Bank Central Asia Opens Islamic Lending Division

Jakarta Globe, Novrida Manurung, April 05, 2010

PT Bank Central Asia, the nation’s biggest financial services company by market value, began operating an Islamic banking business on Monday, the unit’s president director announced.

PT BCA Syariah has Rp 296 billion ($32.7 million) of capital, Yana Rosiana said in the statement. The Jakarta-based bank wants to capitalize on the Muslim population in Southeast Asia’s largest economy, said Suwigyno, a director of consumer and retail lending at BCA.

About 85 percent of Indonesia’s 240 million people are Muslims, with the nation’s economic growth fueling demand for Shariah banking. The $514 billion economy is forecast to expand by 5.6 percent this year from 4.5 percent last year, Bank Indonesia reported last month. Islamic law bans charging interest as well as forbidding investment in businesses such as tobacco, alcohol and gaming.

To lay the groundwork for its new business, BCA bought PT Bank UIB for Rp 248.3 billion last year and converted it into a Shariah lender.

The nation has seven Islamic commercial banks, including PT Bank Syariah Mandiri, the largest by assets, PT Bank Syariah Muamalat Indonesia and PT Bank Syariah Mega Indonesia, according to the central bank. BCA Syariah will be the eighth.

Assets held by banks in sector the rose to Rp 67.4 trillion last year, up from Rp 49.6 trillion at the end of 2008, according to central bank data.

BCA shares rose 5.5 percent to Rp 5,750 on Monday on the Indonesia Stock Exchange (IDX).

Bloomberg