An Opportunity to Make Islamic Financial Products More Accessible

KOMPAS/KARINA ISNA IRAWAN

The ten countries with the largest Islamic financial assets according to the 2020/2021 global Islamic economic report, released by DinarStandard,

JAKARTA, KOMPAS – Indonesia should seize improving indicators of the sharia economy as an opportunity to make Islamic financial products more reachable. Such an effort could help reduce economic inequality in the country.

Those offering sharia economic and financial products should also reach out to micro, small and medium enterprises (MSMEs).

Also read: The Potential of Sharia Economy

In the State of the Global Islamic Economy Report 2020, which was published late last year, Indonesia was ranked as the country with the fourth-largest halal industry in the world. Indonesia\'s position was below that of Malaysia, Saudi Arabia and the United Arab Emirates.

The report, published by the international sharia financial institution Dinar Standard, is a benchmark or reference for the development of the global Islamic economy.

According to the report, Indonesia’s sharia-based fashion industry, Islamic finance and tourism are the three sectors with the greatest potential to be promoted globally. The sectors of food, pharmaceuticals and cosmetics still need improvement to enter the global market.

Also read: Ranking in Islamic Economy Rises, Indonesia Needs Consistency

The report finds that 1.9 billion Muslims spent $2.02 trillion in 2019 on fashion, travel, food, pharmaceuticals, cosmetics, and media and recreation.

KOMPAS/PRIYOMBODO

Craft production activities for the export market at CV Tashinda Putraprima in Kasihan District, Bantul, D.I. Yogyakarta, Friday (11/22/2019). The micro, small and medium enterprises (MSMEs) sector is one of three new economic sources in addition to the Islamic economy and the digital economy which is driven by growth to strengthen national economic resilience.

Institute for Development of Economics and Finance (Indef) Islamic economics researcher Fauziah Rizki Yuniarti said Indonesia needed to act fast so that it would not lose the opportunity to encourage the growth of the country’s Islamic finance industry.

"Stakeholders of Islamic finance need to see the urgency of developing Islamic economic products in Indonesia in order to reach out to lower economic actors, including low-income earners and MSMEs," she said Sunday (24/1/2021).

Also read: Becoming the Catalyst of the Economic Recovery

According to Fauziah, the sharia economic model is preferable for MSMEs because the equity-based funding underlying the profit-sharing principles of mudarabah and musyarakah in Islamic banking is more transparent and less burdensome for MSMEs, especially in the midst of a pandemic.

The planned merger of state-owned sharia banks Bank BRIsyariah Tbk, Bank BNI Syariah and Bank Syariah Mandiri into Bank Syariah Indonesia is expected to be the right answer to the challenge of expanding sharia financial services.

One of the priorities of Bank Syariah Indonesia is to expand its services to MSMEs, in addition to maintaining its services to private and state-owned companies.

Stakeholders of Islamic finance need to see the urgency of developing Islamic economic products in Indonesia.

Hery Gunardi, the head of the project management office for integration and value boosting of state –owned sharia banks, who is also the president director of Bank Syariah Indonesia, vowed last week that MSMEs would remain a priority of the bank.

Until September 2020, funds disbursed by the three state-owned sharia banks to MSMEs reached Rp 36.36 trillion. Of the total, Bank BRIsyariah provided Rp 18.7 trillion, Bank Syariah Mandiri Rp 11.67 trillion, and Bank BNI Syariah the remaining Rp 5.99 trillion.

SUMBER: DINAR STANDARD

Global Sharia Economic Potential in a number of sectors

Contacted separately, Indonesian Sharia Fintech Association (AFSI) chairman Ronald Yusuf Wijaya said he hoped the operation of Bank Syariah Indonesia would enable financial technology startups in the Islamic finance sector to obtain funds more easily.

He acknowledged that the pure sharia fintech platform still lacked a commercial factor that could attract investors. "Usually there are two factors that discourage investors, namely that the ratio of Indonesia\'s sharia economy is still very small and that infrastructure still has many obstacles to grow fast," he said.

Supply chain

The deputy chairman of the Indonesian Chamber of Commerce and Industry (Kadin), Shinta Widjaja Kamdani, said that, to support the halal industry, the Indonesian government needed to improve the efficiency of the domestic supply chain, so that domestic halal products would be able to compete with imported products.

"Indonesia remains a market for these halal products rather than a producer that controls the market of the domestic halal industry, "she said.

Also read: Vice President Pushes for Sharia Economics

The executive director of the National Committee for Sharia Economics and Finance (KNEKS), Ventje Rahardjo Soedigno, said the government was developing a balanced Islamic economic ecosystem and halal industry.

The program is one of priorities in the Indonesian Sharia Economy 2019-2024 plan, namely the development of the halal industry, finance, social funds and the expansion of sharia business activities.

This article was translated by Hendarsyah Tarmizi.