International Finance Corporation (IFC), the private sector lending arm of the World Bank Group, has agreed to invest $75 million in PT Bank Danamon Indonesia Tbk (BDMN), to develop the bank’s Islamic trade financing operations.
Bank Danamon is majority owned by Temasek Holdings (Private) Limited through its affiliate Fullerton Financial Holdings Ltd (67.37%) with JPMB Franklin Templeton Investment Funds holding 6.81 per cent and 25.82 per cent with the public.
IFC proposes to invest up to $75 million structured as an Islamic trade financing instrument. The total facility size would be approximately $150 million including co-investment by the Bank, according to an IFC filing.
With this investment, IFC is targeting deepening of Islamic financing in Indonesia through new financial products and services designed to expand outreach.
IFC will establish a Murabaha Trade Co-financing Facility to provide trade financing to the bank’s corporate customers in selected agri-commodity sectors (in both US Dollars and Indonesian Rupiah) on a sharia compliant basis. Danamon carries out Islamic banking operations through its unit, Bank Danamon Sharia.
Based on the agreement, IFC will partner with Danamon to support an expansion of its Islamic banking business, particularly in trade finance in critical commodities, which is a priority for the Government of Indonesia (GOI) to ensure domestic food supply sustainability.
IFC will also support the Bank’s Critical Commodities Program (CCP), introduced in late 2013 to support the supply and distribution of essential foods and agricultural products within Indonesia.
Bank Danamon is a leading commercial bank offering a wide range of financial products, including corporate loans, retail (housing loan, car loan, credit cards and personal loans), SME, commercial, micro-finance and Islamic finance. In 2004, the bank acquired Adira Finance which is a leading automotive leasing company in Indonesia.
Last year, Bank Danamon through its sharia business unit, PT Danamon Syariah, signed Shariah Joint Trade Financing in Indonesia with the International Islamic Trade Finance Corporation, an international financial institution and member of the Islamic Development Bank Group. This cooperation is targeted to achieve $1 billion in the first five years, starting with $200 million in 2015.