general information

About ALIF

PT. Al-Ijarah Indonesia Finance (ALIF) is a limited liability company formed to service the financing needs of Indonesian business community in particular and South East Asian business community in general. Other than its financing role, ALIF will also provide advisory services on International finance, trade & investment to the business community in Indonesia. ALIF stands ready also to provide consultation to foreign entities primarily from Central Asia & Middle East planning to enter Indonesian market.

At the moment, the financial products of ALIF consist of Ijarah (lease), Ijarah Muntahia Bittamlik (lease and hire purchase), and Murabaha (purchase and resale). In its financing operations, ALIF will operate primarily in the medium to large ticket arena, dealing with transactions from equivalent of USD 200 thousand and above.

Acceptable transactions will be “credit” driven, that is, the decision to participate in a financing transaction will depend on the credit worthiness of the transaction. For major transactions, ALIF will use its networking to arrange for international syndications inviting Gulf-based major financial institutions.

On the advisory side, the role of ALIF basically will be to bridge financing, trade, and investment activities between Indonesia and other major emerging markets with particular focus on countries in Gulf region (Bahrain, Oman, Qatar, Saudi Arabia, and United Arab Emirates), Iran, Kazakhstan, and Turkey.

Here, ALIF will assist all economic entities (from private sector, state-owned enterprises, and regional government) in the country looking for major financiers or strategic investors from primarily Gulf region for viable projects in Indonesia. On the other hand, ALIF will also use its local expertise to be reliable partners of foreign parties interested to penetrate the market in Indonesia, be in the area of financing, investment, or trade.

The Ownership Structure

Three financial institutions own equally the capital of ALIF amounting to Indonesian Rupiah (IDR) 105.0 billion. These institutions are: Bank Muamalat Indonesia, Bank Boubyan Kuwait, dan International Leasing & Investment Company (ILIC) Kuwait.

Bank Muamalat Indonesia (BMI) is one of the key founding members of ALIF. BMI already has an established network in Indonesia that will help strengthening business development activity of ALIF.

Boubyan Bank, Kuwait (BB) is a fast emerging major Islamic financial institution in Middle East and has a strategic interest in Islamic banking and investments in Indonesia. BB support to Al Ijarah is important to its strategic business plan in this market.

International Leasing & Investment Company, Kuwait (ILIC) is one of the pioneer Islamic leasing company with an outstanding performance record during the last seven years and owns diverse and high level expertise in leasing financial products. ILIC targets emerging economies primarily in the Middle East and Asia. Indonesia is on the priority list of countries for expansion of Islamic lease financing and investment products.

Target Market and Business Focus

Indonesian financial sector is growing at a fast pace. There are 130 banks in Indonesia, three of these are Islamic and 23 conventional banks also have Islamic finance windows. Total banking assets are about IDR 1,721 trillion (USD 191 billion). Islamic financial assets are only 1.5% of this amount and therefore indicate an immense potential growth of this sector in Indonesia. Moreover, the Indonesian Government represented by the Central Bank & the Ministry of Finance is willing to boost the Islamic Financial share become 5% by 2008. Hence, the establishment of ALIF is timely, in a sense that it will not only contribute to this development of Islamic Finance in the country, but also to seize the opportunities coming with it.

Under its financing activities, ALIF will focus on sectors of Indonesian economy that display strong and consistent profitability and possess sustainable competitive advantages in each particular industry. The target sectors will include corporate entities with experience and proven cash flows to service the lease financing and shows credit worthiness. The focus will be on strong security, supporting cash flows and earning potential. Initially, the target sectors will be:

• Transportation
• Mining: Tin, Gold, Nickel etc.
• Oil and Gas
• Coconut oil and bio products
• Cement
• Other sectors which show strong credit worthiness

Another important area of focus would be to arrange funding facilities with various financial institutions in Indonesia and abroad. Bank Muamalat Indonesia would be the first such institution to be followed by other Islamic institutions and other entities willing to deal with Islamic financial institutions.

Short to Medium Term Objectives

The medium term objective of ALIF will be to position itself as a strategic intermediary that can increase financial activities between Indonesia, as a major economy of South-East Asia, and primarily the Gulf countries. Although the objective is bigger than just making profit, it could only be achieved if the company could make a sustainable profit.

In order to be able to make sustainable profit, the company plans to successfully achieve a number of other objectives and goals. Some of these are “non-financial” in nature (they will not add directly to the profits of the Company) but are necessary to the Company’s short to medium term objectives. The major immediate goals and objectives of ALIF are as follows:

1. Build the infrastructure of the Company

   The initial challenge of the Company is to build its team of key people, properly train them and develop and/ or build the policies, procedures, and systems support necessary for them to do their jobs, properly and efficiently. It is anticipated that the Company will be able to begin limited operations immediately, with full operations underway by the middle of its first year of operations.

2. Build name and Company recognition

   In order to meet its objectives, ALIF faces the challenge of building recognition of its name and expertise. This involves the immediate penetration into selected areas of the Indonesian marketplace. As the Company matures and grows, it involves expansion of this penetration to incorporate the entire expected market areas of the Company.

3. Build relations with other financial institutions.

   To widen the scope of its financing, ALIF must leverage its equity base and shareholder reputation with outside funding partners. ALIF intends to seek funding partner participation in the majority of the financing it originates. In such relationship, ALIF will be able to earn, in addition to a share of the profits, a premium for the origination and packaging of the transaction, and should also be able to earn a mudharib or agency fee for the servicing of the transaction on behalf of the funding partner.

The paramount objective of ALIF would remain to eventually list on the Jakarta stock exchange based on its successful record, thus; providing the shareholders a reachable material value at their disposal.

There are a number of critical success factors that ALIF will consider in order to establish and ensure the viability of future operations. These are:

• Leasing technical expertise
• Capital and funding capabilities in the medium term
• Market positioning: customer reach, branch network potential
• Building brand name
• Innovative and customer friendly product development
• Shareholder support

Human Resources Policy

ALIF is committed to create a conducive working environment to reflect its Islamic character. It will attempt not only to create 'Shariah compatible' financial products, but also 'Shariah compatible' human relation, where respect, integrity, service and growth will be the key words. ALIF will attempt to optimize the potentials of its staff for the growth of the company. However, ALIF will not only consider its staff as only a means for the growth of the company, but also as the end, meaning that the growth of the company will also be accompanied by the personal growth of its staff. This in turn will also foster the growth of the company.