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Indonesia keen to harness untapped sharia economic potential

Indonesia keen to harness untapped sharia economic potential

Screenshot - Bank Syariah Indonesia (BSI) President Director Hery Gunardi while addressing the opening of Indonesia Stock Exchange (BEII) trade and introducing PT Bank Syariah Indonesia Tbk in Jakarta on February 4, 2021. ANTARA/Citro Atmoko/am.

Indonesia, with the world's largest Muslim population, constituting almost 90 percent of its 271 million people, has yet to unlock the vast, untapped potential of the sharia economy.

It is grim reality that Indonesia continues to trail behind other countries, both Muslim majority and non-Muslim majority nations, in terms of sharia economic development.

Malaysia led the Global Islamic Economy Indicator in 2019, with a score of 111 points, while Indonesia ranked fifth, with 49 points.

The ranking of 15 countries, with a Muslim-majority populace, was based on the indicators of Islamic finance, halal food, Muslim-friendly travel, the modest fashion industry, media and recreation, and pharmaceuticals and cosmetics.

Apart from that, the country's Islamic economic literacy index remains low, notably at around 16.2 percent. In 2019, Indonesia’s sharia financial literacy rate was recorded at only 8.93 percent, according to data of the Financial Services Authority (OJK).

To promote the country’s sharia economy, President Joko Widodo (Jokowi) had inaugurated the Sharia Economic Brand on January 25, 2021, with the objective of raising public awareness of sharia economic activities.

"I welcome the inauguration of the Sharia Economic Brand. This is very important to increase public awareness as support for sharia economic activities," the head of state remarked at the launch of the National Movement for Cash Waqf and inauguration of the Sharia Economic Brand at the State Palace in Jakarta.

The head of state, concurrently chairman of the National Committee on Sharia Economics and Finance (KNEKS), remarked that the Sharia Economic Brand will unify forces to boost the added value of sharia economy in Indonesia.

Jokowi drew attention to the fact that sharia economic development was not only being conducted by Muslim-majority nations but also by other countries, including Japan, Thailand, Britain, and the United States.

"We must seize this opportunity by pushing for acceleration. We must work toward accelerating development of the national Islamic economy and finance. We must prepare ourselves as the center of the global Islamic economy," he emphasized.

Related news: President Jokowi inaugurates Bank Sharia Indonesia

Meanwhile, Vice President Ma'ruf Amin, as the KNEKS chairman, affirmed that the Sharia Economic Brand was a logo or symbol of the state that will be used to unite and encourage togetherness in all activities pertaining to sharia economics and finance in Indonesia.

The Sharia Economic Brand is also aimed at stepping up literacy and education in addition to raising awareness of Islamic economics and finance to increase public knowledge, skills, and confidence in Islamic economics and finance.

"I am optimistic that the Islamic Economic Brand would be used by all ministries, institutions, and stakeholders engaged in sharia economics and finance in every activity and product they have," Amin remarked.

Finance Minister Sri Mulyani Indrawati had earlier highlighted the government’s steadfast commitment to promoting the integrated Islamic economic and financial sector to accelerate, expand, and develop the economy and finance to support national economic resilience.

However, the minister pointed to the low level of public literacy on sharia economics and finance as being one of the challenges in the development of Islamic economy in Indonesia.

"To this end, the National Sharia Financial Economy Committee (KNEKS) initiated the launch of the Sharia Economic Brand," Indrawati stated.

The minister detailed that this brand was launched in a bid to unify joint movements to boost public literacy, education, and awareness on the sharia economy.

The movement will be conducted on a massive and inclusive manner, with priority accorded to increasing knowledge, skills, and public confidence in the economy and Islamic finance.

Related news: Low public literacy poses challenge to Islamic economic development

To boost the sharia economy, Jokowi inaugurated PT Bank Syariah Indonesia (BSI), a merger of three state-owned sharia banks -- PT Bank BRI Syariah Tbk, PT Bank Syariah Mandiri, and PT Bank BNI Syariah -- on February 1, 2021.

BSI is one of the largest sharia banks in Indonesia and the world, with assets totaling Rp214 trillion and core capital worth Rp20.4 trillion.

The merger of sharia banks, subsidiaries of state-owned lenders, is also projected to drive development of the halal value chain in the country.

In his inaugural speech, the president drew attention to the performance of Indonesia's Islamic banking industry that grew at a swifter pace than that of conventional banking despite the challenging times presented by the COVID-19 pandemic.

"In the midst of the COVID-19 pandemic, I am pleased to be informed that the performance of Indonesian Islamic banking continues to record stable growth and that Islamic banking has managed to grow even higher than conventional banking. We should be grateful," he affirmed.

Amid the COVID-19 pandemic, the Islamic banking industry clocked a growth of 10.9 percent (year-on-year/yoy) in assets or higher than conventional banking that recorded a 7.7-percent growth, the head of state noted.

Moreover, the Islamic banking industry was able to register a growth of 11.56 percent from the collection of third-party funds (DPK), while conventional banks grew up to 11.49 percent.

Meanwhile, from the financing side, the Islamic banking industry in the country had grown about 9.42 percent, or much higher than conventional banks that recorded a 0.55-percent growth.

With such growth data, President Jokowi is buoyant that Indonesia's Islamic economic industry would continue to record rapid growth.

"I believe Indonesia's sharia economy will grow very fast and will contribute significantly to the welfare of our people and society," President Jokowi affirmed.

The president urged every stakeholder to relentlessly strive to encourage growth of the national sharia economy, so that Indonesia will later become a sharia economic hub at the regional and global levels.

The head of state also underscored the need for Indonesia to seize the vast potential of sharia economy that had yet to be tapped.

"We must prepare ourselves to become a hub for a global sharia economy," he emphasized.

In the meantime, on January 24, State-Owned Enterprises Minister Erick Thohir, appointed as chief of the Sharia Economic Community (MES) for the 2021-2024 term, expressed belief that the COVID-19 pandemic had created the momentum for the sharia economy to rise and have better resistance to the upheaval.

"The pandemic offers a momentum to show that the sharia economy has better resistance to the upheaval and crisis," he stated.
Related news: Islamic banking grew faster than conventional banking amid pandemic
 

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