National committee to expand Indonesia’s sharia finance industry
(11 January 2016 – Indonesia) The Indonesian government announced last week that it would establish a new national committee to develop the sharia financial industry.
The committee will be led by President Joko Widodo and will comprise of a number of relevant ministers. The Indonesian Ulema Council will act as its advisory board.
Among the committee’s tasks is to harmonise laws, National Development Planning Minister Sofyan Djalil said.
“Matters related to wakaf [money for religious purposes] and alms, as well as raising awareness of the products, will also be pushed by the committee,” Djalil told reporters.
The government recently offered a number of tax facilities and relaxations for the country’s Islamic banking industry as part of its fifth economic policy package introduced in the latter part of 2015.
In an effort to help Islamic banks grow their assets, the Indonesian central bank (known as OJK) has also decided to relax some regulations, including a comprehensive “codification” which allows sharia banks to launch new products without the need to seek a permit from the OJK and only the requirement to report regularly.
The national committee will resemble the Malaysia International Islamic Financial Centre (MIFC), which is led by the Malaysian prime minister to ensure that all policies on the sharia financial industry are well implemented.
Malaysia, the world’s top issuer of sukuk (Islamic bonds), has formulated 12 examples of tax incentives for investors and existing companies seeking to issue debt papers to aid expansion, in a bid to support the country’s sharia finance industry.
Meanwhile, Indonesia’s corporate sukuk only accounted for 3.2 percent of overall outstanding corporate bonds while government sukuk was 10.6 percent of the total government debt papers.
President Widodo said the financial industry was still a promising sector despite the economic slowdown.
“However, we want to have breakthroughs in order to increase the role of sharia banking in accelerating national economic development,” added Widodo.
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