How the pilgrimage to Mecca could save the Indonesian economy

Indonesia has a history of high inflation and a dependence on foreign capital. The Indonesian Rupiah was Asia’s worst performing emerging market currency in 2013. But Indonesia is also the world’s most populous Muslim nation. In order to reduce its reliance on other economies, the country’s religious ministry has built up $5.4 billion in reserves from deposits made by the millions of its citizens seeking to make the pilgrimage, or Hajj, to Saudi Arabia each year. Last year, the Hajj department began to invest in Sharia compliant bonds issued by the Indonesian government. Like its neighbor Malaysia, the country is now setting up a Hajj financial management agency, which could realistically play a key role in developing the country’s Islamic finance markets and reduce its reliance on offshore funds.