JAKARTA – The Indonesian government is appointing six members to serve on the executive board of the National Committee for Islamic Finance (Komite Nasional Keuangan Syariah, KNKS) that will lead the improvement and expansion of the country’s Islamic finance industry.
The high-level committee, chaired by President Joko Widodo with vice president Jusuf Kalla serving as vice chair, is to start operating by the end of this year.
“The committee will be led by professionals. We expect they will strengthen Islamic financial institutions by formulating incentives and a regulatory system for the industry as well as promoting the benefits of Islamic financial products to the public,” said Widodo at a press conference in Jakarta yesterday.
The six roles to be filled are:
- Executive Director;
- Director of harmonization of Islamic finance regulations;
- Director of product innovation, market deepening and infrastructure development;
- Director of Islamic microfinance, Islamic social funds (zakat and waqf) and financial inclusion;
- Director of education development, human resources and Islamic research; and
- Director of social outreach, advocacy, promotion and external relations.
The supervisory board will serve in an advisory capacity and also oversee the work of the executive board.
KNKS has nine members on its supervisory board, consisting of:
- Governor of Bank Indonesia, the central bank;
- Head of the Financial Services Authority (OJK);
- Chairman of the Majlis Ulama Indonesia (MUI);
- Head of the Deposit Insurance Corporation;
- Officials from four ministries: Coordinating Ministry for Economic Affairs, Ministry of Cooperatives and SMEs, Ministry of Religious Affairs, and the Ministry of State-Owned Enterprises.
- The Ministry of National Development Planning as secretary for the committee.
“We will support the committee and keep an eye on them to make sure they work effectively,” said Widodo.
The committee’s work will include:
- To mobilise haj, zakat and waqf funds into Islamic banking accounts;
- Launch policy to increase sukuk issuance for infrastructure, agriculture and education projects financing;
- Pursue new sukuk funds and Shariah-compliant primary deals in the capital market;
- Change the sukuk accounting system to boost liquidity in the secondary market;
- Ease capital requirements for Islamic banks;
- Pursue mergers and Islamic banks consolidation;
- Accelerate the preparation for conventional financial institutions to spin off their Islamic units by 2023; and
- Strengthen national zakat body Baznas, national waqf body BWI and the new haj body BPKH
Indonesia’s Islamic finance market share currently stands at around 5.3 percent and the government wants to increase this to 15 percent by 2023.
“The fact is that Indonesia, with its largest Muslim population in the world, should become the leader and the center of the world’s Islamic finance,” said Widodo.
“We have about 4.3 billion square meters of waqf land and 22 billion rupiah($1.65 million) waqf in cash, more than 90 trillion Indonesian rupiah in the haj fund, and also 23 million Islamic finance customers that use Shariah-compliant banking products. Yet our Islamic finance market is still very small,” he said.
The appointments to the executive board were to be finalised six months after the Presidential Decree No. 91/2016 issued in December last year but were delayed by the need to coordinate all stakeholders’ roles.
($1 = 13,330 Indonesian rupiah)
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