Dubai Islamic Bank (DIB) will purchase a 25 percent
stake in Indonesian Islamic lender Bank Panin Syariah, it said on Monday, as
the United Arab Emirates-based bank looks to expand into the world's most
populous Muslim nation.
Under the agreement, DIB - the largest Islamic bank
in the UAE - will "jointly manage and operate" Bank Panin Syariah
along with parent Bank Pan Indonesia, which will remain a controlling
shareholder, it said in a Dubai bourse filing.
DIB Chief Executive Adnan Chilwan this month said
that the bank was in talks to buy a 40 percent stake in an Indonesian Islamic
bank, adding that it hoped to conclude a deal before the end of the year using
its own cash to fund the purchase.
No purchase price was given for the deal, which
will be subject to regulatory approval.
The investment "will involve DIB accumulating
around a 25 percent stake in Bank Panin Syariah in the initial phase, with a view
to subsequently increasing its shareholding in the bank to 40 percent",
the statement said.
Under Indonesian regulations, foreign ownership of
local lenders is capped at 40 percent.
Indonesia has the world's biggest Muslim population
but its Islamic finance market lags behind that of neighbouring Malaysia.
Indonesian Islamic lenders hold about 4.8 percent of total banking assets in
the country while Malaysia's Islamic banks share of hold more than 20 percent
of the banking assets in their market.
Bank Panin Syariah became the first Indonesian
Islamic bank to be listed when a 25 percent stake was sold to the public in
Bank Panin Syariah has a network of 10 branches and
held assets worth 4.3 trillion rupiah ($376.8m) at March 31, DIB's statement
Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.