Shariah-based money market in Indonesia

Hamud M Balfas is a lawyer with Ali Budiardjo Nugroho Reksodiputro (ABNR) in Indonesia. He may be contacted at: hbalfas@abnrlaw.com. Hamud writes articles on various subjects of the law extensively (www.abnrlaw.com). He is also an author of a book on Indonesian Capital (Hukum Pasar Modal Indonesia), now in its second edition.

As the most populated Muslim country in the world, shariah-based financial industry in Indonesia has been growing rapidly in the last 15 years. Assets of shariah-based banks, for instance, have grown steadily over the years with conventional banking opening its shariah windows (Unit Usaha Shariah) or setting up subsidiaries Offering shariah-based compliant services to their customers (‘shariah bank’). There has also been conversion from conventional banks into a shariah-based banks. A number of mediumsized banks in the country, for instance, have been converted into shariah compliant institutions in the last five years. On the small-scale basis, many credit union type institutions (baitul mal wat tamwil) and rural banks have also been set up to cater for a growing appetite for banking services in this sector.