Five Indonesian Banks To Set Up Islamic Units

Removal of double taxation is expected to encourage more banks to enter into Islamic banking in the nation

In order to give an impetus to the Indonesian sharia market, five banks including Bank Central Asia (BCA) are expected to launch standalone sharia units next year – reported Reuters. Industry officials are of the opinion that the removal of double taxation, which made transactions expensive, would encourage more banks to enter into Islamic banking susidiaries.

Adiwarman Karim, chief of Karim Business Consulting, said: "I expect to see more banks spinning off their sharia units as the new VAT law which scraps double taxation from sharia transactions will take effect next year."

Other banks planning to set up sharia banking units in Indonesia include Bank Panin, Bank Victoria, Bank Negara Indonesia and unlisted Bank Jabar Banten.

Reportedly, conventional banks usually establish Islamic subsidiaries by first setting up Islamic banking departments and then converting them into separate Islamic banks. BCA may buy small conventional banks and convert them into Islamic subsidiaries.

Barno Sudarwanto, head of planning and development at the sharia unit of Bank Negara Indonesia, said: "We hope that it would be easier for us to expand business and seek strategic partners. We also hope to grow faster and attract investors from Middle East," reported the news agency.

Link: http://retailbanking.banking-business-review.com/news/five_indonesian_banks_to_set_up_islamic_units_091023/