Diversification of Islamic Financial Instruments
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 To increase the intermediary role in Islamic finance towards real sector economy and
expanding the reach of Islamic banks to the lower segment in society. The current
branding of Islamic banking industry “beyond banking’ promote by the OJK and Bank
Indonesia should be promoted by Indonesian Islamic banking industry to increase
their competitive advantage.
 To be able to compete globally in international Islamic banking industry, it is
important for Islamic banking industry in Indonesia to adopt best practices and
international financial standards as developed by IFSB and AAOIFI. Indonesian Islamic
banks also need to comply with these standards to enhance their capability to conduct
business globally.
 Innovation in this regard is important focusing on product development, service
quality, efficiency in economics of scale to create an equal level of playing field with
conventional banking industry. In this regards, Islamic banking industry should
support larger-scale strategic planning and development.
 Since the market share of Indonesian Islamic bank industry is very small (below 5%)
of total market share of national banking industry, some consolidation in Islamic
banking sector to create a bigger player that is financially strong to move the industry
further is considered important.
 Another potential strategy is collaboration of Islamic banking industry with zakat and
Waqf institution for poor empowerment through financing scheme for startup
business and others entrepreneurship program.
3.2.7.2. Islamic Capital Market
Indonesian Sukuk market has reached a CAGR 63.56% from 2002 till 2015. However, the size
of the industry is relatively small as compared to conventional bond market. There are some
challenges to increase the market share of Sukuk in Indonesia and to release its full potentials
to facilitate the development of the country and to accelerate the growth of Islamic finance
industry in Indonesia. To improve further the development of Islamic capital industry, some
recommendations could be considered as follows:
 To integrate with international capital market and to enhance the infrastructure of
Islamic capital market that would streamline the processes and procedures in Sukuk
issuance is important in order to reduce the cost of Sukuk issuance such as in legal
documentation, agreement. This would attract investors to invest in Sukuk both locally
and globally.
 To offer incentives especially to the new instruments that are designed to fund the
national economic agenda in developing infrastructure, education, agriculture and
others.
 Innovations in Sukuk instruments are needed in Indonesian Islamic capital market to
diversify the products and meet the needs of the Sukuk issuer and also investors.