A look at Bank Muamalat Indonesia's journey

A look at Bank Muamalat Indonesia's journey

As long as there are no funny moves, being a solo player in a
market often bears fruit. This is one of the important lessons to
take from the journey of Bank Muamalat Indonesia (BMI). As we
know, BMI is the first (public) bank to adopt the Syariah (legal
code of Islam) system, and for the moment it is the only player
in this market.

On the one hand, its market position is advantageous because
BMI has the chance to build customer loyalty. On the other hand,
as a bank that practices the Syariah banking system, BMI faces
great difficulties in creating a sizable customer base. This is
mainly caused by the constraints faced by BMI in educating its
target market, starting from limited finances and resources to
educate the market to the psychological constraints of its target
market.

Faced with these trying conditions, BMI chooses to take extra
care in running its banking operations. In the beginning, this
particular choice seemed to be disadvantageous to the development
of BMI, since BMI could not grow as large as other private local
banks. However, BMI continued to remain cautious because it
realized that as a new system, Syariah banking not only faced
difficulty in educating current and prospective customers, but
also was unsupported by a suitable macrosystem. This latter
condition limited BMI's ability to move effectively in the money
market in the same way conventional banks were able, because of
instrument constraints.

Apart from being careful in running its operation, BMI first
chose a particular market segment identified by Jeff Moore as the
"early adopter". This name refers to the people who basically
cannot accept a system of banking that bases its operation on
interest. Because of that, the positioning for BMI was to be an
Islamic bank. This identification of BMI as an Islamic bank has
lasted for some time now and has become deeply ingrained, as
revealed in a survey of bank customers from various cities in
Indonesia in mid-1999.

Apparently, the almost 1,500 respondents, customers and
noncustomers, largely have a strong perception of BMI as the
Islam bank. Meanwhile, its perception as a bank that uses a
profit-sharing system, or as a bank that does not charge interest
also has emerged. However, the perception that BMI is a bank only
for Muslims was relatively small.

This is very interesting, because BMI apparently has great
growth potential, not only in the segment of early adopter, but
also in the early majority or late majority. Moreover, since
there have been no funny moves, there is no negative perception
of BMI. Taufik