GIC to buy 9% of Indonesia's Bank Jago to tap digital banking business

Singapore sovereign wealth fund GIC will purchase a stake in Bank Jago, a publicly listed Indonesian lender that is set to become the first fully digital bank in South-east Asia's largest economy, a rights issue prospectus shows.

GIC will spend as much as 3.15 trillion rupiah (S$293 million) to acquire about 9 per cent of Bank Jago's enlarged capital through a rights issue slated for next month, according to a prospectus filed to the stock exchange by the Jakarta-based bank. GIC declined to comment when contacted by The Straits Times yesterday.

"The more the shareholders, the more transparently Bank Jago will be run and the better the corporate governance as there are more parties watching the management," Bank Jago deputy chief executive Arief Harris Tandjung told reporters yesterday morning while explaining the prospectus.

Bank Jago will hold a one-for-3.6 rights issue, which gives investors the right to buy one new share for every 3.6 existing shares that they own.

The proceeds from the rights issue will be used to boost Bank Jago's capital to about 8 trillion rupiah, from about 1 trillion rupiah currently - 97 per cent of the expected fresh funds injected into the bank's capital will be channelled to finance business expansion, 2 per cent to develop information technology infrastructure and 1 per cent to develop the bank's human capital, chief executive Kharim Siregar said.

Bank Jago's existing major shareholders that collectively hold a 51 per cent stake - Metamorphosis Ecosystem Indonesia and Wealth Track Technology - will use only part of their rights to buy new shares in the rights issue, having committed to transfer such rights to GIC and other foreign institutional investors.

Metamorphosis Ecosystem is mainly owned by veteran Indonesian banker Jerry Ng. Wealth Track is owned by Mr Patrick Walujo, who is also the co-founder of Northstar Pacific Partners, an Indonesian private equity firm backed by TPG Capital.

Bank Jago recently entered into a strategic partnership with ride-hailing and digital payment services firm Gojek.

In December last year, Gojek spent US$160 million (S$212 million) to raise its stake in Bank Jago to 22.16 per cent.

This will eventually see Jago's digital banking services being offered on Gojek's super-app platform, allowing Gojek's millions of users to instantly open a bank account, for instance, and manage it on the app.

Indonesia's financial watchdog OJK is set to outline by the middle of this year how digital banks should operate in the country, Mr Anung Herlianto, its executive director of banking research and regulation, told The Straits Times earlier this month.

Digital banking is expected to provide a boost to Indonesia as it will cater to the unbanked population, which stands at up to one-third of the country's 270 million people. Meanwhile, smartphone penetration in the country has reached between 70 per cent and 80 per cent.

In a recent interview with ST, Bank Jago commissioner Anika Faisal said: "Banks must be present in digital ecosystems; this is how people do their banking nowadays, instead of visiting a bank."

Bank Jago has pledged to take a consumer-centric approach, Ms Anika said, adding that a digital bank provides customised banking.

"In the past, customers would adjust to bank products on offer. But banks must now adjust to the customers. How do customers want to do it? That's the way the bank should do it. Banks now follow the customers, not the other way around," she said.

A version of this article appeared in the print edition of The Straits Times on February 27, 2021, with the headline 'GIC to buy 9% of Indonesia's Bank Jago to tap digital banking business'. Subscribe