Islamic Finance

Indonesia’s BNI Syariah to expand international banking services


JAKARTA – Indonesia’s state-owned BNI Syariah plans to add overseas representative offices to run trade finance, and financial institutions and remittance services, Abdullah Firman Wibowo its president director told Salaam Gateway.

The Islamic bank will leverage the branch offices of its parent company, Bank Negara Indonesia, in Singapore, Tokyo, Seoul, Hong Kong, London and New York.

The bank can now expand its international banking services after it received a non-cash capital injection of 255 billion rupiah ($17.5 million) in March. This moved it up to Tier 3, for banks holding core capital of 5 trillion rupiah (around $342.5 million) to 30 trillion rupiah.

BNI Syariah and Bank Syariah Mandiri are currently the only two Islamic banks in the Tier 3 category.

“Alhamdulillah last March our holding company transferred land assets in Pejompongan that will be used for one of our new offices in the future,” said Abdullah Firman.

“Our holding company already has 6 overseas branch offices and we were given the privilege to leverage this. We will collaborate with them and place some of our trade finance experts and remittance representatives there,” he added.

Trade finance is a lucrative segment for the bank as many of Indonesia’s diaspora are involved in export – import businesses and many foreign companies also operate in the country. Abdullah Firman estimates that trade finance can offer BNI Syariah fee-based income of up to 50 billion rupiah to 70 billion rupiah per year.

Remittances are also a strong business line as more than 8 million Indonesians work abroad, primarily in Hong Kong, Japan, Malaysia, Saudi Arabia, South Korea and Taiwan. BNI Syariah estimates fee-based income of 20 billion rupiah to 30 billion rupiah per year from remittances, exchange rate margins and transfer fees.

In 2019, Indonesians sent home $11.4 billion, according to Bank Indonesia, the central bank. This was up from $10.9 billion in 2018. The COVID-19 crisis has impacted this growth, with first-quarter 2020 remittances at $2.5 billion, down 10.7% from $2.8 billion in the fourth-quarter of 2019.

“We invested heavily in human resources and IT. We’ve recruited certified trade finance specialists and trade finance advisor specialists as well as remittance representatives to be attached to several remittance agencies including at our holding overseas branch offices to attract consumers for the trade finance, financial institutions and remittance segments,” said the President Director.

“Our representatives will also offer our hajj savings product, house financing, SME financing and so on. From our internal research, 86% of our international customers are already eager to shift to Shariah products,” he said.

Ali Garnuk, BNI Syariah deputy head of international business division told Salaam Gateway the lender is also eyeing markets outside its current geographies, such as Malaysia, Saudi Arabia and Taiwan. He said the plan is to install representatives in Malaysia and Japan in the third quarter of this year.

“We will attach our overseas representatives in stages, depending on how fast we recover from the COVID-19 pandemic situation,” said Ali.

BNI Syariah posted net profit of 214 billion rupiah ($14.7 million) for the first quarter of this year, up 58.1% year-on-year as the downturn had yet to land on the bank’s bottom line up to the end of March. The pandemic will hit profits this year, with the bank estimating 5-6% growth compared to double digits in previous years.

Alongside expanding its international presence, the bank is mitigating downside risks by optimizing its digital banking channels.

“This year, in Q3 we’ll be in place for Malaysia and Japan. Next year we’ll be in Taiwan, South Korea, Hong Kong and Saudi Arabia. In addition to marketing officers, we will also integrate our IT system with our holding overseas branch offices and local remittance agencies,” said Ali.

(Reporting by Yosi Winosa; Editing by Emmy Abdul Alim emmy.abdulalim@salaamgateway.com)

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Yosi Winosa