Rise in religious conservatism in Indonesia is drawing talent away from what some view as un-Islamic jobs in banking, creating hiring woes for conventional banks but a boon for the country’s fledgling sharia 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. Since 2018, hiring for banks and fintech companies in peer-to-peer lending, payments and investment platforms has been more challenging. 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.
Islamic banking accounts for just over 6 per cent of the roughly US$634 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 March 2021, outstripping the 18 per cent growth in conventional counterparts, while financing also grew faster than conventional loan growth. There were 1.5 million people overall employed in finance and the sector offered Indonesia’s third-highest average salary, government data showed. The sector employed 1.7 million in 2018. XBank Indonesia advises people against taking out mortgages and other loans. But it’s 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 didn’t use banks to the extent Western peers might. In fintech, some startups have also been trying to align with Islam, to tap a bigger slice of Indonesia’s multibillion-dollar Internet economy.