MUI's new edict to lure more sharia stock investors

The capital market may be seeing more Muslim investors after the Indonesian Central Securities Depository (KSEI) received an edict from the Indonesia Ulema Council’s (MUI) sharia division on its sharia-based services.

The newly issued edict on sharia-based securities transaction settlements and custodial functions complements the council's existing list of edict on sharia-compliant investments, which have been flourishing in the Muslim-majority country.

One of them is an edict issued in 2011 on the Indonesian Stock Exchange's (IDX) sharia-complicant equity trading.

KSEI president director Friderica Widyasari Dewi expressed hope that the edicts received by her company and the IDX, along with the Financial Services Authority's (OJK) Islamic securities list, could lure potential investors who were previously worried about whether the nature of the stock exchange was acceptable under Islamic teachings.

She said that a sharia-compliant stock exchange had remarkable potential in Indonesia, where existing infrastructure has supported the growth of sharia-compliant investments. Around 60 percent of the 625 stocks listed in the IDX and 12 online trading systems have complied with sharia laws, she added. 

IDX president director Inarno Djajadi shared the sentiment, citing data from sharia online trading providers, indicating that there were 47,165 sharia-compliant investors as of February, a significant jump from only 2,705 in late 2014.

This means sharia-compliant investors accounted for around 2.9 percent of total investors in the capital market as of February, during which the KSEI recorded 1.61 million Single Investor Identification (SID) numbers.

The goverment and observers have repeatedly pointed out that sharia-compliant economy could be a key to achieving financial inclusion in the country. 

Hoesen shared a similar view, suggesting that MUI sharia council participate in raising people's awareness of sharia-compliant investments to achieve the desired financial inclusion. 

"MUI sharia council's role is not only to issue edicts but also to become a strategic partner in educating the people," he said. 

MUI sharia council education and literacy head Azharuddin Lathif acknowledged that so far, the council's literacy programs in partnerships with the IDX and OJK had mainly focused on certain groups of people, such as academics while neglecting people of the lower economic classes and education levels.

However, he said that sharia-compliant investments had seen a growth, adding that his council would issue up to seven new edicts on the matter to help improve the market.

 

Source : The Jakarta Post