Enactment of Law no. 21 of 2008 issued on July 16, 2008 has provided more adequate legal basis to the development of Islamic banking in Indonesia, and consequently will accelerate the growth of the industry. With the progress of the construction of an impressive annual asset growth averaging more than 65% in the last five years, it is expected that Islamic banking industry will have a more significant role in supporting the national economy.
Islamic banking in Indonesia has a unique characteristic that is composed of Commercial Islamic Banks (BUS), Islamic Business Unit (UUS), and sharia rural banks (BPRS).
Islamic commercial bank (BUS) is a bank that is fully transacts sharia and not a business unit. Commercial Bank is a Sharia Islamic Banking provides services in payment traffic.
Sharia Business Unit, which further referred to UUS, is a unit of Conventional Commercial Bank head office that serves as the main office of the agency or unit conducting business based on Sharia principles, or unit of work in a branch office of a bank located outside the country conducting conventional business which serves as the head office of sharia branch offices and / or sharia unit.
Basically system of Sharia Business Unit (UUS) is equal with Commercial Islamic Banks (BUS). The difference is in the status of the establishment. BUS has independent status and not shelter under the conventional banking system. While UUS status is not independent and still under the auspices of the management rules of conventional banking.
Islamic banking in Indonesia is a financial institution that is concerned about the development of the real sector. Amounted to 61.29 % or IDR 83.09 Trillion of total Islamic banking financing is channeled to the SME sector.
Since 2012, the Indonesian Islamic banking is more directing its financing to the productive sectors as well as working capital and investment to reduce the financing to consumptive sectors such as automobile and home mortgage.
Until middle of 2013, the growth of Islamic banking was encouraging. As of June 2013, the growth of Islamic banking assets reached 40.64% increase from IDR 155.41 trillion in 2012 to IDR 218.57 trillion in 2013. Financing has reached IDR 171.23 trillion (grew 45.61%) and raising funds reached IDR 163.97 trillion. If seen during the last five years, the growth rate of Islamic banking in terms of assets, financing and deposits showed an upward trend.
According to data from FSA by December 2013 the total combined assets of Islamic banks (BUS) and Sharia Business Unit (UUS) is estimated to reach IDR 242.28 trillion, an increase of 24.23% from December of previous year. Increasing Islamic banking assets exceeded the asset growth of the national banking industry that grows 16.23%. The number of accounts is also experiencing growth. As of October 2013 the total deposit accounts in Islamic banking and finance recorded 15.58 million, an increase of 3.16 million of the total accounts in October 2012 that as many as 12.42 million.
The high growth of Islamic banking which in turn increases the market share of Islamic banking is supported by the aggressive expansion of Islamic Commercial Bank and Sharia Business Unit services currently. Since the end of 2012 until the month of June 2013 the number of BUS in Indonesia is 11 banks while UUS are 24. Although there has been no addition of new BUS and UUS, BUS office number in June 2013 increased by 13.8% compared to the number of BUS office in late 2012.
At the institutional aspects, elements that distinguish between Islamic banks and conventional banks is the necessity of Sharia Supervisory Board (DPS), which oversees the operations of the bank and its products to conform to sharia lines. In practice, DPS supervised by the National Sharia Board-Council of Ulama Indonesia (DSN-MUI), which among its functions is to examine and give fatwas for the products developed by Islamic banks.
Sharia Rural Bank (BPR-Sharia) is one of the financial institutions of Islamic banking, which the pattern of operations is following the Islamic principles.
BPRS operations provide financing to small businesses in the area that is difficult to reach by public banks.
BPRS established by Law no. 7 of 1992 and Government Regulation (PP) No.. 72 of 1992 on Bank Based Sharing Principles. In Article 1 (point 4) of Law no. 10 of 1998 on the Amendment of Act 7 of 1992, stated that the BPRS is a bank conducting business based on sharia principles in their actions and do not provide services in payment traffic.
BPRS excellent characteristic is operating in remote areas even in areas remote areas so as to provide services to a wider range to the public.