JAKARTA (TheInsiderStories)– Indonesian government on Tuesday launches the Masterplan for Islamic Financial Architecture to accelerate the Shariah business in the country. The portion of Shariah business in Indonesia is still at low level, around 5% of the national financial assets compared to Malaysia at 20 percen.
Minister of National Development Planning Bambang Brodjonegoro told reporters on the sideline of 12th World Islamic Economic Forum (WIEF) in Jakarta, the masterplan consists of action plans and interventions to provide these services, covering important aspects such as capital adequacy, human resources development, governance, consumer protection, socialization and financial safety net.
The masterplan has two main recommendations. First, improvement and expansion of banking, capital market, non-bank financial services and social fund. Second, a recommendation for the establishment of National Committee on Shariah Finance chaired by President Joko Widodo and the Vice President Jusuf Kalla as the Vice Chair.
The committee will consist of Minister of National Development Planning/Head of National Development Planning Agency, Minister of Finance, Coordinating Minister for Economic Affairs, Minister of Religious Affair, Minister of State Owned Enterprises, Minister of Cooperative and SMEs, Chief Commissioner of the Indonesian Deposit Insurance Corporation and the Head of Indonesia Council of Ulemas.
The objective of the committee is to synergize all Shariah financial development efforts to be conducted by all stakeholders such as government, regulators and the sharia financial industry.
““It is time the government of Indonesia together with the financial regulators embark on expanding our Shariah financial system into a broader dimension, market and playing field,” Bambang said.
He added Indonesia wants to establish Shariah investment bank, re-takaful companies, public budget placement in Shariah banking system, improving quality of Shariah economic and financial education in tertiary education also enlarge the size of Sukuk issuance.
Currently, Indonesia joined with Islamic Development Bank (IDB) and Turkey government to formulate the establishment of World Islamic Infrastructure Bank (WIIB), which will provide funds for infrastructure development and liquidity needs of Islamic countries.
Turkey and Indonesia have six months to complete the organizational structure of the bank. The team will also discuss the operation of WIIB.
The headquarter of the bank could be in Jakarta, Jeddah or Istanbul which are surrounded by the Islamic countries.
The Islamic infrastructure bank function is slightly different with the IDB, which focuses on development issues in general. ADB has a wider scope including gender equality, education, health, and disaster mitigation.
WIIB will be directed at financing long-term infrastructure. In addition, the institution may also play a role to support the addition of liquidity in the economy of Islamic countries.
Liquidity is a major issue for developing countries like Indonesia, which has high economic growth. The economic slowdown that occurred from 2008 until now causes the developing countries to lose their sources of funding to boost economic growth. The reason is because in the past, the funding needs only come from Western countries, even though their economy was in trouble.
Islamic finance in Indonesia has been existed for over two decades. Although, it has recorded strong year-on-year growth in the past few years, the overall size of the industry and its impact on the national economy remain modest compared to conventional financial industry.
After 20 years of existence, Indonesia now has 34 Shariah bank, 54 takaful companies, six capital ventures, one Shariah pawn shop and more than 5,000 micro finance institutions that serve more than 22 million loyal customer across the nation.