Eisya A. Eloksari, Jakarta – Indonesia's sharia financial committee hopes to quadruple the nation's sharia bank assets over the next five years. It will also establish programs to enhance sharia financial services, including a partnership with Malaysia.
National Committee for Sharia Finance (KNKS) executive director Ventje Rahardjo said that the goal was to reach Rp. 2 quadrillion (US$142.2 billion) in sharia bank assets by 2024.
According to Financial Service Authority (OJK) data, sharia banks had total assets worth Rp 477 trillion ($33.9 billion) last year. The number is significantly lower than conventional banks' Rp 8.1 quadrillion ($575.9 billion) in assets.
"Sharia banks still need help, such as through temporary tax incentives, to reach the goal," he told The Jakarta Post on Wednesday.
He added that the incentives could boost sharia bank performance to ensure a level playing field with conventional banks. Ventje said allowing sharia banks to finance government projects could also boost the banks' portfolios.
The committee, led by President Joko "Jokowi" Widodo and guided by several ministries and government institutions, planned to widen its coverage of Islamic finance to the Islamic economy in general.
Therefore, the name of the committee, established from a 2016 Presidential Regulation on KNKS, will be changed to the National Committee for Sharia Economy (KNES) to better reflect its responsibility to oversee the development of the halal value chain, including halal certifications.
Ventje said Indonesia and Malaysia would work together to create a regional halal standard, a move many business players await. Indonesia's new regulation requires halal certification for all applicable products and services.
"We should be able to collaborate since we have about 90 percent similarity with Malaysia [halal standards], but often people see only the differences," he said.
He added that if the collaboration was successful, the two countries would strengthen their brands as the largest Muslim markets in Southeast Asia.
The committee also planned to digitize sharia financial services, including a digital zakat (alms) platform and a sharia-compliant e-wallet.
"We want to make Islamic finance market-friendly, simpler and more inclusive. We understand it is a basic need for Muslims, but many non-Muslims are also interested," Ventje said.
Based on the 2019 Islamic Finance Country Index (IFCI), Indonesia ranked first, up from sixth last year, overtaking Malaysia, which had dominated the index since 2011.
The report cited President Joko "Jokowi" Widodo's promotion of Islamic finance in the country, as well as the fact that Indonesia is the largest economy in the Organization of Islamic Cooperation (OIC) block, in terms of both population and gross domestic product.
Meanwhile, data from the Global Islamic Economy (GIE) report estimated that Islamic finance could be worth up to $3.8 billion in 2023.