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Indonesia plans mega Islamic bank

Indonesia is finalizing plans to create an $8 billion Islamic bank. The country’s Financial Services Authority declared 2015 as the year of the sharia capital market, with its first act to merge three state-owned Islamic banks – Bank Mandiri Syariah, Bank Rakyat Indonesia and Bank Negara Indonesia. A small unit of Bank Tabungan Negara is also likely to be looped in. According to a ministry of state owned enterprises spokesperson, a team will assess the feasibility of the merger, including its profit opportunity, possible financial loss and impact towards the industry. Indonesia has the world’s biggest Muslim population, but its Islamic finance market lags behind Malaysia. Indonesia’s Islamic banks hold just 5.5% of the country’s banking assets, compared to Malaysia’s 20.7%, according to the latest World Islamic Banking Competitiveness Report. However, the three-way mega merger could present an oppportunity for the Islamic banking sector to offer services at more competitive rates, due to scale, and win business away from leading names in banking, such as Standard Chartered and HSBC.

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