BNI Syariah: Competing In a Growing Market - aif.org.my · 1 BNI is a state-owned bank and is the fourth largest bank in Indonesia. Established in 1946, BNI Established in 1946, BNI

BNI Syariah:Competing

In a GrowingMarket

This case study was developed by the Asian Institute of Finance in collaboration with the Indonesian Banking Development Institute (LPPI).

AcknowledgementsThe Asian Institute of Finance and LPPI would like to thank individuals from BNI Syariah for their cooperation in the completion of this case study. We would also like to express our gratitude to Mr Wahyu Avianto from BNI Syariah for providing valuable inputs and comments through the course of this project.

Case WritersDr Wan Nursofiza Wan Azmi, Asian Institute of FinanceMulyana Soekarni, LPPI

Case ResearchersChamida Nurhidayati, LPPISudarminto, LPPIFarah Fadilla, LPPI

Published byAsian Institute of FinanceUnit 1B-05, Level 5 Block 1BPlaza SentralJalan Stesen Sentral 5KL Sentral50470 Kuala LumpurMalaysiaT: +603 2787 1999 F:+603 2787 1900Website: www.aif.org.my

© 2013 Asian Institute of Finance

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying or otherwise without the permission of the Asian Institute of Finance.

BNI Syariah: Competing in A Growing Market

1

Introduction

Since foraying into the financial services sector in 2000, Bank Negara Indonesia Syariah or BNI Syariah is considered as one of the leading Islamic banks in Indonesia. Faced with competition to retain and expand its customer base, the bank realised the need to broaden access to banking while deepening the services offered to existing customers. Supplementing its organic growth strategy, BNI Syariah embarked on a two-pronged approach of customer-centric focus and business line expansion pursuant to its corporate Navigation Map.

The bank has taken home a number of accolades under its belt including the recipient of the Indonesian Customer Satisfaction Award 2010 and the Indonesia Brand Champion Award 2011. BNI Syariah was also adjudged as the Best Sharia Bank in Zakat Service Excellence in recognition of its value-added customer services and banking products. In 2003 and 2004, BNI Syariah was lauded as The Most Profitable Islamic Bank for its outstanding success in generating profits in a short span of time.

The changing financial landscape coupled with intense competition in the Islamic banking sphere in the country resulting from the emergence of foreign players poses several challenges for BNI Syariah. However, with the Indonesian economy and Islamic banking forecasted to grow to more than 5% and 40% respectively in the next few years, tremendous opportunities lie for growth and expansion.

BNI Syariah: Competing In A growing Market

2

Background of BNI Syariah

BNI Syariah is a subsidiary of Bank Negara Indonesia (BNI) which is one of the largest banks in Indonesia.1 BNI Syariah was initially established as an Islamic banking unit (unit usaha syariah or UUS) under BNI before it was spun off to become an independent Islamic bank in 2010. The decision to spin off the Islamic business unit of BNI was motivated by several factors including a conducive regulatory environment, rapid growth of the Islamic banking industry, greater consumer awareness, first mover advantage, consistent strong performance of the Islamic business unit as well as prospects of even better financial results following the spin off.

History and development of BNI Syariah banking unitThe Islamic banking unit or UUS of BNI was established in April 2000 under Law No. 10 of 1998. The move was part of BNI’s strategy to offer universal banking services to a diverse set of customers and to tap into the growing demand for Syariah-compliant banking products and services among the country’s sizeable Muslim population.2 Taking advantage of the bank’s existing strong retail banking operations, the number of UUS increased from 5 branch offices in the year of its inception to 18 offices in 2003. In line with this expansion, deposits and financing grew by 163.41% and 67.57% respectively. In 2004, its status as an Islamic banking unit was elevated to become a full-fledged Strategic Business Unit (SBU) within BNI and hence was accorded greater authority and autonomy to pursue growth opportunities.

In the same year, BNI undertook a radical transformation programme as part of its 15-year long term corporate plan with a view of transforming the bank to support its renewed vision of becoming a leading national bank which places strong emphasis on achieving excellence in services and performance. This bank wide restructuring programme as laid down in its Navigation Map was built on four pillars - service excellence, customer intimacy, creative thinking and performance leadership. Towards this end, the Navigation Map outlined several key strategic initiatives for sustaining financial growth including strengthening distribution networks, improving

1 BNI is a state-owned bank and is the fourth largest bank in Indonesia. Established in 1946, BNI was the first bank founded and owned by the Indonesian Government. It is also the first state-owned bank to go public in 1996.

