Sharia Economic and Finance Development Strategies
M. Anwar Bashori
Head of Sharia Economic and Finance DepartmentInternational Program for
Islamic Economics and Finance (IPIEF)
UMY, Yogyakarta
28th of December 2017
Outline
1. VUCA and the changing world...
2. Industrial Revolution v4.0 and Indonesia Sharia Economy and Finance...
3. The Strategic Framework to reach the goal...
2
the VUCA world...
3
Highly volatile market as one of the consequences of the digital technology...
Industrial Revolution v4.0
Uncertain world political situations...
The unprecedented impacts brought by digitalization...
- higher productivity?
- wider inequality?
Digitalization also increases
interconnectedness...
4
Changing world...
Source: Adopted from Simio.com
1780 1870 1969 2000s
Digitalization
Digital world characteristics...
VALUE
Volume Velocity
Variety Veracity
“In 2010 1.2 zettabytes (trillion gigabytes) is created a year, compare to 35 zettabytes in 2020” [Cisco]
“500 million tweets per day, 3.5 billion google search queries per day, 205 billion emails sent per day“ [internetlivestats]
Social Media Multimedia
(Image, Audio, Video)
“Currently, there are 2.7 billion smartphones users & 20 billion network connections worldwide that will generate
data at a very high rate” [Ericsson]
“1 in 3 business leaders don’t trust the information they use to make decisions” [IBM]
5
Digitalization has changed the way we live our life....
Source: Bank Indonesia, Fintech Office
Shifting in financial technology innovations originator...
Source: Bank Indonesia, Fintech Office 7
From bank driven to costumer driven...
8 greater
inequality
Indonesia to ROW
within Indonesia
ZISWAF as
powerful solution optimizing this sector is necessary Indonesia Islamic market as advantage
1. Top market of halal food
3. Most millennial engagement
serving own market is necessary
increasing online education is powerful
Dynamic Halal Supply Chain
Massive Open Online Courses Online ZISWAF
Payment
Source: World Economic Forum 2016 Source: Global Islamic Economy Report 2016/2017 cost
benefit
2. Top 10 player
Islamic Finance enlarging outreach
is necessary Financial
Technology
Industrial Revolution v 4.0
The Potentials for Indonesia Sharia Economic and Finance...
benefit
Islamic Finance Opportunities with FinTech
One of fintech’s characteristics that in accordance with Islamic Finance principle - “No Gharar”:
• transparent, minimizing asymmetric information
• broader and quicker access to market and information
Indonesia is among countries with competitive fintech initiatives (15 initiatives in crowdfunding, banking software, payments, P2P finance).
Islamic banks can benefits from fintech: more efficient with wider and deeper (more inclusive) coverage.
Landscape of World Islamic FinTech
(Fintech firms offering Sharia compliant products)
Source: IFN FINTECH, as of 20 December 2017 9 15 21
14
18
Key Success Factors:
1. Full government support.
2. National programme.
3. Special dedicated institution.
4. Focus on competitive advantage.
5. Dedicated National Strategic.
Islamic Economy and Finance initiatives...
10 Largest supplier of halal
poultry to the Middle East
Aiming Halal industry as key economic contributor by 2020 Visioning to be Halal
Kitchen of the world
Largest supplier of halal beef to the Middle East
Visioning to be Global Halal and Islamic Finance Hub by 2020
Highest modest clothing export to the Middle East ($28 bio)
Visioning to become the main destination of Halal tourism
Dubai Vision:
the Capital of Islamic Economy
Saudi 2030 Vision:
the Heart of Islamic World London as Islamic Finance Hub of the West
Source: Global Islamic Economy Indicator Report 2016/2017 and 2017/2018, recalculated
Where we are in the Global Halal Industries...
