ZhongAn Buys Into Bank Aladin

China's online insurer ZhongAn Online P&C is buying a stake in Indonesian tech-based syariah lender Bank Aladin. ZhongAn was co-founded by the chairmen of Alibaba Group, Tencent Holdings and Ping An. The firm is interested in capturing the potential market in South-east Asia's largest economy that still has low insurance penetration. Indonesia's syariah banking is also an underpenetrated market, despite the country being home to the world's largest Muslim population.

Bank Aladin - A joint press statement issued in the afternoon says that ZA Tech, a ZhongAn unit in which Softbank also has a stake, has become Bank Aladin’s strategic partner that will act as an investor and a business partner, and will strengthen the Jakarta-based bank’s ecosystem.

ZhongAn's reported investment plan comes as Indonesia becomes one of the hottest investment destinations in the region. It witnessed record deal value last year, with fresh foreign capital pouring into the country in a wide range of tech-based sectors.

Companies in Indonesia raised a total of US$8.56 billion (S$11.64 billion) through initial public offerings and rights issues in 2021, beating pre-pandemic figures. Indonesia ranked third last year in South-east Asia, trailing behind only Singapore (US$18.48 billion) and Thailand (US$13.61 billion. These figures do not include deals done outside the Indonesia Stock Exchange.

Ribbit Capital - in October last year (2021), US venture capital firm Ribbit Capital, a fintech solution partner of the world's largest retailer Walmart, bought a stake in Jakarta-based Bank Jago  that also counts Singapore sovereign wealth fund GIC as an investor. In March last year, GIC acquired an approximatel 9% stake in the bank for about three trillion rupiah (S$284 million).

ZhongAn  - was established in late 2013, initially catering to Alibaba's online shoppers. It has since expanded to offer other services on various platforms, giving comfort to shoppers who buy merchandise at an unfamiliar store.

In early 2019, ZhongAn and Singapore-based Gab formed a joint venture (JV) to enter the digital insurance distribution market in South-east Asia. The JV created a digital insurance marketplace that offers insurance products through Grab's mobile app.

Syariah Banking - Newly established tech-based lenders in Indonesia are enthusiastically tapping syariah banking in the country, vying for a potential customer base of 45 million. Syariah banking assets in Indonesia represent a mere 6.5 per cent of total banking assets, dwarfed by Malaysia's 29 per cent and Saudi Arabia's 65 per cent.

Syariah banking assets in Indonesia were recorded at 631.58 trillion rupiah at the end of July 2021, according to data from the Indonesian financial service authority.

Bankers say growth has been stymied because syariah banks, unlike conventional banks, are not ubiquitous, with hardly any physical branches or automated teller machines. In a country with more than 100 banks, attention has been focused on conventional banking, with few syariah products and services available.

South-east Asia's largest economy currently has only two tech-based syariah banks, Bank Aladin and Jakarta-based Bank Jago. The latter launched its syariah mobile banking app in February.