2 Indonesia has the largest Muslim population in the world. About 88% of its 248 million population are Muslims.


3

branch-banking infrastructure, sharpening focus on customer segmentation, applying prudent and rigorous risk management regimens and the rolling out of an advanced IT platform. The Navigation Map also outlined the strategic roadmap for the development of BNI’s Islamic banking business. As part of the bank’s wide transformation plan, BNI developed a revitalisation programme for the development of its Islamic banking unit which involved sharpening its business focus, strengthening its customer orientation and pursuing operational restructuring programme. The navigation map also contained plans to eventually spin off this Islamic banking unit into a full-fledged Islamic commercial bank by the year 2009.

Under this long-term corporate plan, the primary business focus of BNI’s Islamic business is on small and medium size segments of the market. At the core of this new business focus, the bank adopted a combined market segmentation strategy with a product differentiation strategy. This was viewed as an effective way of matching its product strategy to the characteristics of its target market segments. In its pursuit of growth and service excellence, the bank also restructured its operational infrastructure with more focus on greater market outreach through increasing the number of Islamic outlets; improving quality business operations and strengthening human capital development in particular on enhancing knowledge and expertise in Islamic banking. The introduction of the “office channelling” policy by Bank Indonesia (the central bank of Indonesia) in 2006 enabled BNI to pursue an aggressive expansion strategy of its Islamic banking business.3

Although plans for the separation of BNI’s Islamic business started in 2003, it was not until June 2010 that BNI Syariah was incorporated as an independent Islamic bank following the successful spin off from its parent bank.4 With the spin off, BNI Syariah is geared to strategically focus on key business segments (retail banking services and consumer financing), be

3 Under the office channeling policy, the Islamic business unit is allowed to conduct Islamic banking services through the branches of its parent (conventional) bank. The policy aims to improve the Islamic banking services network nationwide via conventional banks infrastructure in an attempt to reduce cost of setting up Islamic branches.

4 BNI owns 99.99% of shares in BNI Syariah after injecting Rp999.9 billion. BNI Life Insurance owns the remaining shares.


4

more market driven and customer-oriented, more flexible and responsive to market opportunities as well as meet the growing demand for Islamic financial products. The realization of this spin off is attributed to conducive external factors including a favourable regulatory regime with the issuance of Law 19 of 2008 on State Sharia Securities and the enactment of Act 21 of 2008 on Islamic Banking. Today, BNI Syariah has grown to become one of the leading Islamic banks in Indonesia with total assets portfolio of Rp8.47 trillion and total financing of Rp5.31 trillion as at December 2011.

Financial Highlights of BNI SyariahTable 1

2006 2007 2008 2009 2010 2011

Assets (million rupiah)

1,598,921 2,546,844 4,017,502 4,799,247 6,394,924 8,466,887

Investments (million rupiah)

379,066 622,404 697,617 1,360,957 2,419,918 2,494,626

Financing (million rupiah)

1,132,559 1,800,996 3,312,553 3,265,445 3,558,485 5,310,292

Third Party Funds (million rupiah)

1,124,363 1,799,247 3,041,984 4,173,245 5,162,728 6,756,262

Current Accounts

221,752 210,548 358,139 416,975 538,690 894,565

Savings 513,362 833,462 1,202,191 1,613,981 1,980,627 2,616,377

Time Deposits

389,249 755,207 1,481,654 2,142,289 2,643,411 3,245,320

Net Profit (million rupiah)

15,217 19,237 34,439 (189,509) 36,512 66,354

Net Non Performing Financing (%)

9.4 3.79 0.57 0.39 1.92 2.42

Return on Assets (%)

1.10 0.80 0.90 -3.60 0.61 1.29

Return on Equity (%)

5.10 6.40 11.30 -18.60 3.65 6.63

Cost to Income Ratio (%)

79.70 78.10 51.60 47.90 55.79 65.49


5

Towards Value Added Islamic Banking

Numerous innovative products and services have been introduced by BNI Syariah, strengthening its position as the leading Islamic bank in Indonesia by leveraging on the scale and substantial resources of BNI. During its early years of establishment as an Islamic business unit, BNI Syariah pioneered the remote banking concept that enabled customers to do their financial transactions via service counters at existing BNI branches nationwide. Named as the Syariah Production Counter (SPC), this concept was introduced in 2001 and allowed BNI Syariah to leverage on the existing large network of BNI to extend its market outreach without incurring high costs associated with opening up new branches. This innovative strategy was in response to the rising demand for shariah-compliant financial services from the community. The success of the SPC later led to the introduction of the office channelling by Bank Indonesia in 2006.