Bangladesh
Sudan
11
2015 2016
1. The biggest market for Halal Food.
2. Top 10 Expenditure rank for all industries, but not for Player rank.
3. The urgency for a comprehensive national strategic framework in developing Sharia Economy and Finance.
INDONESIA
A Dedicated Strategy Focuses on Sharia Economy
12
01
02
03 04
Abundant natural resources as production base
Demographic factor that potentially leads to
biggest global halal industry marketsSharia finance specific characteristic
“ money follow the trade”
Halal Supply Chains
for wider coverage
Literation Index International Initiations Annual Sharia Business
Asset Growth (%)
Share of Sharia Financing to Tot. Econ. Financing (%)
Share of Outstanding Sharia Liquidity Market (% PDB)
Level of Literation International Standing Sharia Business
Asset Growth Sharia Financing Financial Market Depth Level
Sharia Economic Empowerement
Strenghtening Research Capacity & Education
Halal Supply Chain Institutions
Supporting Infrastructure
Research &
Assessment
Education Sharia Financial
Market Deepening
Infrastructure
Instrument Investor
Based Regulation
Regional Policies National Policies International Policies
Human Capital Data and Information Coordination
Foundational Strategies
Main Work Programmes
Core Strategies
Main Indicators Achievement
Targets
13
Center of World Islamic Economy and Finance
The Sharia Economic and Finance
Strategic Framework
Number of Business
Price Stability
Possible transmission mechanism to strenghten stability and resilience...
Developing
Halal Value Chains Number of
Business Domestic
Supply Demand for
Import Imported
inflation
Price elasticity
of supply Price
Stability
14 Concentration
Risk Systemic
Robust CAR Risk Financial sector
stability
Financing Intermedi-
ation Profitability
Developing Halal Value Chains
Pilar 2 Pilar 1
PKES
Collaboration with People Association Pillar 2
Bappenas
Kemenkeu
Pillar 3 Pillar 1
Kemenag
Pillar 2
Pillar 1 Pillar 3
MUI
Kemenpar Kemendes BPN
Pertanian ESDM Kemendikbud
ICMI KNKS
Kemenko Perekonomian
Kemenkop dan UMKM
Pillar 2
Pillar 1 Pillar 3
Pillar 3
15
Collaboration area
Collaboration area Collaboration area
Collaboration area
Collaboration area
Collaboration area
Collaboration area Collaboration area
Collaboration area
Collaboration area Collaboration area
Collaboration area Pillar 2
Pillar 1
Collaboration area
Collaboration is necessary...
Pillar 2
Pillar 1 Pillar 3 Pillar 1Pillar 2Pillar 3
Pillar 2
Pillar 1 Pillar 3
Pillar 2
Pillar 1 Pillar 3
Pillar 2
Pillar 1 Pillar 3
Pillar 2
Pillar 1 Pillar 3
Pillar 2
Pillar 1 Pillar 3
Pillar 2
Pillar 1 Pillar 3
How Islam ensure the economic flows...
16 Source: Majelis Ulama Indonesia and Bank Indonesia
Gold, properties, etc.
TAX : PBB, PKB
WEALTH
P R O D U C T I O N
I Y
C
Poor
MONEY
INCOME C
O N S U M P T I O MARKET N
MARKET MARKET MARKET
ZAKAT MAAL
PAD APBD/N
Z
RIBA
MAYSIR
Z
Z
1
3
4
6
2
Rich
ISWaf
5
Nisab
Prohibition of maysir (gambling) Riba obstructs
productive investment
Social participation
(ISWaf) for public needs Zakat redistributes
income Zakat drives
wealth to flow productively
Economic activities in accordance to sharia principles in muamalah
transaction
G
Key messages...
1. VUCA world is the reality for everyone, not to exclude Indonesia as a country with the highest Muslim population.
2. Industrial Revolution v4.0, with its digitalization, has fundamentally altered the way we live, work, and relate to one another with unprecedented scale, scope, & complexity.
3. Islamic economic system provides mechanism to mitigate those challanges through Islamic Social Finance (ZISWaf) which guarantee economic inclusiveness and deliver economic buffer and automatic safety net into the system.
17
