Jakarta : Indonesian President Joko Widodo formed the National Committee for Sharia Finance (KNKS) in order to boost Islamic banking that will investigate and tackle the challenges surrounding sharia banking in the country, Indonesia-Investments reported.

Together with the Indonesian Islamic Economy Expert Association (IAEI), KNKS is tasked to unite the vision and strategy of all stakeholders in this industry and turn Indonesia into a global center for Islamic banking.

IAEI General Chairman Bambang Brodjonegoro, who is also the minister of national development planning, said the challenges in Indonesia’s Islamic banking industry involve both the supply and demand side. He pointed out that the lack of business sectors that are based on Islamic banking makes it tough for the industry to develop.

Therefore, the KNKS wants to focus on the development of the sharia-based retail sector. Brodjonegoro said this would not only involve halal products but also halal services, such as halal tourism. It is then hoped that there emerge many new entrepreneurs that become active in such sectors. However, normal market mechanisms will be safeguarded, he added. Hence conventional banking is allowed to play its part in the development of the sharia-based retail sector.

Secondly, KNKS will focus on the deepening of sharia-compliant financial markets. Several instruments available in conventional banking are not present in Islamic banking and therefore new sharia-compliant instruments need to be added in the Islamic banking sector in order to meet corporate and individual demand. One example is Islamic microfinance.

The third topic that will be dealt with by KNKS is the strengthening of research and education related to Islamic finance. Currently, many residents in Indonesia, especially in the eastern parts of the country, have limited – or no clue at all – about sharia banking. In fact also in terms of conventional banking, many Indonesians lack financial literacy. Therefore, awareness of Islamic banking needs to be raised among the population.

—AB/IINA