TheJakartaPost

Please Update your browser

Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.

Jakarta Post

Sharia-compliant investments guard against foreign influence

Sharia-compliant investments have flourished in terms of valuation and number of investors in recent years, which could help strengthen the domestic market’s resistance to global influences

Stefanno Reinard Sulaiman (The Jakarta Post)
Jakarta
Mon, April 23, 2018

Share This Article

Change Size

Sharia-compliant investments guard against foreign influence

S

haria-compliant investments have flourished in terms of valuation and number of investors in recent years, which could help strengthen the domestic market’s resistance to global influences.

Data from the Indonesia Stock Exchange (IDX) shows that the number of sharia-compliant investors in March grew 18 percent, or by 4,245 investors year-to-date (ytd), with transactions totaling Rp 476 billion (US$34 million).

This means there are currently at least 27,000 sharia- compliant investors, or 4 percent of total investors, in the capital market. The figure shows a steady increase in the past four years from only 0.7 percent in 2014.

The growing presence of sharia-compliant stocks in the capital market was also underlined by the Financial Services Authority (OJK), whose data shows that over half of investments in 2016-2017 were sharia-compliant.

The Sharia Economic Society (MES), which is led by OJK chairman Wimboh Santoso, believes the growth of sharia-compliant investors needed to be maintained to strengthen the market’s resistance to foreign influences.

“The performance of sharia-compliant investments in the capital market has been outstanding,” MES deputy chairman Frederika Sari Dewi said on Friday. “The issuers also see this as an opportunity to expand their market, whether for conservative investors or not.”

Frederika is also the director of the Indonesian Central Securities Depository (KSEI). She added there was also growing demand from foreigners for sharia-compliant investments in Indonesia.

“Local investors mainly see the investment for sharia players, but foreigners have been [investing] for the reliable return of investment,” she said.

Sharia-compliant mutual funds are also blossoming, according to Infovesta, a Jakarta-based investment research center. In 2017, the asset under management (AUM) of sharia-compliant mutual funds grew
75 percent to Rp 20.6 billion from Rp 11.7 billion in 2015.

“Though they remain exposed to the same risks as conventional mutual funds, generally speaking, I have yet to find any specific threats to the growth of sharia-compliant mutual funds [in 2018],” Infovesta director of research Edbert Suryajaya told The Jakarta Post on Friday.

He said literacy on sharia-compliant investments has significantly improved in recent years, but believes there was still ample room for improvement on education efforts.

“We could try to utilize various communication platforms in order to expand the scope [to potential investors],” he added.

The success of sharia-compliant investments may also be due to the greater education efforts of stakeholders. The OJK reported that as of last year, 180 activities took place in the sharia capital market in 95 cities.

Meanwhile, the number of trainees has jumped 320 percent in five years to 18,066 in 2017.

Manulife Aset Manajemen Indonesia (MAMI), part of Canadian financial services firm Manulife Financial Corporation, echoed the importance of literacy for the growth of sharia-compliant investments.

Recently, the company teamed up with MES to help promote its sharia-compliant investment products, including Islamic bonds, locally known as sukuk, stock mutual funds and US dollar offshore mutual funds.

“It is also part of our corporate social responsibility [CSR] to improve literacy [on sharia-compliant investments],” MAMI’s director and chief of legal, risk and compliance, Justitia Tripurwasani, said in a press conference about the cooperation in Jakarta on Friday.

The company has managed Rp 65.7 trillion in mutual funds, 10 percent of which is sharia-compliant. Meanwhile, around 32 percent of its investors are sharia-compliant investors.

“More than 80 percent of [Indonesia’s] population is Muslim, but we have yet to reach them all,” she said.

Good news from the capital market is a relief for the sharia-based financial industry, as a recent survey from international consultant PricewaterhouseCoopers (PwC) shows pessimism over sharia banks’ growth in market share.

“Bankers are of the opinion that sharia banking over the next eight years would either remain stagnant or grow slightly,” the survey said.

{

Your Opinion Matters

Share your experiences, suggestions, and any issues you've encountered on The Jakarta Post. We're here to listen.

Enter at least 30 characters
0 / 30

Thank You

Thank you for sharing your thoughts. We appreciate your feedback.