A report from a global news platform shows that Indonesia is the fifth largest share (US$ 2.9 billion) of the Islamic financial technology (fintech) market in the world. Reports also noted that millennials dominate borrowers on the platform. The first rank is Saudi Arabia with US$ 17.9 billion. Then Iran with US$ 9.2 billion, United Arab Emirates US$ 3.7 billion, and Malaysia US$ 3 billion.
Chairman of the Indonesian Joint Funding Fintech Association (AFPI) said that sharia fintech services are growing rapidly and Indonesia is a market with significant growth. He also conveyed the large potential of the sharia fintech market in Indonesia because of the large Muslim population. Data shows that Muslims in the country increased from 209.12 million in 2010 to 229.62 million last year.
In addition, the growth of sharia fintech in the country is driven by millennials. The share of borrowers aged 21-30 years reaches 47% of the total. Then 31-40 reached 36% and the remaining 12% were aged 41-50 years or generation X. In addition, the association considers that there is quite a lot of interest in Islamic financing schemes in Indonesia.
Consumption and exports of Indonesian halal products increased respectively by 3.6% and 19.2% in 2017 according to the State of The Global Islamic Economic Report.
Sharia fintech, with technological capabilities, can contribute to the growth of Islamic-based financial services, said the Lead Research Economist of the Islamic Development Bank. Digitisation has also become more massive during the COVID-19 pandemic, including financial services. Islamic finance contributed 8.69% of the total financial industry in 2019.
The Financial Services Authority (OJK) noted that credit disbursement by financial technology start-ups (fintech lending) was more than US$ 18 billion as of March. Companies in this sector also recorded a threefold increase in transactions during the first quarter.
As reported by OpenGov Asia, recent research shows that digital wallets or e-wallets are more widely used by Indonesians during Ramadan. The percentage is higher than bank services such as debit or credit cards. The use of digital wallets also aims to avoid physical contact to anticipate transmission of COVID-19.
In Indonesia, several fintech companies provide digital wallets. Even so, traditional banks also have mobile banking applications. The head of the research team said 80% of respondents surveyed in April 2021 chose digital wallets during Ramadan and Eid. Meanwhile, other payment methods are cash (56%), debit card (26%), and credit card (5%). It shows that consumers spend a lot of time at home during Ramadan. They choose to make payments for shopping with digital money for a variety of reasons. About 87% choose digital wallets because of the promotions. while 67% expect cashback, added the researcher.
For product categories purchased during Ramadan and Eid, 94% are food and beverages. Then, cooking and household needs are 78%, health products 58%, clothing 45%, beauty care 31%, and others. People also choose to donate with digital services during Ramadan and Eid this year. More than 60% of respondents choose to give alms online, while 94% were interested in using digital money to distribute donations or alms.
In addition, it is estimated that digital payment services are widely used for the payment of holiday allowances (THR). Research reveals that 80% of respondents choose digital money as their THR distribution method for their relatives.
Sharia FinTech platforms continue to provide common services like crowdfunding and peer-to-peer lending, with some differences: borrowers share investment profits and losses with their lenders; money is only invested in Halal projects, and investors are encouraged to help low-income groups.
