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Indonesia’s sharia finance gains traction amid pandemic: OJK
The assets of the country’s sharia finance industry reached Rp 1.639 quadrillion (US$111.1 billion) as of July this year, an increase of 20.6 percent compared to the same period last year, according to the OJK.
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A teller arranges rupiah banknotes at a Bank Syariah Mandiri branch office in Malang, East Java, on May 18, 2020. Indonesia’s Islamic finance has gained traction amid the coronavirus pandemic as the industry’s assets rose significantly and sharia banks recorded a jump in corporate profit. (Antara/Ari Bowo Sucipto)
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ndonesia’s Islamic finance has gained traction amid the coronavirus pandemic as the industry’s assets rose significantly and sharia banks recorded a jump in corporate profit, signaling a growing industry previously plagued with low demand.
The assets of the country’s sharia finance industry reached Rp 1.639 quadrillion (US$111.1 billion) as of July this year, an increase of 20.6 percent compared to the same period last year, according to the Financial Services Authority (OJK), with the industry’s market share now at 9.68 percent of the Indonesian financial industry.
“This reflects how sharia finance has a remarkable resilience and a great spirit to support the acceleration of the national economic recovery,” OJK chairman Wimboh Santoso told a virtual discussion on Monday. “We should use this pandemic as an opportunity to revive sharia economy and finance by giving them a bigger role to speed up economic recovery.”
Although Indonesia is the biggest Muslim-majority country in the world, the growth of the country’s Islamic finance industry remained sluggish due to low demand for its financial products, which was driven by low literacy and low inclusion levels.
However, several sharia banks managed to book a jump in their bottom line despite the cooling economic activity caused by the coronavirus outbreak. They attributed the gain to the implementation of the qanun (Islamic bylaw) on sharia financial institution in Aceh, which obliges all financial companies to provide their services in accordance with the sharia principle in the region starting January 2019.
The financial institutions must comply with the regulation within three years of the qanun implementation.
Experts are of the view that sharia banks’ low base also provides ground for higher growth in their financial performance.
