Jakarta. President Joko "Jokowi" Widodo on Thursday (27/07) inaugurated the National Committee for Shariah Finance, or KNKS, as part of the government's push to make the world's biggest Muslim majority country a global hub for the Islamic financial industry.
"The formation of the National Committee for Shariah Finance is part of the government's commitment to develop Islamic finance in Indonesia," National Development Planning Minister Bambang Brodjonegoro said.
Indonesia has lately hosted several international events on Islamic finance, including the 12th World Islamic Economic Forum in August 2016, during which the National Development Planning Board (Bappenas) introduced its master plan for the country's Islamic financial architecture.
"KNKS has a mandate to accelerate, expand and develop shariah-compliant financial services to support the country's development," Bambang said in a statement.
The KNKS establishment is based on a presidential decree signed in November 2016.
Even though KNKS is not a government agency, it holds a strategic role in providing recommendations to the administration regarding Islamic finance. It also has the authority to supervise and evaluate strategic programs in the industry.
The president and the vice president chair the committee, which also has on board the coordinating economic affairs minister, the national development planning ministers, the finance minister, the religious affairs minister, the small and medium enterprises minister, the Financial Services Authority chairman, the Bank Indonesia governor, the Deposit Insurance Agency chairman and the chairman of the Indonesian Ulema Council.
According to government data, Indonesia has the world's biggest number of Islamic finance organizations — including 34 shariah-compliant lenders, 58 takaful operators or takaful insurers, seven venture capitals, 163 rural lenders, around 5,500 cooperatives and one shariah-compliant pawn shop.
Reports suggest, however, that Indonesia's Islamic finance sector still lags behind other countries, with the market share of only about 5.3 percent of the country's banking industry (as of 2016), that compared with 51.1 percent in Saudi Arabia, 23.8 percent in Malaysia and 19.6 percent in the United Arab Emirates.
On Thursday and Friday, KNKS already held top-level discussions with the Indonesian Association of Islamic Economists (IAEI), an organization for academics and practitioners to study and develop Islamic economy.