BNI Syariah also pioneered the rahn business in Indonesia.5 Since this financing product was first introduced in 2004 with the launching of the pilot projects in the East and West Jakarta, it has received positive response from customers. In 2012, rahn financing was valued at Rp212 billion of total financing. However, in early 2012, Bank Indonesia introduced a Rp250 million-per-person cap on the amount of gold that could be pawned at Islamic banks and also limited rahn financing to 20% of a bank’s total financing portfolio or 150% of bank capital, whichever is the lowest. 6 As a result of the new regulation on gold pawn, rahn financing at BNI Syariah decreased as much as 140% in the first quarter of 2012 before increasing again by 13% in the second quarter.7 The new ruling had certainly limited BNI Syariah’s ability to grow. At the peak of the bank’s rahn business, it contributed about 7% of the bank’s financing growth and had expected to reach as high as 40% growth by end of 2012.

5 Rahn is the Islamic mode of gold pawn-broking where customers receive qardh or short-term loan, repayable after a certain period of time.

6 Bank Indonesia issued Circular Letter No 14/7/DPbS on February 29, 2012 concerning gold pawn business. Regulation on the pawn gold practice using the qardh scheme was deemed necessary by Bank Indonesia to prevent the speculative behaviour of customers. The central bank was also worried that Islamic banks would ignore their intermediary role of lending to the real sector as the proportion of rahn financing was growing at the expense of decreasing lending to the real sector.

7 Rahn financing was RP680 billion or 13.18% of total financing as at September 2011.


6

Another fast growing financing product is home financing which registered a double digit growth of 15% in 2011. As at end of April 2012, home financing reached a total value of Rp2.6 trillion. BNI Syariah remains proactive in further developing its home financing. With the rulings on down payments for new home and vehicles loans of conventional banks which took effect June 2012, BNI Syariah is confident that it will be able to take advantage in these new rules to expand its home financing business between 30% and 40%.8 However, Bank Indonesia has proposed to impose similar regulations on the minimum down payments for housing and automotive financing of Islamic banks. Previously, Islamic banks were excluded from the regulation. Nonetheless, musyarakah mutanaqisah home financing will be treated separate from the more popular murabahah home financing. The inclusion of Islamic banks in the regulation on minimum down payment (Loan to Value policy) by Bank Indonesia is expected to have some effect on the bank’s growth.

Development of Islamic Banking in Indonesia

Islamic banking made its first debut in Indonesia in 1992 with the establishment of Bank Muamalat Indonesia pursuant to the enactment of the Banking Act No. 7/1992. Prior to this, the legal and regulatory framework did not allow for the operations of an Islamic bank as the Banking Act No.14/1968 recognises interest as the only basis for banking operations. The Banking Act No. 7/1992 only stipulated that banks may conduct business activities based on the profit and loss sharing principle. However, no reference was made in the Act as to the term ‘sharia bank’ or ‘Islamic bank’.

It was only 6 years later that the Islamic banking infrastructure begun to take shape after a number of legislative changes were introduced to strengthen the legal framework (refer to Exhibit I). The most notable ones were the amendment of Banking Act No. 10/1998 which expressly classifies banking business activities into conventional and those based on the shariah principles. The amendment of Banking Act No. 7/1992 in 1998 allowed conventional banks to open Islamic windows (unit usaha syariah or UUS)

8 The minimum down payment is 30% for mortgages and four-wheeled vehicle loans, 25% for motorcycles and 20% for commercial vehicles. Previously, the loans to value stood at 80% for all lending. The down payment rules were introduced in a bid by Bank Indonesia to avoid property bubble and minimize credit risks.


