Three Indonesian banks to open sharia units-c.bank

JAKARTA, May 7 (Reuters) - Three Indonesian banks plan to open sharia-compliant units this year to tap the potential of Islamic finance in the world's most populous Muslim country, a central bank deputy governor said on Wednesday.

Analysts say Indonesia has the potential to become a major player in global Islamic finance because around 85 percent of its around 226 million people are Muslim.

It lags neighbouring countries like Malaysia and Singapore because of tax and accounting framework issues, but analysts expect sharia financing to take off after parliament passed the long-awaited sharia finance law last months.

Siti Fadjrijah told Reuters state-owned PT Bank Rakyat Indonesia (BBRI.JK: Quote, Profile, Research), the country's third largest lender, and PT Bank Bukopin (BBKP.JK: Quote, Profile, Research), will convert their conventional units to sharia-compliant banks.

She said another state bank, PT Bank Negara Indonesia Tbk (BBNI.JK: Quote, Profile, Research), will also set up a new Islamic bank together with Islamic Corporation for the Development of the Private Sector (ICD), a unit of Islamic Development Bank.

"This year three new sharia banks will be established in Indonesia," Fadjrijah said on the sidelines of an Islamic finance conference in Jakarta.

When asked if Bank Indonesia will give more licences for foreign banks, she said:

"It depends. When investors establish a new bank I will ask what are their expectations, how they will increase their business. We must know their target."

Sharia, or Islamic law, bans payment of interest, allowing money to be earned only from physical assets. It also bars investment in alcohol, tobacco or gambling.