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Indonesia accepts Islamic megabank challenge

Indonesia accepts Islamic megabank challenge

>> ​Indonesia looks to create an Islamic megabank

​​​​​​​​​Indonesia is taking on the challenge of creating an Islamic megabank that has so far proven too difficult for lenders in Malaysia and the Middle East.

The government plans to merge the Shariah-compliant units of state-owned PT Bank Mandiri, PT Bank Negara Indonesia, PT Bank Rakyat Indonesia and WSBI member PT Bank Tabungan Negara​ with paid-up capital of more than 15 trillion rupiah (US$1.1 billion) next year, Gatot Trihargo, deputy minister for government-run enterprises, said in a June 10 interview in Jakarta. Financial Services Authority Chairman Muliaman Hadad said in January that the plan may materialize this year.

Malaysia has been touting the idea of forming an Islamic megabank that can compete with the likes of HSBC Holdings Plc for six years and a three-way merger to create one fell apart in January. The Islamic Development Bank, an institution based in Saudi Arabia with 56 member countries, previously planned to set up such a lender in 2012 with capital of US$1 billion.

“We have seen the challenges that come with wanting to create a mega-Islamic-banking entity,” said Raj Mohamad, managing director at Five Pillars Pte, a consulting firm in Singapore. “If it materializes, it will augur well for Islamic banking and finance for not only Asia but also globally.”​

Islamic banking; Business cases/models; Banking Distribution Channels