JAKARTA (TheInsiderStories) – Indonesian Financial Service Agency (FSA) welcomed the steps of local and foreign investors who intend to inject capital into Islamic lender PT Bank Muamalat Indonesia Tbk (BMI), said the spokesman on Friday (28/09). The sharia bank needs Rp4.5 trillion (US$310.45 million) worth of capital injection to improve its credit quality.
Several local media reported, Singapore’s Lynx Asia Partners has set up a consortium to save the bank. Local businessmen lead by Ilham Habibie like founder of Medco Group Arifin Panigoro, and Hong Kong’s SSG Capital Management intending to inject capital into the sharia bank. Habibie now served as the president commisioner of Bank Muamalat.
The reason, Habibie wants to save the bank was because he had received a direct order from his father, former Indonesian President BJ Habibie. The process of legalizing the entry of new investors will be carried out at the BMI’s shareholders meeting on Oct. 11.
“The Bank must immediately conduct a GMS to determine the investor,” FSA’s Spokesperson Sekar Putih Djarot said in a written statement.
Bank Muamalat is currently struggling to find new investors as existing shareholders, which are foreign investors, are running out of options to bulk up the lender’s capital as they are constrained by the country’s single presence policy for foreign holding in a commercial lender.
Achmad Permana, Bank Muamalat’s President Director has said, that the lender hopes Indonesian authorities can offer solution to the trouble the bank is facing. Amid high non-performing financing, Indonesia’s first Islamic lender desperately needs fresh funds to sustain its operational.
Previously, a local stock broker Minna Padi Investama Sekuritas, expressed interest in acquiring at least 51 per cent in the Jakarta-listed Islamic lender. However, Minna Padi failed to meet the financial sector authority’s request to fully disclose the ultimate investors behind the share buy out.
The banking sector regulator did not give its approval over the planned acquisition and this jeopardized Minna Padi to wrap up the transaction. Also, the broker missed the deadline on Dec. 31, 2017, to comply with terms and conditions in the Conditional Share Subscription Agreement with existing investors.
Minna Padi was supposedly become the standby buyer for Bank Muamalat’s planned rights issue.The lender previously planned to issue 80 billion new shares to investors in a bid to pave the way for the new investor to control 51 per cent holding in the first Indonesia’s Islamic lender.
Currently, the Islamic Development Bank owns a 33 percent holding in Bank Muamalat, Kuwait’s Boubyan Bank KSCP and National Bank of Kuwait SAKP hold 22 percent and 8.45 percent respectively. The remaining shares owned by the public.
Muamalat is in desperate need for new capital injection from new investors as it is struggling with bad financing and tight competitions that erodes its capital. Existing foreign investors cannot inject adequate level of capital into the sharia lender due to the maximum 40 percent foreign ownership regulation in the Indonesian banking sector.
Indonesia’s Islamic banking industry has seen stronger pressures in its non-performing loans, just like its peers in conventional banking industry, after 2015 when the commodity boom was over. Many bank corporate bank debtors, especially those who are in commodity-related industry, saw their profitability falling on lower prices.
Indonesia’s Islamic lenders are alao struggling to grow its business due to lack of competitiveness and public awareness of their products despite tgey operate in the world’s largest Muslim majority nation. Bank Muamalat is not spared from this tough competitive environment.
The banking regulator in Indonesia has issued a number of incentives since 2015 to boost the Islamic finance industry including through easing some regulations regarding loan-to-value ratio, risk-weighted assets, Non-performing finance restructuring, and capital participation.