You might be surprised to learn that a forest community in Indonesia’s Jambi province now boasts access to green electricity, thanks to the Islamic form of donation called Zakat. That leaves many wondering how the Islamic principles of Sharia economy are able to unleash much-needed funds in billions of dollars to support sustainable development and address climate crisis in different parts of the world.
Keep in mind Islamic finance is a way of carrying out financial transactions and banking while respecting Islamic law or Sharia. Having said that, this simple guide takes you through some of the things you probably didn’t know about Islamic finance in Indonesia.
Islamic Financing Offers a Diverse and Rich Financial Product
Indonesia offers Islamic finance strategies that are aimed at accelerating the growth of Islamic finance, which include ziswaf (zakat, infaq, sadaqa, waqf), microfinance, banking, capital market, insurance, and more. All these products carry significant opportunities to realize fresh funding in billions of dollars.
Indonesia was the first county in the world to launch zakat-supported SDG project
UNDP, National Zakat Authority (BAZNAS), and Bank Jambi work together. BAZNAS and Bank Jambi contributed zakat funds and CSR funds to implement micro hydro power plant projects in Jambi province. UNDP combined these resources with the Global Environment Facility (GEF) to support renewable energy initiatives benefitting more than 5000+ beneficiaries or 900+ households.
Indonesia is home to Centre of Excellence (CoE) in Islamic Finance for Sustainable Development Goals (SDGs)
Established in 2021, the Centre of Excellence (CoE) in Islamic finance for Sustainable Development Goals (SDGs) is a joint initiative with the intervention of Universitas Islam Internasional Indonesia (UIII), UNDP, and the Islamic Development Bank (IsDB). The Centre focused on project development assistance, SDGs alignment, and knowledge building.
Remember, working with many Islamic financial instruments, such as zakat, waqf, sukuk, microfinance, and takaful/insurance, creates broader economic growth and social welfare opportunities in Indonesia. It is also in line with the Government of Indonesia’s priorities, which aim to make the country a major global Islamic finance hub in the coming years.