Islamic Bank of Asia Eyeing Indonesia and Malaysia

The Jakarta Globe, February 7, 2009 

Kuala Lumpur. The Islamic Bank of Asia, backed by DBS, Southeast Asia’s top lender, is on the hunt for acquisition opportunities in Malaysia and Indonesia to gain a foothold in the populous Muslim retail markets. 

Islamic banks are turning to retail consumer demand for growth as the explosive rise of the Shariah bond market slows markedly amid the credit crisis. 

Rising demand for ethical investments and growing interest by non-Muslims in Islamic finance have also turned the retail business into a potential major growth market. 

Singapore-based Islamic Bank of Asia is considering various options to enter Malaysia and Indonesia, including taking a stake in banks in these countries, the lender’s chief executive, Vince Cook, said on Friday. 

“Singapore presents a very good platform for wholesale and cross-border business and both Indonesia and Malaysia would complement that by giving us the ability to build a very sizeable retail business,” Cook said. 

“In Malaysia, sometime during this year we will certainly have decided exactly how we want to proceed.” 

The lender, which was set up in 2007 and has a capitalization of $500 million, currently focuses on commercial banking, corporate finance, capital market and wealth management services. 

Singapore’s DBS, Southeast Asia’s biggest bank by assets, has a 50 percent stake plus one share in Islamic Bank. Other shareholders include Gulf investors. 

DBS has been keen to make inroads into Islamic banking, especially as growth weakens in its two main markets, Singapore and Hong Kong, as those economies slide deeper into recession. 

Singapore itself has ambitions to become an Islamic finance center and has been aggressively promoting the concept. 

The operations of conventional and Islamic banks are usually kept separate, despite any cross-shareholding between the two, as Islamic and conventional funds should not be combined because the latter are interest-based. 

Purchasing a firm with an existing Islamic banking license would allow Islamic Bank to take advantage of retail opportunities more quickly than setting up its own branches in the countries. 

Reuters