Takaful Malaysia Eyes Indonesia for Expansion

Kuala Lumpur, Malaysia | December 20, 2008 by D-8 Secretariat

Islamic finance has made a rapid growth in D-8 countries

Islamic insurer Takaful Malaysia said on Wednesday it is seeking a strategic partner in Indonesia to tap opportunities in the world’s most populous Muslim country.

Takaful wants to increase its network of 33 to 34 branches in Indonesia, managing director Hassan Kamil said.

“That is not large enough to gain any presence,” Hassan told reporters after Takaful’s annual shareholders’ meeting.

“We feel that having a strategic partner in Indonesia is the most ideal option. We prefer a sharia bank which has branches across the country.”

Hassan said discussions to find a partner would be held after Takaful completes a 21 million ringgit ($5.80 million) capital injection into its Indonesia subsidiary to fulfil a minimum solvency ratio requirement.

“We have (identified potential partners) but have decided to inject the capital first and then search for the strategic partner in the middle of next year,” he said.

Revenues in Takaful’s Indonesian operations grew 30 to 35 percent in 2007 compared with Malaysia which achieves about 20 to 25 percent topline growth annually, Hassan added.

Indonesia, which has been touted as a potential growth centre for sharia banking, is drawing Islamic lenders and insurers keen to offer services to the country’s mostly Muslim population.

Indonesia has passed a banking law to encourage foreigners to set up sharia banks and the government plans to sell its first global Islamic bond in an effort to spur growth of its nascent sharia market.

Hassan said the company is also holding negotiations to find a partner for Takaful Malaysia.

“The partner must have some value-added potential for Takaful Malaysia. What we will be looking at are distribution capability and cross-selling opportunities,” Group Managing Director Hassan Kamil was quoted as saying.

He said there was also the possibility that parent Bank Islam Malaysia Holdings Bhd. could be looking for strategic Indonesian investors to take a stake in Takaful Malaysia. “Yes, it’s possible but there is no candidate at the moment,” he said.

Takaful Malaysia Tuesday said in a filing to the stock exchange that Dubai-based Islamic Arab Insurance Co. (IAIC.AI), or Salama, had called off plans to acquire a stake in the company.

Bernama reported Hassan as saying that the company intends to grow its existing 35-branch network in Indonesia in order to sustain Takaful Indonesia’s growth of between 30% and 40% in the previous financial year.

Several years ago, the development of Islamic finance was regarded as an infant industry and considered concentrated only in countries where the Muslim population was significant. “But in recent years, Islamic finance has made a rapid growth and is present in more than 75 countries both in Muslim and non-Muslim dominated communities,” said D-8 Economist, Esen Gonen.

She said that there is a growing number of the international financial centers that are beginning to offer Islamic financial products and services such as in London, Singapore and Hong Kong. The number of Islamic banking institutions worldwide including conventional banks that are offering Islamic banking services have doubled to more than 300. She noted the total Islamic financial assets under their management are now estimated to exceed one trillion US dollars, about fivefold its magnitude five years ago.

“Therefore Islamic finance, I believe, has a bright future prospects within the globe, especially D-8 countries that also represented major population and economy of OIC member countries,” she added.

News Contributor: REUTERS.

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