Diversification of Islamic Financial Instruments
64
Another characteristic in Indonesian Islamic banking industry is that is has more retail
orientation. Consumer retail financing in Islamic banks in 2015 is about 38.2% while
conventional banks is about 27.25% which shows Islamic banking commitment to reach the
lower segment of Indonesian society.
Nevertheless, Indonesian Islamic banking industry still have to address the challenges of
relatively small market share compared to conventional banking industry, relatively lack of
diversification of products with various contracts (‘aqd ) to be used to attract customers and to
fulfill various needs of Islamic banking users.
Islamic Capital Market
Indonesian Sukuk market is recognized as having best practice in retail investors and
sovereign Sukuk for infrastructure development. The retail Sukuk issued by the Indonesian
Ministry of Finance (IIFM report 2014: 4) has invited the entry of retail investors particularly
in Indonesia which has opened another stable investor base for Sukuk market.
Recently, there is a recent innovation by the government of Indonesia to launch new retail
Sukuk (Sukuk Retail Negara) called as Sukri , for infrastructure project financing, education,
and agriculture. This retail Sukuk being marketed through Islamic banks including the local
Micro Finance Institutions such as Bank Pembiayaan Rakyat Syariah (BPRS) and Baitul Mal wa
Tamwil (BMT) that are allowed to develop new deposit scheme related to Sukuk so that the
people can directly invest by open an account (ADB, 2012: 10).
Furthermore, another best practice in Indonesian Sukuk industry is that the sovereign Sukuk
based on project financing (called as Project Based Sukuk/PBS). This type of sovereign Sukuk
are developed in line with a specific infrastructure project done by the government. In the PBS,
project underlying Sukuk that utilizes infrastructure project that has been approved in the
government budget is used as underlying asset for Sukuk issuance. The proceeds will be used
to replace the revolving fund whereby the project is usually initially funded by the government
from the sources of taxes or others, but once the Sukuk issued the proceeds will be utilized to
replace the funds.
Nevertheless, Indonesian Sukuk market still has to overcome the challenges of small market
share as compared to conventional bonds, limited investors and lack of attraction of global
investors. In addition, initiatives to issue Sukuk by corporate sectors also need to be enhanced
with various incentives.
Takaful
Takaful products in Indonesia are developed based on what conventional products have been
made, not based on specific Muslim needs. In other word, the Takaful operator attempts to
‘Islamize’ the conventional insurance product using Islamic contracts (‘aqd) and to follow the
rules and contract requirements of Shariah. Moving forward, it is expected that the Takaful
products can be designed creatively based on the needs of the Muslim and other fellow human
being.
Furthermore, in Indonesia, many segment market levels are only low income level to affluent
level. Many Takaful products are aimed at the middle to affluent market (the same is happened
with conventional insurance). Generally, the product of Takaful in Indonesia is unit-linked