Asia Financial Services

Recent reports indicate that Indonesia’s banking sector is growing, with profits, assets and loans showing significant year-on-year increases during the first four months of 2011. The system is also stable, with the sector’s average capital adequacy ratio (CAR) at about 16%. However, there have been calls for the country’s banks to improve corporate governance and implement risk management measures.

The Sultanate’s sharia-compliant insurance sector is looking to expand its market share, stepping up efforts to promote takaful products and increase the range of policies on offer, with the sector likely to see greater segmentation as a result.

The Islamic financial sector in Indonesia is hoping a mix of state-backed infrastructure projects and regulatory reforms will help the country’s sharia-compliant lenders to continue their rapid expansion, allowing the industry to realise its full potential and to come out of the shadows of other regional banking powers.

The banking sector in Sabah – already well-managed and capitalised – seems poised for a positive performance in 2011, but consumers will also benefit from an increase in competition. With strong economic fundamentals in place on the back of high crude palm oil (CPO) prices (which tend to broadly track those of regular crude oil) and a burgeoning local tourism sector, Sabah’s financial services market is attracting growing interest from foreign players.

Solid economic growth bodes well for Indonesia’s insurance sector, with forecasts that insurance premium and total asset levels will increase over the medium term. It is possible, however, that many of the smaller players in the market could be squeezed as competition for clients, especially in the life segment, heats up.

Brunei Darussalam’s Islamic financial sector is set to expand in the coming years, following a series of advances that will strengthen its operational and regulatory base and bridge some of the gaps that have restricted the development of new products and services.