Indonesia and IDB studying feasibility of new Islamic microfinance scheme - fin min official

JAKARTA - Indonesia's government is studying the feasibility of a new Islamic Micro Finance for Indonesia (IMFI) scheme to boost access to Shariah-compliant capital for small businesses, Syurkani Ishak Kasim, Director for Climate Finance and Multilateral Policy at Indonesia’s Ministry of Finance, told Salaam Gateway.

Kasim said the IMFI will involve several foreign and local authorities working in collaboration with the IDB, including the Ministry of State-Owned Enterprises (BUMN), Financial Services Authority (OJK), and Bank Indonesia (BI), the country’s central bank.

“We are examining Shariah financing models that are applicable for Indonesia. The IMFI is one of our efforts to promote more Islamic finance and micro finance in Indonesia,” Kasim told Salaam Gateway on April 29.

The Indonesian government wants Islamic banks to hold at least 15 percent of total banking assets by 2023 from around 5 percent currently.

Shariah-compliant financing to small and medium enterprises reached 51.6 billion rupiah (approx $4 million) in June 2015, according to Islamic banking statistics from the central bank. This was 25 percent of total Islamic financing of 203.89 billion rupiah extended to businesses.

Overall, Shariah-compliant financing to SMEs accounted for 27 percent of all loans and financing to SMEs in June 2015.

Total loans and financing to MSMEs was 748.78 billion rupiah in June 2015 compared to 3.2 trillion rupiah to non-MSMEs. They reached 830.66 billion rupiah and 3.346 trillion rupiah respectively by the end of 2015.

Micro-, small- and medium-sized enterprises (MSMEs) make up around 99 percent of Indonesia’s total enterprises and employ around 97 percent of the country’s workforce.

Indonesia is hosting the Islamic Development Bank’s Annual Meeting in Jakarta from 15 to 19 May. The meeting will focus on enhancing growth and poverty alleviation through infrastructure development and financial inclusion.

($1 = 13,186 Indonesian rupiah)

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