Indonesia's Islamic Finance Industry Still Not as Strong as Malaysia's

Indonesia is the country with the largest Muslim population in the world, approximately 229.6 million people in 2020 (equivalent to 87% of the total population).

However, the development of Indonesia's Islamic finance industry is not as strong as its neighboring country, Malaysia, which has a Muslim population of only around 22 million (equivalent to 66% of the total population).

This is evident from the 2023 Islamic Finance Development Indicator (IFDI) report.

IFDI is an index used to measure the development of the Islamic finance industry on a global scale.

This index is based on five assessment indicators: industry performance, governance, sustainability, the number of formal educational institutions and research publications, and awareness of Islamic finance.

These indicators are then formulated into a score on a scale of 0-200. The higher the score, the stronger the development of the Islamic finance industry in a country is assumed to be.

In 2023, Indonesia achieved an IFDI score of 58, ranking third out of 136 countries researched.

However, Indonesia still lags far behind Malaysia, which scored 103, ranking first globally.

Malaysia achieved the highest global score in aspects of Islamic finance industry performance (especially in sukuk and Islamic financing), governance, sustainability, and awareness.

Meanwhile, Indonesia only achieved a world-leading position in one indicator: the number of formal educational institutions and the quantity of research publications related to Islamic finance.