Growing Indonesia’s Sharia economy requires focus on four energy pillars

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The State of Global Islamic Economy Report 2020/2021, which covers various sectors including Islamic finance, halal food and beverages and halal cosmetics, ranks Indonesia fourth globally. AFP

Indonesian Vice-President Ma’ruf Amin has, on various occasions, asserted that Indonesia has great potential for developing a sharia economy. This optimism is based on the achievements Indonesia’s sharia economy made last year.

The State of Global Islamic Economy Report 2020/2021, which covers various sectors including Islamic finance, halal food and beverages and halal cosmetics, ranks Indonesia fourth globally. And Indonesia is ranked second for the country with the most developed Islamic finance industry in the ICD-Refinitiv Islamic Finance Development Report 2020.

To predict the future of Indonesia’s sharia economy, we must ask an important question: Does Indonesia’s sharia economy have enough energy to grow sustainably?

In my opinion, four energy pillars are important to Indonesia’s sharia economy.

The first and foremost pillar is the moral values of the sharia economy. This is the most precious source of energy for growing the sharia economy. In this context, the sharia economic system must be developed not only in critical opposition to the capitalist system, but also because the sharia economy aligns with human nature. The sharia economic system treats people as full human beings.

To avoid degrading the value of the sharia economy, the system should not be understood only as regards its technical aspects. To illustrate, if the mudharabah-musyarakah (profit-and-loss sharing) system is understood only as a substitute of the interest-based system without understanding its moral value, it will not be able to eradicate human exploitation. Further, consumers will refer to the system’s material and financial benefits as their main consideration in daily transactions, instead of the moral value behind it.

Therefore, Islamic economics scholars must continue to explore the moral values of the sharia economic system and disseminate them the public through a simple yet strong message. Understanding of the sharia economy’s moral values will strongly influence human behaviour, including financial behaviour.

The sharia economic system teaches people to be honest, to avoid greed, fraudulent transactions and excessive consumption, as well as to not harm others. Hence, people would uphold these values, even without external acknowledgement or recognition. It is not because of legal compulsion, but because people are consciously aware of the noble values of the sharia economic system.

The most important value of the sharia economic system is “the vision to benefit others”. Each party should hold to a vision to benefit others. Regarding this value, the main goal of sharia economy players should be “to maximise benefits”. This is fundamentally different from the primary goal of conventional economy players, which is “to maximise profits” in their transactions. If this value can be extracted optimally, it will provide a limitless source of energy for strengthening Indonesia’s sharia economy.

The second energy pillar for the sharia economy is its interconnectedness across sectors. In the perspective of Islam, this interconnectedness implies realising every potential of the sharia economy. If virtue is uncoordinated, it will be defeated by misdeeds that are coordinated. Therefore, the interconnectedness between sharia economic sectors must be coordinated.

Another view is that this interconnection is a congregational manifestation. So many virtues are attached to congregational activities. For example, the reward for congregational prayer is up to 27 times greater when compared to praying alone. It is also said that Allah is present in a congregation (yadullah fauqal jamaah).

In these contexts, the interconnectedness between the sharia economic sectors has an important role to generate value-added for each sharia industry sector. It also has a strategic role in boosting growth of the sharia economy through the snowball effect.

The third energy pillar for the sharia economy is government commitment to supporting sharia economy development. In the Pancasila democratic system, the Indonesian government has a broad role in taking the initiative in developing the sharia economy. Government support is very important for accelerating sharia economy development through policy, budget intervention, infrastructure and other means.

Two of the most important government initiatives are the establishment of the National Islamic Economics and Finance Committee (KNEKS) and the merger of sharia banks into Bank Syariah Indonesia. These initiatives are strategic and also prove that the Indonesian government is strongly committed to developing the sharia economy.

The fourth energy pillar for the sharia economy is public participation. The public has a vital role as the market of the sharia economy. The sustainability of the sharia economy is strongly dependent on public participation. The public is the place for sowing the values of the sharia economy. If the values are the soul, then the public is the physical body. The soul cannot exist without a body. Combining its moral values and the very large Muslim population will produce a massive amount of energy for growing Indonesia’s sharia economy sustainably.

Today, the sharia economy has valuable support from Nahdlatul Ulama, Muhammadiyah, the Sharia Economic Community (MES), the Ansor Youth Movement, pesantren (Islamic boarding schools) and various educational institutions. On another level, there is a behavioural shift in society toward religiosity, which has had a significant impact on increasing the demand for sharia economy products and services.

Mohammad Amin is a sharia pension fund analyst at the Financial Services Authority (OJK)