UIII x BSI Public Lecture: "The Future of Islamic Banking: Current Trend and Future Challenges"

Faculty of Economics and Business of UIII held a partnership with Bank Syariah Indonesia (BSI) to run a public lecture entitled “The Future of Islamic Banking: Current Trend and Future Challenges” on Tuesday, November 21, 2023. At this event, the Chief Executive Officer of BSI, Dr. Hery Gunardi, became the only speaker.

In his lecture, he predicted how the Islamic Finance Industry would continue to grow. He said there is a potential growing asset from the Islamic Finance Industry from $3.05 trillion in 2021, reaching $4.94 trillion by 2025. The growth will be rapid, especially in Indonesia, he said.

“So the sharia finance will increase, especially in Indonesia, that we still have room for improvement. Bigger upside, because of the population,” Dr. Hery said in his lecture.

He also mentioned that Islamic banks in Indonesia still have the opportunity to grow even higher. This is because Indonesia is the country with the largest Muslim population in the world, and around 46% have a strong preference for Sharia products.

“From the research, we knew that 46% of the Muslim population in Indonesia has a strong preference for Sharia products. With growing Sharia preference customers, Islamic banks are not only targeting individuals but extended to corporate/commercial clients to access their employees or ecosystem for cross-selling opportunities,” he said.

Thus, Sharia banks have the privilege of collecting hajj/umra payments. Dr. Hery stated that Sharia banks will be a solution for Muslims in the country for cash management and financing, including gold.

But, the potential growth also comes with the challenges for the Sharia banks. He sees three significant challenges for Sharia Banks to address: global risk, digital talent, and financial literacy and inclusion.

First, on the global risk, there will be challenges by the environmental issues and cyber issues. “This means that climate change and technology development are something that needs to be handled,”

Second, digital talent will be challenging because of the increasingly rapid technological advances. Dr. Hary sees more banking shifting from traditional to digital or online channels. It means the demand for digital talent will be increased. “It is not easy to get a lot of digital talent who understand programming, coding, and artificial intelligence,” he stated.

Lastly, Indonesia still needs to work on Islamic financial literacy and inclusion; in his sights, it will be challenging, but Dr. Hary believes it has shown positive growth in the past year.