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Sharia lenders seek liquidity incentives amid spin-off push
The OJK issued a regulation in July that obligates sharia business units with significant assets to convert to sharia banks before the end of 2026.
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A teller serves a customer at Bank Muamalat in Jakarta, in this file photo dated Sep. 15, 2019. (JP/R. Berto Wedhatama)
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ublicly listed lender CIMB Niaga has urged the Financial Services Authority (OJK) to provide incentives to help banks convert their sharia business units into fully-fledged sharia lenders amid a regulator push to consolidate the sharia banking sector in the country.
CIMB Niaga, which currently has the biggest Indonesian sharia business unit in terms of assets, pointed out that the stimulus could take shape in the form of a lower average primary reserve requirement (GWM), the minimum amount of bank liquidity held in the central bank.
“The GWM incentive for our sharia bank would ease [the growth]. In Malaysia, we could also grow because of a similar incentive," CIMB Niaga's director for strategy and finance Lee Kai Kwong said during a press briefing on Friday, as quoted by CNBC Indonesia.
Read also: Cultivating opportunities in Indonesia's Islamic financial industry
Initially, Indonesian lenders could opt to establish a sharia business unit as an integral part of their overall banking operation instead of creating a separate bank.
However, the government and the lawmakers agreed in 2022 to pass a law that would oblige lenders to separate their sharia business units as a separate bank, which is also known as a spin-off policy.
Spin-off is mandatory for sharia units with total assets of more than Rp 50 trillion (US$ 3.23 billion) or that hold more than half of the assets of their parent company, and lenders must do so by the end of 2026, according to OJK regulation No. 12/2023, which took effect this July.
