Indonesia BNI aims to spin off sharia unit in first half

JAKARTA - Indonesia's fourth-largest lender, PT Bank Negara Indonesia Tbk (BBNI.JK), said on Monday it expects to spin off its Islamic banking unit in the first half of 2009 in a bid to tap growing demand for Islamic financial products.

As the world's most-populous Muslim country, Indonesia has been developing its Islamic financial market, with various sharia-compliant investment products.
The daily newspaper Kompas reported on Monday that banks will have to allocate a minimum of 500 billion rupiah ($43 million), or half the amount currently required, in paid-up capital if they spin off their sharia banking units as separate entities.
Bank Indonesia, the central bank, is expected to issue the new ruling in March, Kompas reported, citing Ramzi A Zuhdi, a central bank director in charge of sharia banking.

Central bank officials could not be reached for comment.
"With the expected new ruling, there is a possibility to accelerate" the spin-off of the sharia unit, Ismi Kushartanto, head of BNI's sharia unit, told Reuters.
Under sharia or Islamic law, interest is banned and income must be derived from a fundamental economic transaction such as trade in goods and services, direct investment in a business, or renting out property.

Last month, Bank Indonesia predicted that sharia banks would account for 3 percent of total banking industry assets in 2009, compared with 47 trillion rupiah in 2008, or 2.1 percent of total banking assests.

Indonesia had five sharia banks and 28 commercial banks with sharia units at the end of 2008, according to central bank data. 9th February 2009 (Reuters)