Bank Islam eyes growth in Bangladesh

Bank Islam Malaysia Bhd is eyeing opportunities for expansion in Indonesia and Bangladesh, which have sizeable Muslim populations and adequate Islamic banking regulatory policy and supporting infrastructure in place to facilitate Shariah-based financing and banking operations.

Managing Director Datuk Seri Zukri Samat said that as mergers and
acquisitions are on Bank Islam’s agenda for inorganic growth and corporate
expansion, the bank is on the lookout for suitable candidates but has not
initiated any discussions on mergers or acquisitions.

While the two countries have been identified as “very interesting countries”

that fit into the bank’s expansion plan, Zukri, however, said such plans would
have to take into consideration the current global economic situation and its
effect in this region.

"Some economists believe that there could be a double dip with Europe going
into recession and growth in the Asian region decelerating.

"We are monitoring this situation and because of that, we are adopting a
cautious approach towards our agenda, so we are very cautious and we don’t want to be overly aggressive.

“Nonetheless, there is always an opportunity in a crisis -- acquisition may
occur when a shareholder wants to exit -- and as long as there are synergies and the pricing is right, the opportunity arises,” he said.

Zukri said both countries have sound economies which offer opportunities for
Islamic banking, and the presence of many Indonesian and Bangladesh migrant
workers here also allows the bank to tap the lucrative remittance business.

Asked to comment on the Indonesian market, Zukri said the Central Bank of
Indonesia has yet to make an announcement on foreign ownership in the country's financial institutions. Currently, the regulation allows foreigners to own more than 90 per cent, however this may change.

“Indonesia has a population of more than 240 million, the majority of whom
are Muslims. However, the penetration of Islamic banking assets is only three
per cent of the total banking asset. We see an opportunity here,” he told
Bernama in an interview.

Bangladesh, apart from its Muslim population of 140 million, has also put in
place an Islamic banking infrastructure for Bank Islam to start its operations
should there be a merger or acquisition. It is a market that is similar to
Indonesia, he said.

He said Bank Islam’s overseas expansion model would involve acquiring
Islamic banks rather than conventional banks. This is to avoid operational
issues involving non-Shariah income from the businesses of the conventional
banks during the transition period.

Zukri said Bank Islam prefers to work with a local party, who would be
familiar with the local market and the regulatory environment, adding a
controlling stake is not a requirement but preferred, provided it is not costly
to the bank.

On the bank’s acquisition of a 20 per cent stake in Sri Lanka-based Amana
Bank Ltd, he said: “It’s a good decision to go to Sri Lanka. We are upbeat about
the potential and we expect this investment to break even after two years.” -- Bernama