Photo for illustrative purposes only. A customer paying for purchases at a supermarket in Aceh, Indonesia, on June 6, 2021. Muhsin Rina/Shutterstock

Islamic Finance

Indonesia eyes bigger Islamic finance market share after launch of social security agency's Shariah service

JAKARTA – Indonesia’s workers social security agency BPJS Ketenagakerjaan will start offering Shariah services from next month, a move the government hopes will help boost Islamic finance market share.

The move comes as part of the government’s Islamic economy masterplan 2020-2024 that stipulates BPJS Ketenagakerjaan provide Shariah-compliant services to provide Islamic options for workers.

Aceh will make Shariah-compliant services mandatory from August and other provinces are expected to provide Islamic services alongside conventional offerings by 2024.  

The social security agency is scheduled to increase its investment allocation in Islamic capital market instruments following regional government policy number 11/2018 that mandates all financial institutions in Aceh must be Shariah-compliant by January 2022, four years after the policy was signed in January 2019.

The plan will significantly increase Islamic financial market share in Indonesia, Hasan Fawzi, Development Director at the Indonesia Stock Exchange (IDX) told Salaam Gateway.

“It will give workers contributing to BPJS Ketenagakerjaan across the country Shariah investment preferences and will probably give better investment returns for them. As their internal study revealed, around 77.11% of workers want an option of Shariah-based services,” said Hasan.



Indonesia’s Islamic financial market, excluding Shariah-compliant shares, reached 1,899.09 trillion rupiah ($131.26 billion) in April, equivalent to 10.11% of the total financial industry. This breaks down into:

  • 1,170.87 trillion rupiah in the Islamic capital market that includes mutual funds, corporate and sovereign sukuk. Market share = 17.52%
  • 609 trillion rupiah in Islamic banks, including in Islamic windows, subsidiaries, full-fledged Shariah-compliant banks, and rural banks. Market share = 6.48%
  • 119.22 trillion rupiah in Islamic non-bank financial institutions, including insurance, multi finance, pension fund, micro finance and fintechs.  Market share = 4.42%


Indonesia Stock Exchange has several Islamic instruments that are regularly traded, including government and corporate sukuk, more than 440 Shariah-compliant stocks, Islamic mutual funds, four Islamic stock indexes (ISSI, JII, JII70, IDX MES BUMN17), Islamic exchange traded funds, and Islamic asset-backed securities, that can be adjusted to suit BPJS Ketenagakerjaan’s investment program schemes, expected return rates and risk profiles.

BPJS Ketenagakerjaan manages mostly long-term investment funds such as pensions. It currently holds 500 trillion rupiah ($34.5 billion) in funds. 76% of the funds are placed in conventional instruments, mostly in bonds. Of the remaining 24%, 80 trillion rupiah (16%) are placed in sukuk instruments, 39.3 trillion rupiah (7.86%) in Islamic stocks and 714.6 billion rupiah (0.14%) in Shariah-compliant deposits.

Sutan Emir Hidayat, director of Islamic Economy Supporting System at the National Sharia Economy and Finance Committee (KNEKS) told Salaam Gateway BPJS Ketenagakerjaan has been working with KNEKS since 2019 to set up its Shariah service.

With the new Shariah service, all workers who contribute to social security can choose between the default package that mixes funds between those placed in conventional and Islamic instruments or the Shariah-compliant package.  

“From what we heard, BPJS preparation is almost 100% ready,” said Sutan Emir Hidayat.

“I think the regulator can make them a more competitive institutional investor in the market by giving special yields or coupons,” said Sutan referring to the Financial Services Authority (OJK) and the Indonesia Stock Exchange (IDX).

“Usually big institutional investors, like BPJS, have their own preference rates and they are negotiable. Issuers or investment managers can later design the instrument to best suit BPJS’s needs,” he added.

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