Bank Bumi Arta investment escalates Indonesia’s digital banking rush

With their focus on technology, internet-based companies are swiftly gaining a presence in Indonesia’s banking sector, with Ajaib’s $52 million investment in Bank Bumi Arta being the most recent development.

Ajaib is a Softbank-backed online mutual fund service provider where investors can invest in stocks, bonds, and the money market through mutual funds.

According to data from Bank Bumi Arta, Ajaib has bought 554.4 million shares of the company, approximately 24% of its total issues. The purchase was completed on November 17 at a price of IDR 1,345 per share.

Previously, Gojek had invested in Bank Jago and Sea Group, Shopee’s parent company, bought shares in Bank Kesejahteraan Ekonomi, now Bank Seabank Indonesia. According to reports, Sea Group is still looking for another bank to be bought.

Furthermore, Buy Now, Pay Later (BNPL) players have also made inroads to the banking sector, with Akulaku (PT Bank Neo Commerce Tbk) and Kredivo (PT Bank Bisnis Indonesia Tbk) emerging as prominent contenders.

Ajaib entered Bank Bumi Arta by acquiring shares owned by PT Surya Husada Investment, PT Dana Graha Agung and PT Budiman Kencana Lestari.

Ajaib bought 277.2 million shares from Surya Husada Investment so that its ownership decreased from 1.05 billion 45.45% to 33.5%. Meanwhile, Dana Graha Agung sold 166.32 million shares from the previous 630 million or 27.27%, leaving only 20.1% of its ownership remaining. Meanwhile, the ownership of Budiman Kencana Lestari sold 110.8 million of its shares from 420 million or 18.18% so that its post-transaction ownership became 13.4%.

By the end of this year, Bank Bumi Arta will also increase its capital with pre-emptive rights (HMETD) or rights issues to meet the minimum core capital requirements set by regulators, at least Rp 2 trillion ($140 million) at the end of 2021 and Rp 3 trillion ($210 million) at the end of 2022.

Bank Bumi Arta will issue a maximum of 750 million shares with a nominal value of Rp 100 per share. The company expects to receive an effective statement from the OJK for this action on November 29. The period for the implementation of the Preemptive Rights is scheduled for December 13-17, 2021.

This development and many others like it follow the August launch of the country’s digital banking guidelines. As more players attempt to enter the Indonesian market and fulfill high capital requirements, a number of aggressive investments from neighboring Singapore have already been in play.

“There are strong reasons to pursue digital banking in Indonesia, given that more than 66% of its population of 270 million are unbanked,” said Adeline Paul Raj of The Edge Malaysia. “In addition, half of the population are aged 30 and below.”