7

whilst the enactment of the Central Bank Act No. 23/1999 had given Bank

Indonesia the mandate to regulate, supervise and develop Islamic banks.

These legislative changes paved the way for the development of Islamic

banking in the country. In 2002, there were 2 Islamic commercial banks, 6

Islamic banking units (UUS) and 83 Islamic rural credit banks.

In order to further spur the development of Islamic banking, the central bank

released “The Blueprint of Islamic Banking Development in Indonesia” in

2002. The 10 year blueprint sets the vision of Bank Indonesia in developing

Islamic banking in the country and formalises the strategic plan to strengthen

Islamic banking institutions with respect to shariah compliance, regulatory

structure, operational efficiency and systemic stability. In between 2002 and

2004, emphasis was on creating a strong base for sustainable development

of the Islamic banking industry. This included promoting a better

understanding of shariah financial concepts, standardization of international

shariah financial norms, improving the foundation for prudential regulation

and good corporate governance, supporting economies of scope and scale,

developing human resources and ensuring systemic stability.

By the end of 2004, there were 3 Islamic commercial banks and 15 Islamic

banking units. Assets grew nearly tenfold to Rp14,035 trillion, an average

of 70% per year since 2000. Meanwhile, funds collected and financing

channelled by Islamic banks registered at Rp10,559 trillion and Rp10,978

trillion respectively. A significant development was the increase in the

number of branch and sub-branch offices offering Islamic financial services

which expanded from 28 to reach 148 by the end of 2004. The issuance

of the “office channelling policy” by Bank Indonesia in 2006 spurred the

development of the industry further as conventional banks were allowed

to offer basic Islamic banking services using their existing infrastructure via

shariah service counters in selected branches. This policy had successfully

achieved its desired aim of reaching to wider customers who want shariah

compliant financing, particularly micro entrepreneurs.9 At year end of 2011,

Islamic banking customers had surpassed 10 million clients.

9 According to Islamic Development Bank, more than 70% of Islamic financing is channeled to micro entrepreneurs as well as small and medium enterprises who previously received financing from international sources.


8

As part of its concrete efforts and firm commitment to develop the industry, the ‘Grand Strategy of Islamic Banking Development’ was formulated and launched in 2008 by Bank Indonesia. In line with its precursor (10-year Blueprint), this strategic document maps out the market development strategy of making Indonesia’s Islamic banks the most attractive in ASEAN.10 The participation of conventional banks in Islamic banking surged with the passing of the Islamic Banking Act No.21/2008 and Law No.11/2009 on the Regulation on the Conversion of a Conventional Bank to a Shariah Bank. The Islamic Banking Act provided a more comprehensive regulatory framework for further development of the industry and covers both Islamic banks and Islamic business units. The Law No.11/2009 was enacted with the aim of developing a sound Islamic banking network as part of the national banking system. As such, the main effect of the regulation was to allow the conversion of conventional banks to Islamic banks and community credit banks to Islamic community banks. The regulation also sets out 2023 as the deadline for the spin-off of all Islamic windows or business units. A further impetus to stimulate the development of the Islamic banking industry in Indonesia was provided with the amended Tax Law No. 42/2009 which rules on tax neutrality on shariah-based financial transactions, in particular for murabahah transactions.

In July 2012, Bank Indonesia issued a new regulation on the limit of shareholding in Indonesian banks.11 The New Bank Ownership Rules apply to both foreign and domestic banks, but not to state-owned banks and regional development banks. Under the new ruling, banks and non-bank financial institutions can hold up to 40% of a bank’s equity while non-financial institutions can hold up to 30%. Ownership limit for individual investors in conventional banks is 20% and 25% in Islamic banks. However, majority shareholders of Islamic banks that are created by the spin-off of Islamic business units will not be subject to the ownership limits until December 2028. Prior to the ruling, a foreign investor could own up to 99% of the issued and paid-up capital of an Indonesian commercial bank.

10 ASEAN or Association of Southeast Asian Nations is an alliance promoting economic and political cooperation by fostering dialogue among its ten members: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam.

11 Regulation No. 14/8/PBI/2012 on Share Ownership in Banks was issued to tighten the bank ownership rules. The aim of the regulation is to encourage consolidation so as to strengthen Indonesia’s banking industry, reduce the dominance of single shareholders, and make Indonesian banks more competitive in anticipation of the 2020 ASEAN financial sector integration.


