RIZKY WISNOENTORO believes that in the context of social development, the Shariah banks in Indonesia can play an additional role as the change agents of the entire population.
The dynamics of the Indonesian Shariah banking industry are intriguing. This includes the recent event at the shareholders’ meeting of BNI Syariah, which changed the composition of the board of directors.
Shariah banking industry are intriguing. This includes the recent event at the shareholders’ meeting of BNI Syariah, which changed the composition of the board of directors.
Through a wider lens, I have seen the emerging potential of an Islamic economy as a whole in Indonesia. Islamic banks in Indonesia have recorded major advances lately, even though their assets remain far below those of conventional banks. According to the Bank of Indonesia, up until April 2012, the republic consisted of 11 Shariah banks that have been established as independent entities, plus 23 Shariah business units that are still embedded with conventional banks. Ideally, in anticipating the future, Indonesia may need up to 30 independent Shariah banks with a target annual growth of 50%.
What makes it different?
To some extent, I believe that we don’t always have to be the ‘champion’ to win the public’s attention and hence gain a positive reputation. Sometimes, the ‘winners’ are those with a certain uniqueness. In the case of the Islamic banking industry, I foresee that the toughest competition for Indonesian Islamic banks will come from Malaysia and the Middle East. Or is it vice versa?
It will be interesting to see whether Indonesia, with the largest Muslim population in the world, can take shape as a tough competitor to the other established Muslim countries.
Through a discussion with Dr Rifki Ismal, the senior researcher at the directorate of Shariah banking, Bank of Indonesia, I have observed that there are some unique propositions of the Indonesian Shariah banking industry that make it relatively different from other countries.
Firstly, the Indonesian Shariah banking industry was spearheaded by the ‘social movement’, instead of being driven by the oil industry, or by government intervention. The strong persuasion of the ulemas toward President Suharto in the early 1990s debunked the reluctance and skepticism of the government at that time. In comparison, Islamic banks in other countries may have been catapulted by the rocketing oil price or by commitment and support from their governments.
Secondly, Indonesian Shariah banks are commonly based on Shariah compliant or genuine contracts of akad, which are fully supported by ulemas, and have empirical reference in Islamic law.
Furthermore, Fatwas can only be published by the Majelis Ulama Indonesia, the Indonesia Ulema Council; or Dewan Syariah Nasional (DSN), the national Shariah board of Indonesia.
The DSN stands independently, protected from the intervention of the authorities. It is, however, different with other countries where an ulama – as a single person – may launch a Fatwa. It is also different to countries in which the Shariah institutions/boards lie directly under the government body.
Driven by social power and supported by the solid grass-roots structure of the local Islamic financiers, the Indonesian Shariah banks harness an impressive performance. In comparison to worldwide growth in 2010, which was only 10%, Indonesian Islamic banks recorded a 48% growth. By 2011, growth reached 49%. In the last five years, Islamic banks have recorded a 38% growth.
Contribution towards the social development
Not just in terms of economics, the Shariah banks in Indonesia have the potential to enact social development.
At the same time the Indonesian Shariah banks not only do business, but they also contribute to poverty alleviation; hence triggering the sustainable economy. Why? Instead of chasing extravagant projects, or the financial market, the Indonesian Shariah banks emphasis their concern for real sectors and the middle low segment.
In the context of social development, the Shariah banks in Indonesia can also play another role as the change agents of the entire population. When we are developing the real sectors, for instance, it means that we are opening more room for employment, and hence developing family incomes and improving the purchasing power of society. This can be multiplied to trigger the development of other sectors in the society, resulting in the development of a wider social improvement.
Conclusion
At this point, I hope that Indonesian Shariah banks can and will strictly maintain their platform. In my imagination, I have a small but essential dream. How tremendous the impact they give to the society will be, and how sustainable their business will be, if their real-sector operations are also embedded within well-managed corporate social responsibility.
Rizky Wisnoentoro is a researcher and consultant in corporate social responsibility with a certified strategic issues management. He can be contacted at
[email protected]
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