As banking by phone and digital payments continue to gain traction in Indonesia, fintech firms are looking to align themselves with Islam in the world’s most populous Muslim-majority country.
Compliance with Islamic law is a big hurdle to fintech services, Reuters reports.
Only half of Indonesia’s 270 million population have bank accounts, but almost all now have mobile phones, making the fintech opportunity obvious.
Sharia, however, bans the charging of interest, and Islamic scholars in Indonesia are not in full agreement over whether such things as cashback rebates and discounts given by digital wallets fall into this category.
Videos on social media addressing the question of whether e-wallets are forbidden attract hundreds of thousands of views, Reuters noted, but the country’s leading clerical body has deemed virtual money acceptable so long as it meets certain specified criteria.
Fintech firms are so keen to display their Islamic compliance that they have set up forums with religious scholars and sponsored religious festivals; in addition, newer start-ups are setting up services for the growing number of “born again” Muslims, known as the “hijrah” movement in the country.
GoPay has linked with the Indonesian Mosque Council to allow digital donations, such as “zakat”, the alms Muslims are required to give, in the Council’s 800,000 mosques, the company’s CEO, Aldi Haryopratomo, said. Zakat amounts to $500m a year in the country.
“Sharia-fintech” has still to scale up in Indonesia, and Sharia-compliant startups gave out a mere $73.15m in loans last year, but that figure was up 400% on 2018, according to the Indonesia Sharia Fintech Association.
And the sector has had a fillip from the country’s vice vice-president, cleric Ma’ruf Amin, who took over Indonesia’s National Islamic Finance Committee in January and has stated that the growth of Islamic fintech is a national priority.
While start-ups are mainly focused on attracting Muslim customers, some are finding they have an appeal to a wider base. The CEO of peer-to-peer lender ALAMI said that although conservative Muslims are its main target, others are also choosing Sharia-compliant financial services as an ethical banking option.
“They see the fact we are focused on Sharia principles as a sign of integrity,” Dima Djani told Reuters.
Sourced from Reuters