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.
Islamic Sharia law prohibits interest, and start-ups are adapting their services to comply. It is a multi-billion-dollar opportunity as Indonesia’s Muslim consumers spend US$224 billion a year. And its rapid growth has caught the attention of Indonesia’s financial services regulator, OJK. Indonesia’s clerics are debating the eligibility of virtual payments under Sharia law, but consumers are keen. Half of the nation’s population lacks bank accounts, but most have mobile phones now.
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.
Another aspect of Islamic finance is paying zakat, or donations, to charitable causes. Currently, there are digital platforms in the country that allow people to donate their zakat digitally. One of them partnered with the Indonesian Mosque Council to allow digital donations across 800,000 mosques.
The demand for Sharia FinTech firms is booming across Southeast Asia, according to reports. The majority of Indonesia’s 270 million population is Muslim, this makes the country a viable opportunity for firms in the Sharia FinTech space.
The Sharia Fintech sector is expected to grow rapidly this year. One of the reasons for this is the increasing number of new players who are currently processing permits from the OJK. There are dozens of fintech lining up to get OJK permits. Some of them are sharia fintech. This is an opportunity to work on because the level of the sharia economy in Indonesia is still low. The presence of new regulations currently being discussed by the regulator is also a prospect for improvement.
Until the end of 2020, the value of Islamic fintech loans reached IDR 1.7 trillion, up from the previous year’s realisation of IDR 1 trillion. At that time, there were 10 registered and licensed Sharia Fintech platforms.
