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Jakarta Post

Islamic finance an engine of development, growth

Islamic finance will be a new engine of national economic growth.

Jhordy Kashoogie Nazar (The Jakarta Post)
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Jakarta
Fri, August 4, 2017

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Islamic finance an engine of development, growth Muslim women wear mukena (head-to-toe prayer gowns) during Idul Fitri prayers in Gumuk Pasir, Parangkusumo, Yogyakarta. (The Jakarta Post/Albertus Magnus Kus Hendratmo)

P

resident Joko “Jokowi” Widodo has just launched the National Islamic Finance Committee (KNKS), which aims to synchronize and integrate the Islamic finance policies of relevant government bodies.

Under Government Regulation No. 91/2016, the KNKS, headed by the President with the committee members from relevant ministries and government authorities, has the function of formulating and recommending the direction of cross-sectoral strategic programs in contributing to the economic growth of the nation.

Hence, Islamic-finance development can be integrated into the national economic packages through the KNKS to enhance national welfare and prosperity, which fulfills the aspirations of Jokowi’s Nawa Cita (nine-point agenda).

In light of that fact, the KNKS is in line with the Sustainable Development Goals (SDGs) set by the United Nations with 17 goals to foster global prosperity.

The formation of the KNKS is relevant and timely considering Islamic-finance development is still at the nurturing stage dominated by Islamic banks with a current share of 5.3 percent, in comparison with the national banking system.

Besides, the management of social funds (zakat, waqf, infaq and shadaqah) is not yet at the optimal level to contribute to the productive sectors and eradicate poverty in Indonesia, while there is potentially an immense amount of social funds.

The National Development Planning Ministry has a development plan through the Indonesian Islamic Finance Architecture in 2016, which is in line with the National Mid-Term Development Plan (RPJMN) — 2015-2019. Nevertheless, planning without strategy for the strategic program execution is not sufficient.

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