The Map of Sharia Banking in Indonesia is Changing, Consolidation Continues

BANKING - JAKARTA. The prospects for the Islamic banking business this year could be boosted by the consolidation occurring among Islamic banks and Islamic business units. Understandably, several banks are currently preparing the process of separating Islamic business units due to obligations.

As is known, the penetration of Islamic banking business in the country is currently relatively small compared to the Muslim population. Where, in 2023 alone, the penetration of Islamic bank financing in the country was only about 8% based on OJK data.

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The Head of the OJK Banking Supervisory Executive, Dian Ediana Rae, revealed that her party is currently aligning regulations between Islamic banking and conventional banks. One of them is the development of distinctive products for Islamic banks.

Not only that, Dian said the most important effort for the development of the Islamic banking industry is consolidation. As is known, there are currently banks planning to merge to compete with PT Bank Syariah Indonesia Tbk (BSI).

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Take, for example, PT Bank Tabungan Negara Tbk (BTN) which is currently conducting due diligence to acquire Bank Muamalat. The plan is for Bank Muamalat to be merged with BTN's Islamic business unit, which could generate assets of more than Rp 100 trillion.

In addition, Dian has also given signs that there will be other BSI competitors from the private banking sector. Where she has heard preliminary talks between three to four private banks that will merge their Islamic units.

”There are several candidates that we certainly hope will become quite large mergers as well,” said Dian.

Meanwhile, the President Director of CIMB Niaga, Lani Darmawan, revealed that her party has now prepared a spin-off process. Considering, CIMB Niaga's assets have reached Rp 62.74 trillion as of 2023.

However, Lani has not yet wanted to reveal further plans related to the spin-off. She only said that she will continue to fulfill the obligation to spin off if the assets have exceeded Rp 50 trillion.

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”But the concept of office channeling with UUS without a spin-off in my opinion can provide a push to grow faster,” said Lani.

In addition, Lani added that there needs to be supportive regulations such as incentives to provide more interest for banking and investors. Where it can encourage this segment to be worked on more seriously.

On the other hand, the merger of Islamic banks from the private sector could also occur from BCA and BTPN. Where, the two banks currently each have an Islamic bank, although their assets are still small.

Moreover, BCA has also confirmed that it will remain a shareholder of BTPN through the rights issue plan of the bank owned by SMBC. However, BCA President Director Jahja Setiaatmadja confirmed that his reason would still hold 1% of BTPN shares to have interaction with foreign countries.

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”BBCA occasionally needs to interact with several countries, such as Japan, Korea, Thailand, and Malaysia,” he said at the Mirae Asset Securities event (22/2).

IDEAS Research Staff Shofie Azzahra sees that this consolidation between Islamic banks can increase the scale to the expansion of networks and market reach. However, that is not the only solution to increase the penetration of Islamic banks.

She said Islamic banks still need to innovate products and services that meet market demand. And expand the market to explore new markets.

”It is also necessary to build alliances or strategic partnerships with various parties to increase networks and capacity,” she said.