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Thursday, 29 May 2008

Indonesia: BRI to set up stand-alone sharia bank in June

Jakarta (ANTARA News/Thomson Financial) - Indonesia's third biggest bank by asset, PT Bank Rakyat Indonesia (BRI), said on Monday it is planning to set up a stand-alone bank that will run its sharia services in June.

Bank Rakyat said it is seeking to accelerate growth in its sharia banking operations, given that stand-alone sharia banking businesses in Indonesia have performed better than the sharia units of conventional banks.

The three existing sharia banks -- Bank Muamalat, Bank Syariah Mandiri and Bank Syariah Mega Indonesia -- hold a combined share of 76 percent of the market in the world's biggest Muslim country.

Comparatively, the sharia units operated by 74 conventional banks only have a combined market share of 24 percent. In 2007, the funding provided by sharia units and banks accounted for about 2 percent of total loans extended by the banking system.

BRI said in a newspaper announcement that under the plan, all the services currently provided by its sharia unit will be transferred to its newly-acquired PT Bank Jasa Arta, which will later be renamed PT Bank Syariah BRI.

Bank Syariah BRI will become the fourth sharia bank in Indonesia. A sharia bank normally does not charge or earn interests on loans. It generates profits from sharia-compliant investment activities and then shares the profit with its customers.

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