Affected By COVID-19, Sri Mulyani Asked Sharia Banking To Revise Its Growth Target

Minister of Finance, Sri Mulyani. (Photo: Bank Indonesia)

JAKARTA - The Islamic finance industry has also not escaped the impact of the COVID-19 pandemic. Significant impacts have been seen since the first time the SARS-CoV-2 virus entered Indonesia in early March. Therefore, Islamic banking must also be vigilant and immediately revise targets like other banks.

Minister of Finance Sri Mulyani said the risk posed by the COVID-19 pandemic was increasing. The impact of the pandemic also stopped community activities and increased the risk of increasing non-performing financing (NPF).

In 2019 the Islamic banking industry recorded double digit growth with the market share in the financing sector increasing to 5 percent.

However, Sri Mulyani said, the COVID-19 pandemic had caused global panic which caused tremendous turmoil on finances around the world. The Jakarta Islamic Index was no exception, which was corrected sharply by 6.44 percent. At the end of March the Jakarta Islamic Index recorded it was below 400 before it finally managed to climb again to 500 in early April.

To that end, Sri Mulyani asked the Islamic banking industry to start revising its growth target. This is because the current conditions are so extraordinary compared to the crises that have previously been through Indonesia.

"Currently, Islamic banking must begin to revise the growth target similar to other banks," he said, during a virtual discussion, Thursday, July 23.

Sri Mulyani said, Islamic bank financing was mostly channeled to the non-business sector. Like the owner of a tall house of Rp.83.7 trillion, other household appliances including multipurpose amounting to Rp.55.8 trillion.

Not only that, Islamic financing was also channeled into the wholesale and retail trade sector amounting to Rp. 37.3 trillion, construction Rp. 32.5 trillion, and Rp. 27.8 trillion in the processing industry.

Furthermore, Sri Mulyani said, the ability of Islamic banking to manage NPF is one of the benchmarks for whether or not the sharia industry can survive and rise after the pandemic.

"The increased risk of sharia banking in the form of non performing loans or non performing financing will be one of the determinants of being able to survive and bounce back. The implementation of social restriction policies has caused a decline in activities in the manufacturing sector, trade and even project projects. cancellation, "he explained.

In addition, Sri Mulyani also reminded that Islamic banking must be aware of the risk of tightening liquidity. It is the same as what conventional banking is experiencing today.

"Be aware of the risk of increasing liquidity difficulties, decreasing financial assets, decreasing profitability and the risk of slowing or even negative growth in Islamic banking," he said.