The initiative was initially proposed by the Indonesia government earlier this year and calls for proposal have been made to several potential developers. As a result, Kuala Lumpur-listed property developer Matrix Concepts Holding Bhd in a filing to Bursa Malaysia last month said it entered an agreement with two Indonesian companies, real estate developer PT Bangun Kosambi Sukses and investment firm PT Nikko Sekuritas Indonesia, in order to set up a joint venture and to determine the timeline and the potential costs of the project.
For the Indonesian government, the project plays a key role in positioning the country as another Islamic finance hub in Southeast Asia and attracting Islamic investments from all over the world.
Therefore, it takes no wonder that its dimensions are on a rather large scale: Plans are to develop the Islamic finance district within the 1,000-hectare PIK 2 Sedayu Indo City, a new seaside district in North Jakarta which is currently in the first phase of its development and will comprise a central business district with office buildings, a shopping street, educational facilities, hospitals, as well as a residential district with houses and apartment buildings, shopping malls, its own light rail transit system, a waterfront promenade, a green belt and a stadium.
For Matrix Concepts, the planned joint venture for the Islamic finance district is the first step to establish a presence in Indonesia. The company has further plans to develop an affordable housing compound, also in Jakarta, the company’s CEO Lee Tian Hock said earlier this month.
A new Islamic finance district in Jakarta – even though its exact facilities are still under consideration – would send an important message to the global Islamic finance industry that the world’s most populous Muslim country is finally undertaking efforts to establish a halal finance industry ecosystem. The status quo is that although up to 90% of the Indonesian population is Muslim, Islamic banking and other Shariah-compliant financial services remain underdeveloped in Indonesia due to a lack of Islamic finance institutions and a comprehensive market regulation. In 2017, Islamic finance-related assets accounted for just around 5.5% of total banking assets in the country.
In its latest initiative, Indonesia’s Financial Services Authority launched a roadmap for the development of Islamic finance in Indonesia for the 2017-2019 period, aiming to create an environment for sustainable Islamic financial services that can compete with conventional financial services in the country. According to the authority’s chairman Muliaman D Hadad, the roadmap seeks to overcome a number of challenges in Islamic finance development in Indonesia, such as misalignment and lack of co-ordination between the government and the authorities in the sector’s development, unvaried products and services, inadequacy of human resources, underdeveloped information technology for the sector, low public understanding and awareness and suboptimal regulation and supervision. A central Islamic finance in Jakarta with all the necessary facilities could particularly help solving problems of shortage in human resources, optimise co-ordination with stakeholders and synchronise the development of the entire industry by offering a fully-equipped business environment for Islamic banks, Islamic financial service providers and takaful operators.
“We will address all those problems and establish a conducive Shariah banking industry which should attract many new investors to Indonesia, which, after all, is Southeast Asia’s largest economy,” Hadad said.
