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Govt launches Indonesia’s largest sharia bank. Observers sense opportunity.
Bank Syariah Indonesia is the result of a merger of three state-owned sharia banks.
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A Bank Mandiri Syariah employee serves a customer at the lender’s Central Jakarta office. (JP/Wendra Ajistyatama)
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ndonesia is seeking to boost its currently limited sharia finance sector with the launch of Bank Syariah Indonesia (BSI) this week, the country’s largest sharia bank.
BSI, which was launched on Monday, is the result of a merger of three state-owned banks’ sharia subsidiaries, namely Bank Syariah Mandiri (BSM), BNI Syariah and publicly listed BRI Syariah. The government expects the bank to serve some 15 million customers as it seeks to develop the country into a sharia finance hub.
Anugerah Mega Investama director Hans Kwee said the benefits of sharia banks, such as waived administrative fees for certain savings options and fairer credit card exchange rates, would likely to entice some customers to make the switch.
“There are a lot of benefits of sharia banking that attract even those who are not Muslim. Among Muslim consumers themselves, I think as they get older, they want to comply with Islamic rules of finance, and they will switch to sharia banks. So the prospect of sharia banking is bright,” he told The Jakarta Post on Tuesday.
For credit cards, for example, sharia banks do not apply a traditional interest rate system and instead impose a fee that is generally lower than that of conventional credit cards.
Although Indonesia is the world’s largest Muslim-majority country, sharia finance makes up just 9.9 percent of the country’s total financial sector because of low demand attributed to low financial literacy and inclusion.
Despite this limited penetration, sharia finance assets grew 21.48 percent year-on-year (yoy) to Rp 1.77 quadrillion (US$125.31 billion) last year, while loan disbursement increased 9.5 percent. This growth stood in contrast to the 2.41 percent contraction in loan disbursement recorded by the conventional financial sector, according to the Financial Services Authority (OJK).
