Indonesian Islamic finance growth potential untapped, says Fitch 

JAKARTA, Indonesia (MNTV) — Indonesia’s Islamic finance industry is likely to grow further in the second half of 2026-27 due to its strategic importance to the government and resilient operating environment, Fitch Ratings says. The industry was estimated at more than $200 billion at end-May.

Fitch expects Indonesia to remain among the world’s largest issuers of sukuk (Islamic investment bonds). 

Islamic banks have considerable room for expansion, given the Muslim-majority population and large underbanked demographics. Challenges, like the limited distribution network, awareness, and product gaps, remain despite improvement over the past decade. 

Deeper ASEAN and GCC linkages could also attract investments. The industry is anchored by sukuk outstanding (67%) and Islamic bank assets (30%). The rest is split between Islamic funds and takaful (Islamic insurance).

Islamic banks have lower reserve requirements than conventional banks. The Hajj Financial Management Agency issued a regulation in February that only Islamic banks and sharia business units may serve as receiving banks for hajj pilgrimage cost deposits.

“We do not expect bank sukuk issuance to rise in 2026 due to limited refinancing-driven supply and rate hikes,” the ratings agency said.

Islamic banking assets were above $58.8 billion at the end of the first quarter of 2026, and formed 8% of system financing. Sector assets are likely to grow by around 10% in 2026, on consumer financing growth, financial inclusion measures and product innovation such as bullion banking. 

“We expect Indonesia’s GDP to grow by 5.1% in 2026 and 5% in 2027, supporting steady banking sector growth, including for Islamic banks”.