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Jakarta Post

Challenges of sharia banking in Indonesia

  • Arisyi Raz

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PREMIUM
Jakarta   /   Mon, November 25, 2019   /  12:36 pm
Challenges of sharia banking in Indonesia A teller serves a customer at Bank Muamalat in Jakarta, in this file photo dated Sep. 15, 2019. (JP/R. Berto Wedhatama)

The recently released 2019 Islamic Finance Development Index (IFDI) by the Islamic Corporation for the Development of the Private Sector (ICD) reveals exciting news for Indonesia. The country jumped to fourth rank, below Malaysia, Bahrain and the United Arab Emirates, from 10th in the previous year. The irony behind this achievement is that Indonesia’s sharia banking sector, which is the largest asset contributor to the country’s Islamic finance sector, is still facing a structural challenge. The failure of Bank Muamalat, the first sharia bank in Indonesia, to meet its minimum capital requirement of 12 percent reveals several structural issues eroding sharia banks in Indonesia. Among these issues, the lack of risk culture is probably the most detrimental. It hampers the growth or — if we want to speak in a sustainable manner — the development of sharia banki...

Disclaimer: The opinions expressed in this article are those of the author and do not reflect the official stance of The Jakarta Post.