DUAL ECONOMIC SYSTEMDR. DIAN EDIANA RAEEXECUTIVE DIRECTOR, HEAD OF BANK INDONESIA REGIONAL OFFICE FOR SUMATRA

Delivered on :58th Padjajaran University AnniversaryBandung, September 2015

OUTLINE• Background

• Framework

• Where are we (BI)?

• Strategy

• Timeline

Background

• Lessons learnt from current and past experience of Islamic economic’s development in Indonesia:

a) Current approach is much more business oriented as it heavily focuses on Islamic banking, so that Islamic banks just mirror that of conventional banks.

b) The use of Islamic terms makes Islamic banking exclusive and limits the chance for Islamic economic to grow universally as rahmatan lil’alamiin Islamic Banking’s asset share stays less 5% of industry.

c) Ignite retention in region where moslem is minority.

• The need for more strategic, comprehensive, conceptional and pragmatic Islamic economic’s development that leads to a better dual economics system, through:

a)Human Capital and market Empowerment, incl. research

b)Supporting infrastructure, incl. legal, data and information

c)Regulatory and supervisory;

d)Product and market development; and

e)Efficient industrial structure

In such an inclusive manner.

Framework

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Synergy between two systems

Knowledge people must take responsibility for their own development and placement – Peter F.Drucker

Where are we (BI)?

a. Limited mandate on BI, as not stated in UU BI, in developing Islamic economics

b. Limited commitments from government in supporting the development in Islamic economic and finance

a. design business model for stimulating Islamic economic and finance

b. Expanding the role of Islamic social institution (Zakat dan Wakaf).

c. Use of Islamic Bills/Bonds as monetary instrument as well as project financing.

d. Develop Islamic money market instrument

e. Eradicate poverty through Islamic financial inclusion

Weakness Strengths

Threats Opportunities

a. BI’s policy does not directly affect Islamic economics industry

b. Islamic monetary operation acts as complement, per se.

c. Limited instrument & shallow Islamic money market.

d. There is no synergy b/w BI & Gov. in supporting development financing.

a. Role as authority in monetary & financial stability, both conventional & Islamic

b. Role as Lender of Last Resort (LOLR) & Authority in Islamic money market

c. Pursue active role in developing Islamic economic internationally

d. Has financial inclusive program, including Islamic financing.

Strategy

HC&

Market Empowerment

Supporting Infrastructure

Regulatory&

Supervisory

Product &Market Dev

EfficientIndustrialStructure

• Increasing awareness through soft skill, Education & Value inducement

• Technical assistance from int’l body• Engagement & ownership by

designing business model for Islamic Entrepreneur

• Pilot project, financing with zakat

• Informational backbone

• Money market’s Infrastructures

• Good Governance -waqf core principle-roadmap BWI-inclusive Islamic financial service board -harmonization

• Encouraging sukuk issue, bothgovernment & corporate,Including waqf management

• Islamic-Money Market’s Scheme development

• Inter-sectoral & authoritycoordination

• Islamic Economic & Market Research

Timeline

2014-2019

2019-20241. Inisiate shariah’s financial market development

through int’l institution (OIC, IDB, IIFM, IILM, IFSB)

2. Suggest optimal financing schemes w.r.t region, and industrial character and local wisdom.

3. Amplify the impact of Islamic social finance through zakat, wakaf, and relevant government and authority’s cooperation.

3. Sending expert on Islamic economic & finance as advisor to newly develop country on Islamic economic and finance.

4. Role model for development of Islamic economic in the world

5. Center of Islamic economics and finance education

1.Intensely involved in Indonesia-Islamic Financial Architecture (AKSI)

2.Establishment of int’l General Zakat in Indonesia

3.Coopertaion w/ stakeholders (MES, IAEI, PKES, etc)

4.Int’l Workshop on zakah and waqaf

20151. Amendment UU BI2. Cooperation w/ other NIFC authority in Islamic economic and finance development in Indonesia3. Strategic alliance w/ int’l institution incl. the development of Islamic social finance4. Cooperation w/ university in research, dissemination and education of Islamic economic5. Empowering skill and knowledge of Islamic financial HR in macroprudensial, financial inclusion, monetary and risk mgt. 6. Initiate international forum for regulator of Islamic economic and finance in regular basis.

-THANK YOU-