Islamic Financial Institutions Honored in Investor Magazine Shariah Awards

Jakarta Globe

Business magazine Investor has honored 10 Indonesian Islamic financial institutions in this year’s Best Shariah Awards, which are based on companies’ 2010-11 financial performance.

Bank Syariah Mandiri, a subsidiary of state-controlled lender Bank Mandiri, was named the Best Shariah Bank. In the category of a Shariah unit with assets more than Rp 500 billion ($53 million), the award was given jointly to the Shariah units of regional lenders Bank DKI and Bank Sulselbar.

Investor magazine reviewed 17 aspects of lenders’ performance, including capital adequacy ratio, non-performing Islamic loans, return on assets, return on equity, net interest margin, the ratio of operating costs to operating revenue and net income.

To be eligible to win, financial institutions need to have been operating for at least two years

In the category of Shariah insurance companies, Investor named as winners the Islamic units of conventional insurers Asuransi Jiwa Sinarmas, Avrist Insurance, Asuransi Sinar Mas, Asuransi Umum Mega and Reasuransi Nasional Indonesia.

In multifinance, the award was given to Amanah Finance and also the Shariah unit of Trust Finance Indonesia.

Shariah financial institutions comply with Islamic rules that forbid charging interest or conducting businesses that are banned by the religion, such as gambling and alcohol.

Despite Indonesia having the largest Muslim population in the world, its Islamic financial sector lags other heavily Islamic countries, including Malaysia.

Central bank data shows the total assets of Indonesia’s Islamic lenders currently stands at Rp 147.9 trillion ($15.7 billion), well below Malaysia’s 355 billion ringgit ($114 billion). Indonesia has 12 times as many Muslims as its northern neighbor.

Lack of awareness of Shariah financial products has meant that only a relatively small proportion of Indonesians Muslims put their money in Shariah-compliant products.

The Investor magazine award is intended to boost awareness of Shariah finance providers. It was the seventh time the awards had been given by the magazine, which is affiliated with the Jakarta Globe.

The awards were given at a ceremony at the Aryaduta Hotel in South Jakarta on Wednesday.