In Indonesian banking, rise in religious conservatism ripples across sector

A growth in religious conservatism in Indonesia is drawing talent away from what some view as un-Islamic jobs in banking, industry professionals say, creating hiring woes for conventional banks but a boon for the country's fledgling sharia finance sector.

The trend comes amid broader societal change in the world's biggest Muslim-majority country, driven by an incredible number of young, "born-again" Muslims embracing stricter interpretations of Islam.

Reuters spoke to twelve industry sources over how concern about Islamic law barring exploitative interest payments, known as "riba", is reverberating through the world of Indonesian finance.

Since 2018, hiring for banks and fintech companies in peer-to-peer lending, payments and investment platforms has been more challenging, said Rini Kusumawardhani, a finance sector recruiter at Robert Walters Indonesia.

"Roughly speaking 15 out of 50 candidates" would refuse employment within conventional banking and peer-to-peer lending, she told Reuters. "Their reason was quite clear-cut. They wished to avoid riba."

Islamic scholars usually do not all acknowledge what constitutes riba. Some say interest on a bank loan can be an example, but others say that while such loans ought to be discouraged, they aren't sinful.

"It's so common that the stigma is if one borrows it's identical with riba," Finance Minister Sri Mulyani Indrawati told a webinar on the Islamic economy earlier this season. "But loans are allowed in the Koran provided that they're taken carefully and they are recorded correctly."

Islamic banking accounts for just over 6 per cent of the roughly US$634 billion assets in Indonesia's banking industry - but has seen tremendous growth in recent years. Savings in Islamic banks jumped 80 % from end-2018 to March 2021, outstripping the 18 per cent growth in conventional counterparts, while financing also grew faster than conventional loan growth.

WORSE THAN ADULTERY

Exactly how many have gone Indonesia's conventional banking sector is unclear. Statistics show a gradual employment drop, but this may also reflect digitalisation or coronavirus pandemic-related layoffs.

As of February, there have been 1.5 million people overall employed in finance and the sector offered Indonesia's third-highest average salary, government data showed. The sector employed 1.7 million in 2018.

For 36-year-old Syahril Luthfi, finding online articles labelling riba as "tens of that time period more sinful than committing adultery with your personal mother" was enough to persuade him to give up his conventional bank job and move to an Islamic lender, he said.

Concerns over the issue have helped create online organizations for former bankers, including XBank Indonesia, which claims almost 25,000 active members on a messaging platform and comes with an Instagram account with half of a million followers.

Its chairman, El Chandra, said within an email the community was founded in 2017 to aid those facing challenges quitting a financially supportive, but un-Islamic job.

"To decide to give up a riba-ridden job is not easy, many things should be taken into consideration," said Chandra, who said some branded those who quit as stupid or radical.

XBank Indonesia advises persons against taking right out mortgages and other loans. But it's hard to measure the effect on demand for banking products among the so-called "hijrah" movement of more conservative young, middle-class Indonesians now embracing Islam - many already didn't use banks to the extent Western peers might.

Sunarso, president director of Indonesia's biggest lender by assets, Bank Rakyat Indonesia (BRI), acknowledges persons had left jobs at financial institutions he spent some time working at for religious reasons.

However, he views the hijrah trend as a chance for sharia finance, explaining how it determined a decision to merge the Islamic banking units of BRI and two other state-controlled lenders in February to create the country's biggest Islamic lender, Bank Syariah Indonesia (BSI).

BSI's leader Hery Gunardi told Reuters it planned to focus on the growing community of more religious millennials in a bid to double its assets.

In fintech, some startups are also trying to align with Islam, to tap a bigger slice of Indonesia's multibillion-dollar Internet economy.

Dima Djani, founder of Islamic lending startup ALAMI, expects Islamic financial products to really take off in 2-3 years as the hijrah movement matures, impacting people's "lifestyle, their looks, their food and their travel" because they find out about their religion.

"But in the end, as they continue steadily to learn and shift their behaviour ... they'll shift their finances," added Dima, who previously worked at foreign banks. He said because of popular, he planned to expand ALAMI into an Islamic digital bank later this year.