Since you became President-Director, you have taken on the goal of reducing non-performing financing and pushing the bank’s vision 2017. Describe the development of the bank during this time.

My priority was improving the internals: some fundamental, such how we underwrite credit and how we monitor the process, including developìng human capital. Indonesia is a country with a population of 240 million modern Muslims. For Syariah banking there is a lot of homework to do.

We needed to work on product range, convenience, digital and mobile banking. Of course, this also applies to our people. The bank had grown at an annual rate of 35% but i said let’s get the basics right and aim for sustainability. We need to be forward thinking not conservative.

You also have major backers in IDB, NBK, and SEDCO; how has this helped the bank and how are you an investment bridge between the Middle East and Indonesia?

It is interesting linking the Middle East to Indonesia or to South East Asia. IDB is actually comparable to the World Bank, where their mindset is not long term, but supports establishment and growth, then moves on. Boubyan and NBK are Kuwaiti, which has a population of only 3 million; that’s why they needed to expand operations abroad. The mindset of the Middle East is still focused on the US and Europe where they like to engage in large deals, real estate and investment banking. Indonesia is still not their focal point, they are still learning about our country and our people, but we are ready to close that gap now.  President Jokowi did the right thing by inviting Middle Eastern investors.

Locally, how is Muamalat engaging in government infrastructure projects?

We divide infrastructure projects into two, state owned enterprises (SOEs) and non SOEs. If we are lending to a SOE, the risk weighted assets will be a maximum of 15-20%. From our perspective that is efficient use of capital. In terms of risk, this is also sovereign risk. The downside is that they are very competitive and the margins they charge are so small that sometimes we cannot compete with banks such as HSBC or Citibank, who have a huge client base and access to cheaper funds.

The first infrastructure financing we did was working with bank Jateng on a toll road in West Java. The challenge for us in infrastructure financing is managing short term (1-3 month) funding. If you are funding infrastructure, you are looking at 10-15 years. This country is very limited in terms of products supporting long term financing.

Indonesia is in a great push to reach the unbanked. What are doing in that area?

We are pushing for this area through mobile banking and we advancing a payment channel where we are working with Telekom Indonesia. This way, people or SMEs can access our gateway channel for payments. This is all possible without the need to open a bank account. 

Another Area is ASEAN or AEC, where you are the first Indonesian bank successfully venturing abroad to Malaysia. How do you see this development? 

Muamalat is quite fortunate to have a license in Malaysia. Malaysia is also focused and keen to support Syariah products, and this was one of the main reasons we were given special dispensation. Our operation in Malaysia is successful but also limited as we are only dealing with non-ringgit. Hence we are dealing in US $, where the market is limited.

There is also a barrier with Indonesian banking regulation against overseas expanison. Any funding we get from overseas will be calculated as borrowing, rather than funding. Sometimes I understand the thinking of other banks, who are reluctant to expand beyond Indonesia. There is limited immediate benefit, and with Indonesia already constituting 60%-70% of the market I understand some banks asking “why bother?”.

What is your vision for the bank?

I would say this bank is already in a position to grow and for us it’s about putting that chance into reality. My vision is that this bank will be the leader of Islamic banking not just in Indonesia but in the region.