IslamicFinance.de

Moody's Investors Service says that the Indonesian government's (Baa3 stable) Islamic finance roadmap will encourage consolidation among smaller Islamic banks in the country, and foster the development of a larger domestic Sukuk market. The consolidation of state-owned and commercial Islamic banks will increase the size of the banks' capital bases, improve cost efficiencies, and allow increased underwriting in the corporate and infrastructure sectors. Moody's report points out that Islamic banks operate less extensive branch networks when compared to conventional banks, and their capital bases are smaller. Their riskier customer base has led to non-performing financing ratios that are consistently higher than the comparable non-performing loan ratios at conventional banks.