Indonesia's Islamic economy has experienced substantial growth in recent years. According to the Global Islamic Economy Indicator (GIEI), Indonesia improved its ranking from 11th in 2018 to 3rd in 2023. Despite this progress, the country still faces significant challenges in developing its Islamic economy, particularly regarding low levels of literacy and financial inclusion in Islamic finance.
Sutan Emir Hidayat, Ph.D., Director of Islamic Economic Infrastructure at the National Committee for Islamic Economy and Finance (KNEKS), noted that as of 2023, Islamic financial literacy was only at 39.11%, while Islamic financial inclusion was at 12.88%. He made these remarks during the 9th Gadjah Mada International Conference on Islamic Economy and Business (GamaICIEB) at Universitas Gadjah Mada (FEB UGM).
GamaICIEB, an annual event organized by the Faculty of Economics and Business at FEB UGM, focused this year on "Islamic Financial Literacy and Inclusion: Dynamics and Progress in Accounting, Business and Economics." The conference served as a platform for discussing and promoting recent research in the fields of Islamic economics and business, featuring speakers such as Prof. M. Kabir Hassan from the University of New Orleans and Prof. Nurul Indarti, a management professor at FEB UGM.
Hidayat highlighted several obstacles to enhancing Islamic financial inclusion, particularly the limited availability of Islamic financial services in rural regions and central and eastern Indonesia. This gap presents challenges for the broader development of the Islamic economy in the country.
He pointed out that the lack of access to Islamic financial services hampers the ability to meet financial needs for religious activities such as Hajj, Umrah, and various forms of charitable giving.
Another challenge is the insufficient support from community leaders and religious figures in promoting Islamic finance. The overall low levels of financial literacy also impede progress in this area.
To tackle these issues, KNEKS is focusing on improving access to Islamic financial services for specific groups, including young people, rural communities, various occupational groups, and those with lower educational backgrounds. These groups typically exhibit lower literacy and financial inclusion rates compared to the national average.
Prof. M. Kabir Hassan emphasized the critical role of financial literacy in fostering economic stability and growth in Indonesia. He noted that enhancing financial literacy equips individuals to make informed financial decisions and reduces their risk of falling victim to fraud.
Hassan identified several challenges to financial literacy improvement, including demographic diversity, educational disparities, pandemic-related behavioral shifts, and increasing cybercrime. He mentioned the Indonesian government's National Financial Literacy and Inclusion Strategy (SNLKI) 2021-2025 as a step towards enhancing financial literacy and inclusion.
He recommended that Indonesia strengthen its financial literacy education by collaborating with public and private sectors and drawing on global best practices.
Prof. Nurul Indarti discussed resource roles in firm performance from both conventional and Islamic perspectives. Her research compared Sharia-compliant firms with traditional ones, revealing that Sharia firms tend to be more stable and efficient, adhering to Islamic principles in their operations. This approach emphasizes balanced growth and ethical profit-making, supported by strong human capital efficiency.