9

12 Total assets of Islamic finance in Indonesia is Rp214 trillion (US$23.5 billion), comprising 69.5% of assets in Islamic banking and 18.7% of sukuk of Islamic bond.

In slightly over a decade, the Islamic banking industry had experienced accelerated growth and development. By the end of 2011, the Islamic banking sector in Indonesia accounted for 3.98% of the country’s total banking assets with accumulated assets of Rp152.3 trillion (US$16.6 billion). The industry also registered a remarkable double digit growth of 49% in 2011 and an average growth rate of 40.2% in the last five years, outpacing conventional banking’s annual growth of 16.6% over the same period.12

However, competition amongst players has intensified in recent years, especially given the growing presence of Islamic business units or windows of foreign banks. The number of Islamic banks grew from 2 in 2000 to 11 banks by end of 2011 whilst Islamic business units were 23 in total and Islamic rural banks were 154 (see Exhibit II). Currently, the market leader of Indonesia’s Islamic banking is Bank Syariah Mandiri (a subsidiary of Bank Mandiri), followed by Bank Muamalat Indonesia, currently in second position even though the latter was the first Islamic bank established in the country (see Exhibit III).

The Changing Customer Landscape

Financial institutions are operating in an environment of increased competition, diminishing margins, competitive product landscape and complex regulatory framework. At the heart of these changes is the changing banking customer landscape that has evolved in line with changing industry dynamics including globalisation and advancement in technology and communication; and changing demographics. The advent of the global economic downturn had forcibly altered customer behaviours, attitudes and preferences. This new breed of banking customers demand more control over their banking relationships, expect greater sense of advocacy from their bank, are less tolerant of poor service quality and are more willing to switch banks.

Indonesia’s banking industry has undoubtedly seen major structural changes driven mainly by the global economic downturn and demographic trends. The industry has benefitted from the country’s strong economic growth and


10

favourable demographics which had fuelled a rise in personal income and

consumption, thus feeding the need for banking products. In a consumer

economy such as that of Indonesia, long term customer acquisition and

retention has become a key business competitive advantage. The country’s

robust consumer driven economy is largely due to its hefty middle class and

strong population trends where about 55% of the total population is under

the age of 30 and more than 33% is under the age of 15. Furthermore, the

emerging customer landscape requires a new set of banking capabilities to

cater to its growing middle class. This includes better insights into customer

behaviours and needs as well as new approaches to reach and engage

them. Within BNI Syariah, this has led to a shift in its business focus from a

product-driven banking model to one that is more of a customer-led model,

making the customer at the centre of the bank’s business activities.

A Customer-Centric Bank

In order to remain competitive and grow market share, BNI Syariah places

customers at the heart of the organisation with the aim of maintaining a

healthy customer relationship. As part of its organic growth strategy, BNI

Syariah is looking to boost its economic lines through the acquisition of

new customers, retaining customer patronage and enhancing customers’

banking experience. Hence, a customer centric approach forms the basis

for BNI Syariah’s long term strategy of strengthening its market position and

achieving sustainable financial growth. However, customer-centricity requires

a fundamentally different approach beyond cross-selling alone. Three main

strategies of acquiring, enhancing and retaining customers are adopted by

the bank in strengthening its service excellence as depicted in Figure 1.


11

Customer-Centric StrategyFigure 1

Acquire

DifferentiationInnovation•Convenience•

Enhance

BundingCustomer •service

Retain

AdaptabilityListening•New Products•

Customer AcquisitionBrand strategy, service delivery and product innovation are the three main approaches pursued by BNI Syariah to build its customer acquisition strategy. The BNI Syariah’s brand strategy comes from the bank’s vision and mission statement. The bank opted for common but powerful business cliché – “people’s choice in Syariah banking”, “leading in service and performance”, “provide solutions”, “deliver optimum investment value”. These core values are tied to the bank’s corporate culture and ethical principles (see Exhibit IV). In 2012, BNI Syariah was awarded as the Most Popular Brand in the Islamic Banking category by the Indonesian Brand Champion Awards.

