JAKARTA, March 13 (The Straits Times/ANN): New tech-based lenders are enthusiastically tapping bank syariah in Indonesia, betting on an underpenetrated market with a potential customer base of 45 million in a country with the largest population Muslim in the world.

The rate of such banking in Indonesia is only 7%, dwarfed by 29% in Malaysia and 65% in Saudi Arabia.

Bankers say growth has been hampered because syariah banks, unlike conventional banks, are not ubiquitous, with barely any physical branches or automatic teller machines (ATMs).

In a country with more than 100 banks, attention has focused on conventional banks, with few syariah products and services available and few economies of scale.

“This is an area where there is an unmet niche,” said Arief Harris Tandjung, deputy chief executive of Indonesian technology bank Jago, which counts Singaporean sovereign wealth fund GIC among its investors.

Arief added that there was strong demand but the features of convenience and syariah products were below expectations.

Bank Jago, which launched a syariah app three weeks ago, saw syariah funding account for two-fifths of its 5.3 trillion rupees (S$503 million) in loans by the end of 2021.

It provided no syariah funding the previous year.

Two fundamental principles of Islamic banking or syariah are the sharing of profits and losses and the prohibition of the collection and payment of interest by lenders and investors.

Bank Aladin director Dyota Mahottama Marsudi, who agrees that demand for syariah banking services is high in Indonesia, said the products should meet customer needs.

“It makes us extremely excited to make Aladin Bank the leading syariah-compliant digital bank in Indonesia,” Dyota said in response to a question from The time of the straits Friday (March 11). “We have ambitious goals.”

Mohamad Alen Aliansyah, 25, a junior partner at a Jakarta-based law firm that has had both conventional and syariah savings accounts, said he was never impressed with the level of customer service provided by the traditional syariah bank.

But he was impressed with Bank Jago’s new syariah digital banking app on his smartphone.

“It’s as if service excellence was non-existent with the Syariah banks of yore,” he said. The time of the straits.

Alen sends his monthly salary to his conventional bank account but relies on his syariah account for his personal savings.

Similarly, Annisa Anindita, 32, an entrepreneur who sells clothes, told the Straits Times that she keeps all her personal funds in a Syariah bank, but still relies on an account in a conventional bank for her business. because most of its partners and suppliers use a traditional bank account.

Jago CEO Karim Siregar said it was high time banks gave Syariah customers their due, adding that this was now possible thanks to advanced technology. He added that digital banking apps allow a customer to not need to rely on physical branches.

“We provide the same level of service and convenience to our Syariah customers as we do to our conventional banking customers,” Karim said. – The Straits Times/ANN