Bank Indonesia suggested that Bank Syariah Mandiri and Bank Muamalat bide time before floating their shares on the bourse.
BI director for sharia banking, Edy Setiadi, says that there are still problems plaguing Islamic-based banks’ operations in Indonesia, such as their huge reliance on haj funds managed by the Religious Affairs Ministry, which is the reason the country’s sharia banking has seen lower-than-expected growth in recent months.
“They should proceed when they have a firm foothold in the banking industry, and their brand name is recognized among the public,” Setiadi said.
Both Bank Muamalat, the country’s oldest Islamic-based bank, and BSM, the sharia unit of Indonesian lending giant Bank Mandiri, have announced their plan to hold IPOs as early as next year to boost their capital for expansion, as well as to comply with the new banking ownership rule.
The robust growth of Indonesia’s sharia banking, however, faced a speed bump recently after the Religious Affairs Ministry withdrew around Rp 7 trillion or US$731.5 million of haj funds from the vaults of Indonesian sharia banks to invest it in state Islamic bonds, called the Indonesian Haj Funds Sukuk.
The withdrawal dried up Indonesian sharia banks’ third-party funds, which increased only 3 percent in the first half of this year, compared to 51 percent a year earlier, according to BI data. The sharia banks’ assets growth also decreased to 7 percent from last year’s figure of 48 percent.
However, Bank Muamalat president director Arviyan Arifin said that proceeding with the IPO would be beneficial as it would encourage a higher degree of transparency and internal management. He also dismissed concerns over the slowing growth of sharia banking in Indonesia. “The potential for growth in sharia banking in Indonesia is still high, we still have ample room to expand,” Arviyan told The Jakarta Post over the weekend.
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