Sharia economy need of future: economist

Sharia economy need of future: economist

Illustration - A worker checks an Indonesian Sharia Bank application after its official launch in Jakarta on February 1, 2021. (ANTARA FOTO/Dhemas Reviyanto/wsj)

Jakarta (ANTARA) - Sharia economy is the need of the future, chief economist of state-owned Islamic bank PT Bank Syariah Indonesia, Banjaran Surya Indrastomo, has said.

"Before everyone talks about filters for every aspect that contribute negative externalities, negative impact towards the people and environment, the sharia economy has dealt with those filters in its own requirements," he said at a regional media workshop held virtually from Jakarta on Friday.

Based on a survey carried out by companies, such as Deloitte and Accenture, sharia banking has a substantial potential to grow and develop, he noted. Such potential can be sustained by a market demand trend that seeks more sustainability, where aspects such as environmental impact, as well as social and governance are considered, he said.

"Sharia banks are seen as the representation of a pro-sustainability financial system," he remarked.

At least 71 respondents surveyed by the companies said that they chose a bank or credit union that had a positive environmental and social impact and 74 percent respondents confirmed that their investments made their money more ethical, while 60 percent of respondents preferred environmentally friendly, sustainable or ethical banking since the start of the pandemic, Indrastomo said.

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"The existence of a sharia-compliant product and service portfolio in every financial institution is now important to provide different and better investment options," he explained.

Furthermore, he said he believed that the considerably low level of sharia industry penetration of 6.48 percent in Indonesia has become an aspect that makes it attractive, as this means that there is still a lot of sharia potential that can be developed.

"If we look at the CAGR (Compound Annual Growth Rate), Islamic banking has grown twice compared to that of conventional banking," he pointed out.

Even if the penetration of Islamic banking in Indonesia can match the penetration in Malaysia, the market size of Islamic banking in Indonesia has the potential to grow six times larger, Indrastomo said.

"The challenge ahead is how Islamic banking can be relevant to support the change from a savings-based society to an investment-based society," he added.

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