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Fintech firms eye Islamic boarding schools
The Association of Indonesian Sharia-based Fintech Companies (AFSI) has recently launched a sharia-based online lending app to tap into the financing potential in more than 3,000 pesantren (Islamic boarding schools) in the country in cooperation with the National Committee for Sharia Economy (KNES)
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span>The Association of Indonesian Sharia-based Fintech Companies (AFSI) has recently launched a sharia-based online lending app to tap into the financing potential in more than 3,000 pesantren (Islamic boarding schools) in the country in cooperation with the National Committee for Sharia Economy (KNES).
The project, called Pesantren-Based Development of Sharia Economy and Finance, started in December 2019 with a pesantren in Cirebon, West Java, as its first target. The program provides funding, including for santri (Islamic boarding school students), ustadz (Islamic teachers) and cooperatives and micro, small and medium enterprises (MSMEs) near the pesantren complex.
Islamic boarding schools, which are mostly located in rural regions, have hundreds of students each. Many large pesantren have established small businesses to serve the students and the people around the pesantren complex.
KNES, which is responsible for arranging the program, works with sharia fintech companies Ammana Fintek Syariah and Kerjasama.com, which provide their peer-to-peer (P2P) lending platforms for the funding program. The pesantren administrators are acting as agents who promote the services at their boarding schools.
Ammana, for example, was seeking to disburse up to Rp 1 trillion (US$73.29 million) per pesantren for both its umrah and MSME funding services, the company's chief executive officer, Lutfi Adiansyah, told The Jakarta Post on Wednesday. But Ammana would only be able to achieve the target if human resources in the pesantren were ready, especially in terms of knowledge about sharia fintech services, he added.
"It is a project to promote literacy about sharia fintech services," AFSI chairman Ronald Wijaya said on the sidelines of a press briefing on the sharia financing outlook in Jakarta on Tuesday.
Promoting the understanding of the concept of sharia-based financing has been the association’s program in the last two years as many people are still unable to see the difference between sharia fintech services and conventional financial services, he added.
According to a survey on national financial literacy by the Financial Services Authority (OJK), the literacy rate on sharia finance slightly increased to 8.9 percent last year from 8.1 percent in 2018, while the inclusion rate of sharia finance fell to 9.1 percent from 11.1 percent.
In May, the government launched the 2019 to 2024 master plan for sharia economics, which focuses on developing the sharia financial sector as one of its four strategies.
AFSI estimated that sharia fintech companies disbursed up to Rp 1 trillion in total loans last year. "I hope it can grow by two- or threefold this year," Ronald said.
The Indonesian sharia financial sector was estimated to be worth up to $3.8 billion in 2023, according to the Global Islamic Economy report.
As of Dec. 20, 2019, out of 164 registered fintech companies, only 12 are sharia-based, according to the OJK. The 12 sharia-based fintech companies, which mainly provide financing to MSMEs, including haj and umrah travel agencies, are seeking to disburse up to Rp 4.6 trillion in total loans this year. (dfr)
