The Blueprint of Islamic Banking Development in Indonesia

This paper notes the development of sharia banking in Indonesia is a realisation of the needs of the public seeking an alternative banking system that is both capable of delivering sound banking/financial services and compliant with sharia rules. Bank Indonesia, as the banking regulatory authority has been in the position to conduct the task as mandated in the Banking Act to establish a sound sharia banking system.

The Blueprint defines the position, vision and strategic initiatives in developing sharia banking and serves as a critical reference for the sharia banking stakeholders. The vision of the sharia banking development referred to here is defined as follows:

“The establishment of a competitive and efficient sharia banking that complies with prudential banking principles, and significantly support real sector activities through share-base financing with real underlying transactions in the spirit of justice, brotherhood and good-deeds to promote the well-being of the nation.”

The initiatives, which are defined in the Blueprint, are derived from the strategic objectives that will be achieved by Bank of Indonesia together with other stakeholders going forward. The initiatives are categorised into four major activities, i.e., ensuring better sharia compliance, improvement on prudential regulations, supporting operational efficiency and competitiveness, and supporting a higher level of systemic stability. The first stage is said to put strong foundation to the sustainable development of the industry. The second stage focuses in strengthening the structure of the industry. The last stage focuses on the adoption of international standards for sharia banking services.

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