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Islamic Finance

Merger of Indonesia’s Danamon, BNP will ‘not have significant impact’ on Islamic unit, seeking more haj savers – director

JAKARTA - The proposed merger of Indonesia’s Danamon and Bank Nusantara Parahyangan (BNP) will “not have a significant impact” on Danamon’s Shariah unit, which is extending its reach to attract more haj savers, director Herry Hykmanto told Salaam Gateway.  

Danamon and BNP are awaiting approval from the Financial Services Authority (OJK) to merge.

The two financial institutions, majority-owned by Japan’s Mitsubishi UFJ Financial Group (MUFG), announced merger plans on Jan 22. Bigger bank Danamon, Indonesia's seventh biggest bank by assets, will be the surviving bank.

MUFG has an increasing interest in Islamic finance. Nikkei Asian Review reported on Sunday the Group will become the first Japanese bank to market sukuk domestically from as early as March, in partnership with Morgan Stanley. Its Malaysian unit has also received the nod from the regulator to advise on new sukuk issuances.

MUFG holds a 40 percent stake in Danamon and 67.59 percent of BNP.

Danamon’s Islamic unit, which currently has around 500,000 customers, aims to serve around 3,000 haj savings accounts this year, up from around 1,700 currently.

The unit became a partner bank for the government’s haj savings and investment schemes under the Haj Funds Management Agency (BPKH) in August.

"We are a relatively new player but we served around 600 new customers per month in the last three months (November-January), so we hope there will be at least 3,000 customers registered by the end of this year,” said Hykmanto, who is also in charge of the development and practices of Danamon’s Shariah unit. 

Danamon will attract more haj savings customers from its sister companies, automobile financier Adira Finance and Adira Insurance, according to Hykmanto.

Adira Finance has around 3 million active customers, about 750,000 of whom use its Shariah products.

Indonesia’s Haj Funds Management Agency (BPKH) took over the management of the pilgrimage fund from the country’s religious affairs ministry in 2017.

The fund held 113 trillion Indonesian rupiah ($8 billion) by the end of Jul 2018.

In Feb 2018, BPKH selected 31 depository banks, both standalone Islamic banks and Shariah units of conventional institutions, to participate in its haj funds savings and investment schemes.  

By the end of 2018, there were a total of 4 million registered haj savings accounts, around 664,000 of which signed on during the year.

Bank Syariah Mandiri holds 26 percent of all accounts, followed by BRI Syariah (23 percent), BNI Syariah (11 percent), Bank Muamalat (10 percent) and BTN’s Shariah arm (7 percent), according to Iskandar Zulkarnain, a member of the BPKH board that overlooks the placement of haj funds.

BPKH is targeting 750,000 new haj accounts this year.

($1 = 14,111 Indonesian rupiah)

(Reporting by Yosi Winosa; Editing by Emmy Abdul Alim

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Yosi Winosa