A booster shot for Islamic finance

The current annual growth rate for Indonesia’s Islamic finance market is 16.5 percent, down from 24.2 percent in 2013, and 49.2 percent in 2011. A large part of this decline can be attributed to the most recognisable instrument of Islamic finance, sukuk. The OJK is now preparing a new blueprint due at the end of the year to expand Islamic finance in Southeast Asia’s biggest economy. It says the new blueprint may include additional benefits to current fee and tax incentives to revive the domestic sukuk market, and also said it was considering extending the beneficial issuance fee for sukuk to issuance of sharia-compliant securities. The document will also address issues in Islamic finance including lack of economies of scale, consolidation opportunities, and the role of foreign ownership.