In 2012, BNI Syariah strengthened its network by enhancing its operational infrastructure. This expansion of network is deemed crucial in the bank’s effort to realise its vision, mission and future business plan. As at September 2012, the bank had 49 branch offices, 89 supporting branch offices, 5 cash offices and more than 1,000 SPCs or also known as Syariah Channelling Outlets. The bank also plans to tap into the burgeoning microfinance sector which has the potential opportunity to grow the country’s economy


12

even further.13 This is in line with the bank’s expansion strategy to further avail its services to prospective customers throughout the country. BNI Syariah strengthened its organisational structure with the establishment of a microfinance division to support the bank’s business expansion in this rapidly growing sector. Although the bank’s focus remains on retail banking, microfinance allows the bank to do retail banking on a micro transaction level but on a very large scale.14 By September 2012, BNI Syariah had set up 38 micro banking outlets nationwide.

BNI Syariah took a giant step in its business expansion strategy by entering the college student banking market. The signing of a memorandum of understanding with 10 public and private colleges in the country for education financing and cash management signifies the bank’s proactive approach to meeting the financing needs of college students. So as to cash in on the growing student banking market, BNI Syariah opened up branches in several college campuses and universities throughout the country. Locational convenience was deemed as necessary to meet the banking demand of students and to drive rapid growth of this new customer segment.

The bank’s approach to customer-centricity goes beyond branch accessibility. In order for BNI Syariah to continue to acquire customers, it needs to innovate and create customer-centric products. Innovation is important both for creating new experiences which consumers want to engage with, and also to ensure that a bank’s offering continues to keep up with the changing needs of its customers. One of the many innovative services offered by the bank to expand its retail banking and increase market outreach is the introduction of a mobile service unit to meet the demands of customers who need a fast and convenient banking service, especially in remote areas of the country. The mobile service unit or known as BNI Syariah Layanan Gerak (BLG) is a customised transit van with an inbuilt counter and an ATM machine. The mobile unit offers basic banking services including deposits, withdrawal, money transfer and opening of bank accounts. From only two units in 2011, BNI Syariah has launched a total of 22 units in 2012 nationwide.

13 The microfinance sector in Indonesia is one of the largest in the world with World Bank estimates that only 9% of adults in the country had accessed to financing from formal financial institutions in 2011.

14 There are approximately 22.1 million potential customers in the consumer mass market segment.


13

BNI Syariah Mobile Service UnitFigure 2

BNI Syariah also introduced several innovative financial products and services

with a focus on developing a savings culture as a means to improve household

income especially those of low-to-middle income people who wish to save

and increase their assets base. The bank has some 8 different types of savings

products to cater for different savings needs of the populace. In 2010, the

bank was awarded Best Achievement in Total Customer Satisfaction under

the Category of Shariah Savings Account from the Indonesian Customer

Satisfaction Award. A new savings product called the iB Hasanah Children

Savings targeted at customers aged between 1 and 17 was also introduced

to expand its customer base and provide savings alternative for children.

By the end of 2012, savings accounted for about 40% of the bank’s total

third party funds and 30% of total assets.

An innovative financing product introduced is the iB Hasanah Card. Unlike

the conventional credit card, the iB Hasanah Card combines savings

programme, pilgrimage financing, business financing and the Smart ZISWAF

transfer feature.15 The latter feature allows customers to transfer their charity

funds either in the form of zakat, infaq, sadaqah or waqf to participating

15 Ziswaf is an acronym for “Zakat, Infaq, Sadaqah and Waqf funds”.


14

charitable institutions. Its business financing feature of the card won the bank an award from the Indonesian Business Records as the first credit card to inspire entrepreneurship as the iB Hasanah Card provides cardholders with financing solutions for those who wish to start a business or would like to purchase a franchise.

Customer retention

In search of growth opportunities, BNI Syariah is focusing on deepening

customer share of the wallet with existing customers. Several customer

retention programmes were implemented as a form of appreciation

towards existing customers including a loyalty programme, direct rewards

programmes and a sweepstakes programme. The Cahaya Rezeki Hasanah

programme, for example, provides lucky draws to savings account holders

of the bank (see Exhibit V). The iB Hasanah (credit card) card holders, on

the other hand, are eligible to participate in the UK Homestay programme

where they can learn English and experience London at the same time. The

success of the loyalty and rewards programmes introduced is translated into

an increase in deposits and savings from Rp2.64 trillion and Rp1.98 trillion

in 2010 to Rp3.245 trillion and Rp2.616 trillion in 2011, respectively.

