Indonesia holds potential in Islamic finance industry

Jakarta (VNA) – Indonesia has potential to become one of the main players in the Islamic finance industry (Sharia), said head of the National Development Planning Board Bambang Brodjonegoro.

Bambang said one way of increasing the potential is to make easy access for clients to financing by Sharia banks or other Sharia financing agencies through synergy with financial technology (Fintech) institutions.

The presence of Sharia banking reduces risks as every transaction needs underlying assets. Besides, with the strong presence of sharia banking, there would always be new entrepreneurs or small business players involved in halal industry which in long term, helping push the growth of Sharia economy in Indonesia.

Currently, Indonesia is still lagging behind Malaysia and the United Kingdom in the Sharia finance industry with Sharia banks having only a 5 percent share of the banking market in the country.

In addition, Indonesia’s halal products are still not competitive in the international market.

Meanwhile, Head of Islamic Finance of the World Bank Abayomi Alawode emphasised the importance of increase in Sharia financial role to cope with economic gap and strengthening sustainability of growth.

The role could be strengthened by making use of financial technology which is now growing fast; giving access to financing to businesses, financing infrastructure, approaching financial services and investment in the education sector, Abayomi said.

However, a number of risks need to be mitigated from technology innovation development such as uncertainty of regulation, cyber security risk and exploitation of consumers possible as a result of data stealing, he noted.-VNA