National Islamic finance needs digitalization and service innovation to maximize the potential of a large world market. This was conveyed by Deputy Chairman of the OJK Board of Commissioners Mirza Adityaswara at the Indonesia Islamic Finance Summit (IIFS) 2025 organized by the Financial Services Authority (OJK) in Surabaya, East Java, Monday (3/10/2025).
Based on data presented by OJK, until September 2025, the total assets of Islamic financial services reached Rp2,986 trillion, equivalent to 11.39% of total national financial assets.
Meanwhile, the Islamic capital market grew to Rp1,832 trillion, followed by the assets of Islamic non-bank financial institutions which also grew to Rp178.6 trillion.
"This achievement is inseparable from a number of challenges that still hamper the Islamic economy in Indonesia, such as limited market share and economies of scale compared to conventional financial institutions. This means that a more aggressive strategy is needed to expand and enter the mainstream," said Mirza during his keynote speech.
The limited market share referred to by Mirza refers to the financial literacy index of the Islamic financial literacy index which has reached 43.4%, but the Islamic financial inclusion index has only reached 13.4%.
"In other words, the public already knows enough about the practice of Islamic financial services, but is not interested in using Islamic financial products and services," he said.
On the other hand, according to Mirza, limited capital means that the differentiation of Islamic finance business models is unable to meet the needs of the community. In addition, human resources who are required to have dual expertise, namely modern financial practices and sharia law, are also limited. In fact, both are crucial so that Islamic financial products are not only competitive, but also comply with sharia principles.
"OJK provides guidance on unique Islamic financial products as an effort to deepen the market, such as cash waqf link deposits (CWLD), salam contracts, and Sharia Restricted Investment Accounts, Islamic securities, corporate sukuk, regional sukuk, and sharia online trading systems as a means of investment," he said.
Going forward, Mirza emphasized, strengthening the role of the Islamic financial industry continues to be pursued through the synergy of Islamic financial institutions, Islamic social financial institutions, halal industries, and UMKM. The hope is that with sufficient encouragement and a supportive ecosystem, sharia financing syndication will be able to reach the corporate segment.
Philanthropy and waqf potential
Bank Islam Malaysia Social Finance Director Zikri Shairy acknowledged that capitalization is still one of the challenges of Islamic finance. However, he underlined that a more difficult challenge is integrating Islamic social finance services with conventional banking frameworks.
"Bank Negara Malaysia has included the Islamic finance economy in its 2033 blueprint. However, for that integration, we have to make sure that the business model does not replicate the workings of a nonprofit organization. We have to add value to the existing ecosystem," said Shairy.
Through various considerations, Bank Islam Malaysia chose and implemented the sadaqa house model as a way out, inspired by the speech of the late Dato' Abdul Halim Ismail (1939-2024), a pioneer of the modern Islamic financial system in Malaysia, when receiving the Global Islamic Finance Award in 2014.
With this model, Islamic banks become enablers that receive and collect philanthropic funds to be distributed to marginalized groups, orphanages, and education through a banking-like instrument called i-TEKAD. In addition to philanthropy, the bank also collects funds from zakat.
"I think the challenge lies in challenging the status quo, especially how regulators can be more open and design policies that meet aspirations. In addition, measuring the impact of policies should also determine the extent to which the distribution of funds impacts local communities," Shairy explained.
Bank Indonesia's Sharia Economics and Finance Department Expert Ali Sakti appreciated the story from the neighboring country, emphasizing that zakat and waqf are two important instruments in Islamic social financial services. The great potential, apart from the growth value, is also evident from the establishment of the National Zakat Agency (BAZNAS) in Indonesia or Islamic Relief in the UK.
"We have one PNM Mekaar champion that serves up to 15 million customers, not to mention custom-based ones such as Lumbung Piti Nagari in West Sumatra. However, what is rarely revealed from the discussion about Islamic finance is the millions of people who receive its benefits," said Ali.
If the effort to collect waqf is sustained, Ali continued, the potential of more than 400,000 land waqf locations with an area of up to 57,000 hectares can be a huge capital for Islamic financial services, not to mention cash waqf which can mobilize social financial services more widely, thus increasing the number of people served.
"The practice of zakat, waqf, and antiriba actually has a single message that is the core of Islamic economics, which is not to make a lot of resources idle," said Ali.
In an effort to maximize the potential of domestic waqf, BI is currently developing a Sharia Economic Development Fund (SEDF) that aims to integrate the values of Islamic finance with modern financial instruments such as sovereign wealth funds (SWF), professional governance, and strategic investment principles.
By maximizing waqf funds, SEDF will target investments in state sukuk, strategic funding, and UMKM. Strategic funding that has been targeted include the construction of Salman Waqf Hospital, Achmad Wardi Eye Hospital, and the empowerment of Islamic microfinance.
"By optimizing the vast potential of domestic waqf funds managed in such a way, the various SEDF programs will increase the economic production capacity of the social sector, complementing the national level of productive output that has also been produced by the private sector and the public sector," Ali said.
Back to the people
Through the Zoom teleconference, Durham University Professor of Islamic Political Economy Mehmet Asutay reminded that facing the challenges of global economic digitalization, Islamic finance must realize that innovation has a moral dimension, and every innovative decision must still be guided by the values of justice, balance, and the welfare of the people.
In his latest research, Prof. Asutay found that the deepening of the financial services sector and the expansion of financial services further increase the risk of overfinancialization. This means that money continues to circulate, but does not make a real contribution to the benefit and socio-economic welfare of the people. In fact, the main function of financial services is to distribute resources.
"Islamic economics has a strong foundation that encourages innovation, renewal and reform, and the digital Islamic economy is part of it. For this reason, ethics and a sense of justice must be embedded so that innovation enhances justice and benefit, and has the goal of reducing inequality and promoting prosperity," said Prof. Asutay.
In its application, digital economy innovations in Islamic finance include digital waqf platforms, zakat distribution using blockchain technology through Smart Sukuk, digital takaful, to microfinance services and financial intermediation functions powered by artificial intelligence (AI).
In addition to service automation, AI can also be used to check product conformity with sharia values. Thus, the competence of human resources can be fully focused on improving modern financial services, while the assessment of product alignment with sharia law can utilize AI algorithms.
"By aligning technology with the principles of ihsan, adl, and maqasid al-shariah, innovation in Islamic finance must serve human interests, not just for efficiency. True innovation does not lie in faster technology, but in alignment with divine values, so that Islam can truly prove to be rahmatan lil-alamin," he concluded.
