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The prospect of a merger between Bank BTN Syariah and BMI
BTNS has been hailed by Islamic financial stakeholders, particularly those from the State-Owned Enterprises (SOEs) Ministry, who are excited about the possibility of a merger of BTNS and BMI.
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A Bank Mandiri Syariah employee serves a customer at the lender’s Central Jakarta office in this file photo.
(JP/Wendra Ajistyatama)
T
here is a positive pattern in the development of Islamic banking worldwide, particularly in Indonesia. According to figures from the Financial Services Authority (OJK), as of September 2023, Islamic banking assets in Indonesia had grown to Rp 831.95 trillion (US$53.6 billion), or 10.94 percent annually. The national Islamic banking market share has decreased even if assets have increased; it was 7.31 percent in the first half of 2023 but is now only 7.27 percent.
This indicates that the expansion of Islamic banking is very slow when compared with its conventional banking counterpart. Indonesia must therefore use the conversion approach if it wishes to grow its market share of Islamic banking. If it continues to rely solely on organic channels, the Islamic banking market share will find it extremely difficult to compete with conventional banking due to the size of the latter.
However, it is regrettable that the majority of Indonesia's Islamic banking assets come from a single, sizable Islamic bank, Bank Syariah Indonesia (BSI), which accounts for 38.45 percent of all Islamic banking assets in the country, equivalent to Rp 319.85 trillion as of September 2023. It is hoped that by 2024, at least three new sizable Islamic banks with assets in the triple digits will be able to rival BSI.
As of September 2023, BTN Syariah's (BTNS) total assets reached Rp 48.41 trillion, increasing 17.26 percent from the previous year, making it the fourth-largest Islamic bank nationwide and the second-largest window after Bank CIMB Niaga Syariah. Approximately 97.43 percent of the total BTN Islamic financing came from housing financing, which was determined by the risk tolerance of the parent company, Bank BTN. Since there are no Islamic banks that focus on financing homes, particularly in the subsidized housing market, this is really seen as a very good point. In fact, this specialty will benefit from the merger of BTNS with the retail financing-focused Bank Muamalat Indonesia (BMI).
Meanwhile, BMI, which merged with BTNS as of September 2023, has large-scale assets and is also the second-largest Islamic bank after BSI. BMI has recorded asset growth of 10.7 percent year-on-year (yoy) amounting to Rp 66.2 trillion compared with the previous year, which was only Rp 59.8 trillion. With large asset growth, BMI was able to become the second-largest Islamic bank above CIMB Niaga Syariah, which previously held the title of second-largest Islamic bank.
When these two powerful forces are combined, this will add new strength to the Islamic banking industry, apart from BSI and of course will change the banking landscape nationally. Of course, this will have a positive impact on the Islamic banking industry from the side of the big players. The total assets of BTNS and BMI, if combined, will reach Rp 115 trillion by becoming an Islamic bank that will focus on housing financing and retail business.
It is evident that the implementation of OJK Regulation 12/2023 will have an impact on two Islamic banks: Bank CIMB Niaga Syariah and BTNS, which are both Islamic windows of major national banks. Thus, BTNS has been hailed by Islamic financial stakeholders, particularly those from the State-Owned Enterprises (SOEs) Ministry, who are excited about the possibility of a merger of BTNS and BMI.
