Global Business Guide Indonesia

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Joint Ventures | Business Services
BJB Syariah | Mr A. Riawan Amin
Mr A. Riawan Amin

Islamic banking offers solutions to many of the issues that characterise the current economic turmoil, and greater international awareness of this is needed

Mr A. Riawan Amin, President Director

Headquartered in Bandung, BJB Syariah provides shariah banking services and products for both the consumer market and corporate market. What can you tell us about the bank’s background and its strategies going forward?

Our bank strategically centres its operations in Indonesia’s most densely populated regions; with a focus on West Java and Banten. Of the country’s 250 million people, 50 million live in this area and in addition to this, most companies are based here. BJB Syariah is a new bank, having been established as an independent entity in 2010. Like many other banks entering the market we face the challenge of a concentrated industry in which the 25 largest players control 60-70% of deposits. To achieve stable growth, we need to develop our retail business and this is closely linked to the manner in which we develop our delivery channels.

As an Islamic bank in Indonesia, we must find ways to compete beyond developing traditional brick and mortar branches. There are about 30,000 banking outlets in Indonesia. Islamic banks account for only 2,000 of these and despite its huge potential, this type of banking currently holds a 5% market share in Indonesia. Thus far, realising Islamic banking’s potential has been approached in the wrong way. If Islamic banking is considered an inclusive part of the banking system, it does not need to be separated from parent companies. The development of this subsector of the banking industry can be better achieved by offering shariah products in conventional banks. Without needing to pay for new infrastructure and human resources, costs associated with spinning off Islamic banks from parent companies could be saved and used more efficiently in advancing the industry.

Given the context of a rise in the number of Islamic banks spinning off from large parent companies, how does BJB Syariah differentiate itself to compete in the market?

First of all, we need to overcome the aforementioned issues related to branches and physical infrastructure. It is not advantageous for us to compete in this regard by investing in new outlets and because of this, branchless banking well suited to remote areas has been an area of focus for us. Our services are now readily available through the use of mobile banking. Such is the straightforwardness of this online system that Indonesian citizens abroad can set up a working account in a matter of minutes. This sets us apart from the vast majority of Islamic banks in Indonesia. Through this type of innovation, our bank is becoming increasingly well known as a local bank with international capabilities.

In South East Asia, Malaysia has been able to establish itself as the centre for Islamic banking. What should be done to facilitate Indonesia’s development into the regional leader in this industry?

We need to understand our strengths and weaknesses relative to our competitors. Malaysia’s position as a member of the Commonwealth affords them with advantages, such as relaxed visa requirements for entry into the UK, that allows them to have considerable global reach and provides them with the network to become the hub for Islamic banking.

Our strength is the size of our population and the abundance of opportunities to serve a growing domestic market. In particular, I expect that the local Islamic banking industry will be able to cater to rising demand for consumer products such as mortgage plans and all-purpose financing for families. We should thus not be overly concerned with competing to become the regional centre for shariah compliant banking.

What are your goals in regards to business expansion abroad?

There is a growing population of Muslims in Europe and yet many European countries such as France and Holland do not offer Islamic banking services. From a retail point of view, there is thus significant potential to tap into this market. Through wholesale banking in this region and the issuance of sukuk, we plan to channel this potential to Indonesia. Having already explored the possibility of entering markets such as Luxembourg, BJB Syariah intends to be a pioneer in establishing an Indonesian Islamic banking presence in continental Europe.

How is BJB Syariah positioned towards working with foreign investors?

It is my opinion that when foreign investors invest in our Islamic banking industry, they are contributing to the advancement of good values and ethics in Indonesia’s banking sector. As such, we should actively encourage partnerships between foreign companies and local Islamic banks. When asked in my former capacity as Chairman of the Association of Islamic Banks in Indonesia whether the country should allow international banks to offer shariah compliant banking services; it was my view that we should not hesitate to grant licenses to these international banks because they have the capability to advance the standard of Islamic banking services in Indonesia through their organisational discipline and commitment to complying with all aspects of shariah guidelines. Indonesia’s Islamic banking industry needs a larger market share so that it can have a greater influence on the regulatory environment. The entry of foreign investors into the industry would facilitate growing market share as well as allow for the industry to have a greater impact in stabilising the economy.

As a final message, what would you like our readers to remember about Indonesia?

Come to Indonesia and invest in Islamic banking. A survey of the global population found that 97% of respondents were not satisfied with today’s economy. Islamic banking offers solutions to many of the issues that characterise the current economic turmoil, and greater international awareness of this is needed.

Global Business Guide Indonesia - 2014

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