Rise in religious conservatism ripples across Indonesian banking sector

JAKARTA • A rise in religious conservatism in Indonesia is drawing talent away from what some view as un-Islamic jobs in banking, industry professionals say, creating hiring woes for conventional banks but a boon for the country’s fledgling syariah finance sector.

The trend comes amid broader societal change in the world’s biggest Muslim-majority country, driven by millions of young, “born-again” Muslims embracing stricter interpretations of Islam.

Reuters spoke to a dozen industry sources over how concerns about Islamic law barring exploitative interest payments, known as “riba”, are reverberating through the world of Indonesian finance.

“Roughly speaking, 15 out of 50 candidates” would refuse a job within conventional banking and peer-to-peer lending, she told Reuters. “Their reason was quite clear-cut. They wanted to avoid riba.”

Islamic scholars do not all agree on what constitutes riba. Some say interest on a bank loan is an example, but others say that while such loans should be discouraged, they are not sinful.

“It’s so common that the stigma is if one borrows it’s identical with riba,” Finance Minister Sri Mulyani Indrawati said at a webinar on the Islamic economy earlier this year. “But loans are allowed in the Quran as long as they’re taken carefully and they’re recorded correctly,” she added.

Islamic banking accounts for just over 6 per cent of the roughly US$634 billion (S$852 billion) assets in Indonesia’s banking industry – but has seen tremendous growth in recent years.

Savings in Islamic banks jumped 80 per cent from end-2018 to this March, outstripping the 18 per cent growth in conventional counterparts, while financing also grew faster than conventional loan growth.

Exactly how many have left Indonesia’s conventional banking sector is unclear. Statistics show a gradual drop in employment, but this may also reflect digitalisation or layoffs related to the coronavirus pandemic.

For 36-year-old Syahril Luthfi, finding online articles labelling riba as “tens of times more sinful than committing adultery with your own mother” was enough to persuade him to quit his conventional bank job and move to an Islamic lender, he said.

Concerns over the issue have helped create online support groups for former bankers, including XBank Indonesia, which claims nearly 25,000 active members on a messaging platform and has an Instagram account with half a million followers.

Its chairman, Mr El Chandra, said in an e-mail that the community was founded in 2017 to support those facing challenges quitting a financially supportive, but un-Islamic job.

“To decide to quit a riba-ridden job is not easy, many things must be taken into consideration,” said Mr Chandra, who added that some branded those who quit as stupid or radical.

XBank Indonesia advises people against taking out mortgages and other loans. But it is hard to measure the impact on demand for banking products among the so-called “hijrah” movement of more conservative young, middle-class Indonesians now embracing Islam – many already did not use banks to the extent Western peers might.

Mr Sunarso, president director of Indonesia’s biggest lender by assets, Bank Rakyat Indonesia (BRI), acknowledges people had left jobs at financial institutions he has worked at for religious reasons.

However, he views the hijrah trend as an opportunity for syariah finance, explaining how it determined a decision to merge the Islamic banking units of BRI and two other state-controlled lenders in February to form the country’s biggest Islamic lender, Bank Syariah Indonesia (BSI).

BSI’s chief executive Hery Gunardi told Reuters it planned to cater to the growing community of more religious millennials in a bid to double its assets.

REUTERS – Straitstimes 2021

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