The Southeast Asia's massive archipelago country Indonesia, has launched its very first sharia-compliant payment app, powered by the electronic payment platform LinkAja.
Called 'LinkAja Syariah', it provides the country's first digital financial services and manages customers' balances that work in accordance with the Islamic law.
To make this happen, LinkAja has partnered with around 1,000 mosques and 242 zakat and waqf agencies to expand the use of its cashless app to a wider customer base.
According to LinkAja's head of sharia service division Widjajanto Djaenudin, in a teleconferenced press briefing after the official launch of the e-wallet payment feature:
Because of its sharia feature, users of the app have their funds deposited to state-owned sharia banks, that include Bank Negara Indonesia Sharia, Bank Mandiri Sharia and Bank Rakyat Indonesia Sharia.
This is to avoid interest charges, regarded as usury in Islamic law.
In Indonesia, LinkAja has more than 40 million users, with partners that include 500,000 e-commerce and merchants. With the sharia approach, the company is aiming to attract 1 million users in 2020, and to also help develop Indonesia's sharia digital economy ecosystem, said LinkAja’s COO Haryati Lawidjaja.
"Through our sharia service products, we are focusing on developing Indonesia’s sharia economic ecosystem. We hope to empower mosque-centered economic activities, digitalization at Islamic boarding schools and digital payment for zakat, infaq and waqf," she said.
Going forward, if the plan goes as expected, LinkAja also aims to expand this sharia feature to other Muslim majority countries, such as Pakistan and Bangladesh.
The company is also in discussions with the Religious Affair Ministry’s Hajj and Umroh Directorate General over the possibility of having Indonesian pilgrims to use the LinkAja app for payments in Saudi Arabia.
National Committee for Sharia Finance (KNKS) executive director Ventje Rahardjo, said the committee is appreciating LinkAja’s initiative in developing the sharia service products, saying that he would help achieve the committee’s goal to increase Indonesia’s sharia bank assets to Rp 2 quadrillion ($126.8 billion) by 2024.
“With the presence of a sharia digital payment system, InsyaAllah [God willing] Indonesia’s sharia financial system will grow exponentially,” he said.
Indonesia is the most populous country in the Southeast Asia, third in Asia, and fourth in the world.
With most of its population are Muslims, sharia banks are having a special place in many consumers' hearts. Over the years, the country has improved the development of regulations, improved its Islamic banking and financial industry ecosystem, and has a strong political support from the government.
According to Indonesia's Financial Service Authority (OJK) data, sharia banks controlled Rp 491 trillion ($31.1 billion) in total assets as of the end of 2019. This is significantly lower than the Rp 8.2 quadrillion (520.1 billion) in assets controlled by conventional banks.
But still, Indonesia received a score 81.93 on the Islamic Finance Country Index (IFCI), according to the 2019 Global Islamic Finance Report (GIFR). Indonesia ranked first, up from sixth in 2018, overtaking Malaysia, which had dominated the index since 2011.
The results of the 2019 GIFR demonstrate how Indonesia is taking an increasingly important role in developing the global Islamic banking and finance industry.
