Indonesia strengthening zakat, waqf management; launching Islamic Economy roadmap next year: cen bank

Photo: Jakarta, Indonesia - July 14 2013: Cars captured in blurred motion around the Plaza Indonesia roundabout in Jakarta / AsiaTravel / Shutterstock.com

JAKARTA – Indonesia’s central bank will strengthen Islamic social finance instruments zakat and waqf to improve financial inclusion for the country's large low-income population and boost the country’s Islamic Economy development, Bank Indonesia governor Agus Martowardojo told Salaam Gateway.

According to Martowardojo, low income citizens, defined as individuals earning less than $4.50 a day, currently have no or little access to commercial finance and the central bank is working on plans to integrate Islamic commercial and social finance to improve their financial inclusion. There were an estimated 203 million low income people in Indonesia in 2015, equivalent to around 78 percent of the population.

“We will facilitate low income people by optimising zakat and waqf. We need to increase their welfare as well as their economic independence,” said Martowardojo.

ZAKAT

The central bank is starting by strengthening zakat management and governance. Bank Indonesia, National Zakat Board of Indonesia (BAZNAS) and the Islamic Development Bank’s Islamic Research and Training Institute (IRTI) kickstarted the first international working group on zakat on October 28 in Surabaya. The meeting focused on two technical notes on the governance and risk management for zakat institutions.

In May the three institutions and eight other countries that make up the international working group released their “Zakat Core Principles” containing 18 principles that govern the management of six major aspects of zakat: legal issues concerning institutions, oversight, governance, risk management, intermediation, and Shariah governance. 

The potential of zakat in Indonesia ranged from 1.59 percent to 3.82 percent of GDP in 2011, according to IRTI estimates (pdf). However, actual zakat collection was $182 million, equivalent to around 0.02 percent of that year’s GDP.

At the Organisation of Islamic Cooperation (OIC) level, the potential of zakat in all 57-member countries ranged from 1.8 percent to 4.34 percent of GDP (pdf).

Zakat collection among Southeast Asian countries in 2011 reached $30 billion and in Sub-Saharan Africa was $24 billion in 2013, said Martowardojo at the Indonesia Shari’a Economic Festival in Surabaya on October 30.

WAQF

As chair of the international working group on Zakat Core Principles, Indonesia is also actively collaborating with the IDB to launch the core principles for waqf. 

Awqaf assets in the country are estimated at $157.7 billiion, equivalent to 5 billion square metres of waqf land spread across 440,000 plots, according to Rifqi Ismal, Assistant Director at the central bank's Sharia Finance and Economy Department. These lands are largely used for mosques, schools, orphanages and cemeteries. 

Last month the central bank released plans for new sukuk based on waqf as the country looks to diversify and raise funding for its infrastructure projects.

ISLAMIC ECONOMY ROADMAP

Bank Indonesia is also working on a roadmap for the Islamic Economy, said Ismal.

“Previously we had the authority to supervise Shariah-compliant banking and we launched the Islamic banking roadmap, but that has moved to the Financial Services Authority (OJK). So now through our Sharia Finance and Economy Department we want to launch a roadmap for the Islamic Economy,” Ismal told Salaam Gateway.

Without revealing any other details, Ismal said the roadmap will probably be launched next year.

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