Dubai Islamic Bank (DIB), the bank which introduced Islamic financing to the world, plans to take an initial 25% stake in Bank Panin Syariah, a listed shari'ah commercial bank offering Islamic banking services in Indonesia, to promote the growth of shari'ah banking in the country, the bank said last
month.
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| Source: DIB website. |
Bank Panin Syariah is
currently controlled by Bank Panin and operates through a network of 10
branches. The bank successfully completed its IPO in January 2014 to
raise IDR475 billion (US$42 million) through the issuance of rights
shares. The bank has assets over IDR4.3 trillion (US$375 million)
whereas its equity base stood at over IDR998 billion (US$88 million) as
of March 31, 2014.
DIB will jointly manage and operate Bank Panin Syariah with Bank
Panin, its controlling shareholder, providing its well-established
expertise in Islamic banking operations to Bank Panin Syariah, while Bank Panin contributes its knowledge of the local market.
DIB expects to increase the equity to 40% upon obtaining the relevant regulatory approval, including from the Financial Services Authority (OJK) in Indonesia.
According to DIB, Islamic banking and finance is one of the world’s fastest-growing
economic sectors, comprising more than 400 institutions managing assets in excess of US$1 trillion globally.
Malaysia's Securities Commission has published new rules for bai' 'inah, a type of Islamic financing contract, in a move that may see Malaysia and the Gulf states converge with regards to shari'ah-compliant banking, Reuters reports.
Bai' 'inah is controversial as in one version of it, a financial institution or individual could contract to sell a borrower an item on credit, but the borrower does not get to keep the item as the institution then buys that item back for a lower amount in cash. The person ends up with some cash, just as if it were a loan, but has to pay the agreed selling price to the financial institution, just as if the difference between the two prices were interest on the loan.
In other versions, the borrower may be entitled to keep the item and have the option to resell it back to the institution.
According to Reuters, Islamic banks from the Gulf tend not to offer bai' 'inah, whereas it is quite common in Malaysia. Agrobank's Agrocash-i, AmBank's Personal Financing-i, HSBC's Amanah Personal Financing-i and Term Financing-i products, and Maybank Islamic's ExeCash-i are all examples of Islamic financing under the bai' 'inah principle.
Reuters said that the new rules do not ban bai' 'inah but make compliance more demanding, ultimately encouraging a shift towards other forms of Islamic financing.
An explanation of the bai' 'inah controversy is here and comments on developments in 2012 here. A list of Islamic capital market statistics for Malaysia can be viewed here.