The paradigm shift from ‘product-based’ to ‘customer-centric’ mindset

entails restructuring internal business process including creating a customer

centric culture within the bank. A key challenge was to encourage its 1,349

employees to provide high quality services across segments by establishing

a system of shared values and behaviours that focus employee activity on

improving customer experience. To this end, BNI Syariah provides both

training and on-the-job training to its employees to ensure that they are

skilled and competent to deliver the highest quality of professional services

to customers. Employees are also incentivised through a remuneration

system designed with pay-per-performance and pay-for-position basis.

Remuneration comes either in the form of good salary and other incentives

that promote performance excellence.

The paradigm shift also requires aligning technologies and processes to

support and drive customer engagement. To ensure that employees meet

the bank’s standards for service and conduct, BNI Syariah implemented

an office automation system that allows all policies, procedures and work

instructions to be documented centrally and viewed electronically by all

employees of the bank.


15

Enhance customer experienceEnhancing customer experience is a key business growth driver. Along with innovative products and best pricing, customer experience defines the bank’s value proposition and generates high customer loyalty. BNI Syariah enhances loyalty by keeping the customers’ experience at the centre of the business. The bank uses social medium networking such as Facebook and Twitter to enrich customer experience as well as a customer service tool. These social media networking channels are used to communicate with customers, spread corporate news and promote events or products as well as to advocate to prospective customers on Islamic banking, particularly for the younger generation or new age consumers. In essence, BNI Syariah uses these social media to promote and build a community to support its business. BNI Syariah also uses technology to improve customer experience banking with them. A number of electronic services channels such as ATM, internet banking and SMS banking have been launched by the bank to create seamless banking experience. BNI Syariah’s innovative approach to using social media to transform banking experience has won the bank several awards and accolades including Digital Brand of the Year 2012 and Digital Sharia Mortgage Brand 2011.

Leading for growth

As a customer-centric bank, BNI Syariah’s role in the banking landscape is achieving prominence as Islamic banking gains momentum as a viable and sustainable alternative to conventional finance. BNI Syariah’s efforts towards introducing a new, unique banking were rewarded not only through improved financials but also the growing clout in the country’s Islamic banking industry. The support of its parent company through the wide sales channels in all provinces in Indonesia has allowed BNI Syariah to reach a broader consumer base. In 2011, BNI Syariah was ranked amongst the 10 largest Islamic banks in Indonesia in terms of total assets. With 138 branch and supporting branch offices and more than 1,000 shariah office channelling, BNI Syariah is well placed to provide a full array of retail and consumer banking services to its growing customer base.


16

Exhibit

Historical Development of Islamic Banking in IndonesiaExhibit I

Year Development

1990 Conference of Indonesian Ulama Board (MUI)

1992 Act No. 7 of 1992 on Banking, allowing establishment of Islamic banks in the country

Bank Muamalat Indonesia, first Indonesian Islamic bank was inaugurated

1998 Amendment of Act No. 7 of 1992 on Banking allowing Islamic banks to operate fully

as Islamic Banks

(BUS) or by opening Islamic Banking Windows/Unit (UUS).

1999 Establishment of National Shariah Board

Central Bank Act No. 23/1999 was established

2000 Establishment of Jakarta Islamic Index

2001 Establishment of Islamic Banking Bureau

2002 Bank Indonesia released “The Blueprint of Islamic Banking Development in Indonesia”

2006 Bank Indonesia issued “office channelling policy”

2008 Bank Indonesia released “Grand Strategy of Islamic Banking Development”•

Law 19/2008 on Shariah Sovereign Bond (RI Sukuk) was constituted•

Law 21/2008 an authoritative law on Islamic finance in Indonesia was constituted•

Islamic Banking Act 2008 was enacted•

2009 Regulation on the Conversion of a Conventional Bank to a Shariah Bank No.11/2009

2010 Amendment of Tax Law No. 42/2009 which rules on tax neutrality on shariah-based

financial transactions.

