Managing director Datuk Seri Zukri Samat said Indonesia possessed tremendous prospects as the country, with a population of 240 million, is still underserved in the Islamic banking sector.
“Islamic banking penetration in Indonesia is about three to four per cent, whereby Malaysia is between 23 and 24 per cent. There is a huge Muslim population in Indonesia but Islamic banking penetration is very low, certainly (there is) a lot of business opportunity there,” he told Bernama in an interview.
He said due to the low penetration of Islamic banking, the sector experienced a rapid growth annual growth of between 30 and 40 per cent.
Zukri said Indonesia also had a large number of middle income population.
“I was told by an Indonesian party that by 2015, Indonesia is deemed to have a middle-income population of between 30 million and 40 million, that is larger that Malaysia’s population,” he said.
However, he said the regulatory system and company valuation remained challenges for the bank to enter the Indonesian market.
Zukri said new regulations in Indonesia have limited foreigners stake in local companies to up to 40 per cent compared with 99 per cent previously.
Furthermore, he said as more foreigners have shown interest to expand their presence to Indonesia, the valuation of the banks in the country have become more expensive.
Nevertheless, he said if a bank is available for the right price, interested parties should take a calculated risk of the changing regulation to venture into Indonesia market.
Zukri said, Bank Islam, however, was not in talks with any party from the neighbouring country right now for any potential acquisition.
“We are still trying but right now, we have not found anyone whom whom we can pursue further,” he said.
Bank Islam’s previous two attempts fell through. One of it was the proposed acquisition of PT Bank Muamalat in 2012 but the deal was put on hold by the Indonesian party.
Meanwhile, on Bank Islam’s domestic expansion plan, he said the bank would continue to increase its branches to 150 by 2015 as underlined by the bank’s three years blueprint from 2013 to 2015.
“We think 150 is ideal for Bank Islam, after that, we will take a breather,” he said.
He said infrastructure, staff allocation and cost constraints were the reasons why the bank was limiting the number of branches to just 150.
“We have to manage capital expenditure. One branch cost between RM800,000 to RM1 million (to set up), inclusive of IT equipment,” he said, adding that the bank also needed to allocate experienced branch managers and capable staff for a new branch, which also added to the bank’s operating expenditure.
Zukri added that the bank would also draw up a new blueprint in the middle of next year to replace the current blueprint after it ends.