Increasing Demand, Supply and Developing Infrastructure Key Steps to Boosting Islamic Banking in Indonesia: KNEKS

Indonesia’s National Islamic Finance Committee (KNEKS) has outlined several key steps that must be implemented in parallel to develop Islamic banking in the country. These include increasing demand and supply, as well as developing infrastructure, according to local media reports.

Why it Matters?

According to Taufik Hidayat, Director of Shariah Financial Services of KNEKS, increasing supply encompasses strengthening the capabilities and capital of Islamic banks. This would impact the pricing or margins of Islamic banks, which are highly dependent on the structure of the cost of funds. In order to achieve a low cost of funds, banks must have a high current and savings account (CASA) ratio, which is supported by information technology (IT) capabilities and...