Source: Bank Indonesia


17

Islamic Banking in Indonesia – Main IndicatorsExhibit II

2011 2010 2009 2008 2007 2006 2005 2004

Number of Islamic Commercial banks

11 11 6 5 3 3 3 3

Number of Islamic banking units

23 23 25 27 26 20 19 15

Number of Islamic rural banks

154 150 139 131 114 105 92 88

Total Assets (trillion Rp)

135.9 97.51 66.01 49.55 36.53 26.72 20.88 15.33

Total Deposits (trillion Rp)

107.36 68.18 46.88 38.19 27.94 19.53 15.23 11.49

Total Financing (trillion Rp)

102.11 76.03 52.27 36.85 25.65 20.67 15.58 11.86

%age share of total banking assets

3.98% 3.24% 2.80% 2.08% 1.84% 1.58% 1.42% 1.20%

Source: Bank Indonesia


18

Financial Performance of Full-Fledged Islamic Banks in Indonesia in 2011Exhibit III

Banks Total Assets

(trillion rupiah)

Total Financing(trillion rupiah)

Third Party Funds

(trillion rupiah)

Net Income(billion rupiah)

Bank Syariah Mandiri

48.67 36.73 42.62 551.07

Bank Muamalat Indonesia

32.47 22.47 22.66 273.62

Bank BRI Syariah

11.20 9.17 9.91 11.65

Bank Mega Syariah

5.57 4.10 4.93 53.67

Bank Syariah Bukopin

2.73 1.92 2.29 12.21

BCA Syariah 1.22 0.68 0.86 6.8

Bank Panin Syariah

1.02 0.68 0.42 9.23

Bank Victoria Syariah

0.64 0.21 0.47 27

Bank Maybank Syariah Indonesia

1.4 1.0 0.35 n.a.

Bank Jabar Banten Syariah

0.28 1.6 2.22 18

Bank BNI Syariah

8.47 5.31 6.76 66.4

Source: various annual reports


19

Corporate Culture and Ethical Principles of BNI SyariahExhibit IV

Corporate Culture Ethical Principles

As BNI Syariah people carry shariah •principles, which refer to Al Quran and Hadith, BNI Syariah has a set of values which gives conduct to its action. The values are formulated in the work culture of BNI Syariah: Amanah and Jamaah.Amanah is one of the Prophet’s •behaviours, which literally means “trustworthiness”. In the corporate culture of BNI Syariah, Amanah refers to “Responsibly doing the duties to obtain optimum results”The Amanah value is reflected in •the core behaviour of BNI Syariah people:

Professional in performing dutiesUpholding strong commitment and responsibilityHonest, fair, and trustworthyA role model for the society

Jamaah is based on the concept •of collectivity in Islam in doing worship by prioritizing togetherness and the importance of collective work under one supervision. In this corporate culture, Jamaah refers to “A synergy in implementing duties and responsibilities”. This culture is performed in the core behaviour:

Cooperate systematically and rationally Humbly reminding each other Working together under an effective leadership

Ethical Principles of BNI Syariah:Operation of our business firmly 1. based on the principles of shariah: kaffah and istiqomahRunning our business activities 2. in order to provide full maslahah universal benefitsRecord all data and prepare all 3. reports for BNI Syariah properlyDo not abuse position4. Avoid conflicts of interest5. Refuse to accept bribes, gifts or 6. other rewards (Risywah)Defend the good name and 7. reputation of BNI SyariahMaintain the confidentiality of 8. Bank dataDo not use corporate identity 9. outside of official interestsEnhance and improve 10. competenciesBecome a role model11. Be fair12. Disclose information properly 13. based on regulationMaintain good human relationship 14. (ukhuwah) among BNI Syariah employeesBe a spokesperson on15. behalf of BNI SyariahRefrain from participating in 16. activities of political partiesMaintain a safe, hygienic and 17. environmentally friendly workplaceMaintain and apply Bank assets 18. correctly and responsiblyDemonstrate your commitment to 19. environmental and social concerns

Source: BNI Syariah Annual Report 2011


20

Cah

aya

Rez

eki H

asan

ah S

wee

pst

ake

Pro

mo

tio

n o

f B

NI S

yari

ahEx

hib

it V

Sour

ce: B

NI S

yaria

h w

ebsi

te

BNI Syariah: Competing In a Growing Market - aif.org.my · 1 BNI is a state-owned bank and is the fourth largest bank in Indonesia. Established in 1946, BNI Established in 1946, BNI

Documents