.
2. Islamic banks, or banks that offer Islamic banking units,
have a market that holds half of the world’s oil reserves
and whose citizens have an estimated $1.5 trillion in
private wealth, according to the International Monetary
Fund.
Source: Rajashekara V Maiya, Basudev Banerjee. 2009.
Banking on Faith: Islamic Banking in the Middle East.
Prespective. Finale Infosys.
Islamic banks in Middle East are
petrodollar-driven
18
II. Characteristics & Prospects of Indonesia
a. Historical: Growth Driving Factor in Europe
1. An added spur is the huge liquidity overhang in the Gulf due to the
high petroleum prices for which Shariah compliant investments are
the channel of choice.
2. This situation has led to European states promoting their
acceptance of Islamic finance.
3. Europe’s acceptance of Islamic finance is a natural follow-through to
the emergence of a sizeable Muslim middle and upper classes, but
the players are eyeing the overall population as a cycle of financial
and credit crises pushes consumers to seek ethical financial
services.
Source: Islamic Finance News, Vol. 5, Issue 355th, September 2008
www.assaif.org/content/download/1243/8684/version/1/file/IFN+Sept.+08.pdf
The main reason behind the
development of Islamic bank in Europe is
due to the opportunity maximization of
huge liquidity of in the Gulf countries.
19
II. Characteristics & Prospects of Indonesia
a. Historical: Growth Driving Factor in Malaysia
Government of Malaysia has
played significant role on
boosting Islamic banking industry
Source: Jennifer Chang. 2009. Incentives from the Malaysian Government. Islamic Venture Capital & Private Equity Conference 2009.
PriceWaterHouseCoopers. Online.
www.assaif.org/content/download/3046/18281/file//Incentives%20from%20the%20Malaysian%20Government-Jennifer%20Chang.pdf
20
II. Characteristics & Prospects of Indonesia
a. Historical: Growth Driving Factor in Indonesia
Two ministers’
Joint decree:
- Religious-based
school teach
general studies
- Public school
teach religious
studies
Family of
“Santrinic” just
have
Bachelor Deg
1st Generation
Elementary
Senior
High Sch
ICMI
(the origin of
social
Islamization)
Islamic
Banking
Booming
Diploma
Degree
1949 1955 1961 1965 1970s 1980s 1990s 2000s
A dichotomy era of
“santrinic” *and
“abangan”**
Organisational leaders
come from santrinic
family, a diploma
graduate, which has
experienced in public
school
Newly fashionable of “Mosque in
office” and veil
•
•
Islamic banking is an accumulated result of
those two minister’s joint decree
At present, the development of Islamic
banking has become the driving force of the
development other Islamic finance &
economic practices
*Santrinic is terminology to describe to those who has more concern on religion
**Abangan is a terminology to describe to those who has less concern on religion or syncretism.
21
II. Characteristics & Prospects of Indonesia
b. Economic & Business: Population (Middle Class)
Recently, Indonesia has about
102 mn middle class
Sources: Key Indicator for Asia and Pacific (barrolee.com)
22
II. Characteristics & Prospects of Indonesia
b. Economic & Business: Population (Middle Class)
1.
2.
3.
Sources: Key Indicator for Asia and Pacific (barrolee.com), BPS, Facebook, media reports, A.T. Kearney analysis
Middle-class in Indonesia will be
doubled
Household consumption as GDP
growth driver
There is gonna be a big challenge
to solve
23
II. Characteristics & Prospects of Indonesia
b. Economic & Business: Population (Middle Class)
24
II. Characteristics & Prospects of Indonesia
b. Economic & Business: Future Economy
Source: IMF, Standard Chartered Research (Desember, 2010)
1. Growing 7% per year, Indonesia shall become the fifth biggest
economies in the world by 2030.
2. The Indonesian economy prospect should affect to the Bottom of
the Pyramid. For Islamic bank, this requires sophisticated
capabilities of Islamic banking in providing products & services.
25
Contents
1
Reflections
a. Maqasid al Sharia
b. Human Capital Readiness
II
Characteristics & Prospects of Indonesia
a.
b.
Historical
Economic & Business
III
What Islamic Bank Should Do?
IV
Expectations
26
III. What Islamic bank should do?
?
How to inline the wealth creation & distribution issues in the
light of Indonesian economy prospective in the next two
decades?
What should Islamic bank do next? What business model
should Islamic bank pursue?
27
III. What Islamic bank should do?
How Islamic banks should take the role?
Islamic banks
Shari’a mission
•
Islamic banks should implement its main
mission: wealth creation & distribution
Affluent
Take opportunity optimally
•
Islamic banks is supposedly able to take
optimally these opportunities thru advancing
technology, innovating product scheme, and
creating new business models, etc.
28
III. What Islamic bank should do?
..Giving fair competitiveness & incentives to both BoP Market and
Islamic banks become a strategic enabler for succeeding wealth
creation & distribution in Indonesia…
Competition Fairness
•
•
•
•
•
Fiskal (?)
ATMR (?)
Relaksasi regulasi (?)
Relaksasi syariah (?)
Dst
Which one is better & relevant for
wealth creation & distribution?
