Mega-Merger of Indonesian Islamic Banks to Create Asia’s Next Islamic Finance Hub

Three Indonesian Islamic Banks signed a merger deal last October aiming to increase the efficiency, performance, and thus competitiveness of Indonesian Islamic banks at both national and international levels. Indonesia's Islamic economy is currently ranked 4th in the world (moved up by 1 rank from the previous year) following Malaysia, Saudi Arabia, and the United Arab Emirates. Having the largest (87%) Muslim population in the world, Indonesia's Islamic finance market remains stagnant at 5-6%, almost three decades since the first Islamic bank developed in Indonesia in 1991.

These uncompelling facts are signalling major inefficiency in the industry. The megamerger should thus be positively welcomed by key stakeholders. Cu...