Supporting a developing Islamic fintech ecosystem

Ronald Wijaya is the Chairman of Asosiasi Fintech Syariah Indonesia (AFSI).

Indonesia is considered the fastest-growing fintech ecosystem in South East Asia since 2016 when the first fintech Peer- to-Peer (P2P) regulation was published by the Indonesia Financial Services Authority (OJK). To date, there are more than 300 fully licensed fintech players in the country, the number could easily beat least double had the regulator not implemented a moratorium on new licenses in early 2020. Indonesia’s supportive ecosystem has four fintech associations which are fully recognized and appointed as Self-Regulatory Organizations (SRO) by the regulator, classified by the types of services or business models such as P2P Association (AFPI), Securities Crowdfunding Association (ALUDI), and Digital Financial Innovation Associations (AFTECH & AFSI).

Although AFSI is recognized as a Digital Financial Innovation Association by the OJK, AFSI acts as the home for all Sharia-compliant fintech players and is the Sharia-compliant digital ecosystem in Indonesia.

Amidst the pandemic, Indonesia saw a slowdown in the absolute number of Sharia-compliant fintech players, but despite this Indonesia now has the highest number of recognised Islamic fintechs globally in the landscape and database of this report and the overall growth in the sector remains strong, with a 130%+ growth in financing volume year on year from 2020 to 2021.

Volumes remain low as compared to conventional fintech, however due to the continued development of better Sharia-compliant banking infrastructure, and greater collaboration amongst Sharia-compliant financial service providers such as Sharia-compliant rural banks, BMTs (Sharia-compliant microfinance institutions), Sharia-compliant regional development banks and the Sharia-compliant fintech players, the growth projection remains strong, evidenced with the improved position of Indonesia in this years’ GIFT Index.

Furthermore, the Indonesian government’s vision within the National Agenda to support the development of a Sharia-compliant economy and the continued work of ecosystem supporters such as AFSI present a bright outlook for Islamic fintech in Indonesia.