Incentives
•
•
•
•
•
Fiskal (?)
ATMR (?)
Relaksasi regulasi (?)
Relaksasi syariah (?)
Dst
29
Contents
1
Reflections
a. Maqasid al Sharia
b. Human Capital Readiness
II
Characteristics & Prospects of Indonesia
a.
b.
Historical
Economic & Business
III
What Islamic Bank Should Do?
IV
Expectations
30
IV. Expectations
1. To Regulators & Ulama: Contextualization & Reactualization
…The most challenging of Islamic bank on tapping up the BoP Market is more than
providing customized, simple, and cheap Products, but on how shari’a compliance
deals with flexibility & cost…
BoP Market Segment
1
Customised
Products
2
Pembiayaan Sektor Pertanian
Contraints: No “IDC” syariah
Possible solutions: Margin
During Construction/Plantation
Sharia Compliance
Flexibility
Simple
products
3
Cheap
products
Context: Pembiayaan Multi Guna
Contraints: compliance cost
•
PMG Konsumer: satu obyek satu akad. Solusi: satu paket satu akad
•
PMG Konsumer/Mikro: Tawarruq. Possible solutions: Bai’ Al Inah
•
Pembiayaan Executing: satu akad satu disbursement. Possible
solutions: ??
•
dsb
Operational cost
Kontekstualisasi
& Reaktualisasi
Compliance cost
31
IV. Expectations
2. To the Government: Tax Fairness
Instead of Tax
Incentives
We need Tax
(Case of Malaysia)
Fairness
(a Proposal for Indonesia)
Tax
Incentives
Tax
Fairness
1.
2.
3.
To create fair competition, Islamic banking
must be placed in “the same playing ground”
with the conventional one
Tax fairness could be considered
See one example in the next slide
32
IV. Expectations
2. To the Government: Tax Fairness
Income Tax of Depositors
Customer’s Question:
“Why are we (depositors) charged with
the same tax rate while facing higher
uncertainty in Islamic Banking?”
33
IV. Expectations
2. To the Government: Tax Fairness
Income Tax of Depositors
Income Tax
For Depositors/
Investors
Conventional
Commercial Bank
Islamic
Commercial Bank
Investment
Bank
Both principal and
interest are
guaranteed
Principal is
guaranteed but yield
is not guaranteed
Both principal and
interest are not
guaranteed
Debt Culture
(low risk)
In Between
(moderate risk)
Equity Culture
(high risk)
Interest
Profit Sharing
Dividend
20%
20%
1.
2.
3.
?
15%
Corporate Tax
10%
Individual Tax
Based on the risk-return principle, is 20% of Income
Tax for islamic banking depositors fair?
How much is the appropriate percentage of tax for
Islamic banking depositors (investment account)?
We think it should be lower than 20%
34
IV. Expectations
2. To the Government : Human Capital
Quality of the educational system
How well does the educational system in your country meet the
needs of a competitive economy? [1 = not well at all; 7 = very well]
Therefore, to fully utilize the
‘window of opportunity’ in 20202030, Indonesia needs to
immediately initiate policies and
programs to prepare high quality
human capital to meet the rapid
changing demand of labor
Source: Klaus Schwab. 2010. The Global Competitiveness Report 2010–2011. World Economic
Forum. Geneva, Switzerland 2010
Intenational Labor Org.
(ILO) - Indonesia
Source: ILO Jakarta News Letter. 2008. Indonesia-ILO to
Continue Tackling the Worst Forms of Child Labour.
http://www.ilo.org/wcmsp5/groups/public/---asia/---robangkok/documents/publication/wcms_101368.pdf .
1.
2.
3.
Education in Indonesia has not matched yet with business needs
Can our education meet Islamic banking needs?
Supposedly, educational institution can play hand in hand with business
player, especially Islamic banking players
4.
We should consider tax incentives for sharia human capital development
35
IV. Expectations
2. To the Government : Human Capital
Islamic
Banking Asset
(IDR Trillion)
Human
Resource
(Thousand)
1.800*
101*
97.5
83 thousand
human resources
gap to be solved
18
2020
2010
* Assumption:
1. the ratio of asset per employee increases by
13% per year based on data 2007 to 2010
2. Asset growth 34% p.a.
1.
2.
3.
4.
Islamic banking growth must be supported by 83
thousands resources
All of them must have hi-competences and
unquestionable integrity
How can we deal with this challenge?
What kind of education we need to deal with?
36
IV. Expectations
2. To the Government : Human Capital
Lessons Learnt from Malaysia
1. Tax incentives on training in Islamic Finance
2. Tax exemption for non-resident Islamic finance expert
3. Additional 20% stamp duty exemption on Islamic Financial
instruments
4. Tax deduction for promoting MIFC
37
IV. Expectations
2. To the Government : Human Capital
Experience
Islamic banking practitioners are
unsatisfied with unfair decision
made by court due to lack of
understanding of Islmic economic
and finance.
Islamic banking had
unnecesary lost
Government should take a role to equip
adequate training for judges who are
involved in dispute in sharia economic &
finance
38
Finish
39