Diversification of Islamic Financial Insturments
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investment that uses an Islamic investment vehicle such as equity funds, unit trust and Sukuk.
This product is suitably to be sold to people who have knowledge of investment - which is the
middle to affluent segment. However, large population numbers in Indonesia are Muslim in the
low to middle market levels which are less aware and hence lack having Takaful. There is a gap
between the affluent market and the low to middle market which are not touched by Takaful
(IFN Roundtable, November 2014).
Furthermore, takaful industry in Indonesia have also to address some challenges such as to
create takaful products that are really needed and suitable with the characteristics of
Indonesian society, to develop Microtakaful and build distribution channels, services and sales
management that are addressed towards entering the markets of the low to middle income
society.
3.2.7. POLICY RECOMMENDATIONS
3.2.7.1. Islamic Banking
Indonesia is a promising market for global growth in Islamic banking but the sector is still in
its infancy and its national market share is growing at a snail’s pace. Without a strong initiative
from the regulatory authorities to nurture and grow Islamic banking, this sector could remain
stuck in its infancy for years. A more aggressive and strategic move to develop the industry is
very much needed. The Islamic banking industry should be a credible alternative to
conventional banks and open to all Indonesians. In this perspective, some recommendations
could be considered as follows:
 A regulatory environment that attracts new entrants from the more established
Islamic banking markets that could potentially create a spark to help Islamic banking
grow in Indonesia should be established. Opportunities for global business for Islamic
banks and units in the global market should be tapped by Indonesian authority to
hopefully increase the Indonesian Islamic banking market share.
 Indonesia is also known as country that has complex regulation in Islamic finance
practices. Various stakeholders are involved to regulate and supervise the practice of
Islamic finance industry, hence it is recommended that the regulations should be made
with coordination among the regulators and could be streamlined to create rooms for
the players to innovate and expand their business.
 To increase the market share of the industry, Indonesian Islamic banking industry for
funding and financing should be improved with various products based on variety of
contracts approved by Shariah. Indonesian Islamic banks should attract for example
the potential sources that they have such as remittance business from Indonesian
workers in Muslim countries and others, idle fund placement, foreign exchange
transaction, and L/C and trade finance for export-import should also be tapped by
Islamic bank in Indonesia.
 As can be seen in the above statistics, the dominant structure in Indonesian Islamic
banking financing is Murabahah Financing, the OJK in this regards should encourage
Islamic banks in Indonesia to also offer equity-financing based on the principle of risk
sharing to promote the development of real economic sectors.