Indonesian peer-to-peer lender Amartha is in talks to acquire 70 percent of a local bank, «DealStreetAsia» reported.

The report, citing two people familiar with the matter, said the bank is likely PT Bank Victoria Syariah, with the talks coming as the fintech is in the process of raising a pre-initial public offering (IPO) funding round.

Fintechs Eye Brick-and-Mortar

The deal, if it materializes, would mark a trend of fintechs looking to bolt on traditional banks to their digital ones. Earlier this year, Singapore-based wealth-management fintech iFAST acquired a majority stake in a U.K.-based bank. Small Singapore-based bank Singapura Finance has tied up with fintech MatchMove. Singtel and Grab, which together have received a licence to form a digital bank in Singapore, have taken a 16.3 percent stake in PT Bank Fama International in Indonesia. At the end of 2020, Indonesian ride-hailing unicorn GoJek acquired a 22 percent stake in Indonesia’s Bank Jago. GoJek has since merged with another Indonesian unicorn, e-commerce player Tokopedia, and the resulting company, GoTo, has filed for an IPO on the Indonesian exchange.

An Amartha spokesperson told DealStreetAsia: «Amartha remains focused on growing our services in Indonesia to help serve the unbanked women to empower them with capital to start their business and pursue their dreams. We will continue to look for any potential opportunities and avenues to support our business development efforts.»

Due Diligence Underway

Amartha and PT Bank Victoria, which is the parent of Bank Victoria Syariah, didn’t immediately return finews.asia’s emailed request for comment.

Indonesian publication Bisnis.com reported in September that new investors were interested in Bank Victoria’s divestment of Bank Victoria Syariah and were in the process of due diligence. Other local media reports have indicated the divestment was related to Bank Victoria’s need to boost its capital to meet new minimum requirements taking effect this year. 

Bank Victoria Syariah had total assets of IDR1.45 trillion, or around $101 million, as of end-February, according to the bank's website.

Islamic Banking

In December, Hery Gunardi, CEO of the then newly merged Bank Syariah Indonesia (BSI) told McKinsey & Co. that Islamic banking products had faced a tough audience in Indonesia, with an only 7 percent penetration rate. That was despite around 87 percent of the country’s around 274 million population being Muslim, he said in the report. Gunardi added that compared with a 30 percent penetration in Malaysia, according to the report.

Amartha has raised $63.5 million in funding across six rounds, attracting a strong bench of investors, according to Crunchbase data. Norway’s sovereign wealth fund Norfund, Mandiri Capital Indonesia, MDI Ventures, Women’s World Banking, UOB Venture, Lendable, LINE Ventures and Bamboo Capital Partners have all invested in the fintech, the data showed.