Rise in religious conservatism draws talent away from Indonesian banking sector

Photo: Reuters

A rise 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 a broader societal change in the world’s biggest Muslim-majority country, driven by millions of young, ‘born-again’ Muslims embracing stricter interpretations of Islam.

Reuters spoke to a dozen 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 have been more challenging, said Rini Kusumawardhani, a finance sector recruiter at Robert Walters Indonesia.

“Roughly speaking 15 out of 50 candidates” would refuse a job within conventional banking and peer-to-peer lending, she told Reuters. “Their reason was quite clear-cut. They wanted to avoid riba.”

Islamic scholars do not all agree on what constitutes riba. Some say interest on a bank loan is an example, but others say that while such loans should be discouraged, they are not 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 year. “But loans are allowed in the Koran as long as they’re taken carefully and they’re recorded correctly.”

Islamic banking accounts for just over 6% of the roughly $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% growth in conventional counterparts, while financing also grew faster than conventional loan growth.

WORSE THAN ADULTERY

Exactly how many have left 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 were 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 times more sinful than committing adultery with your own mother” was enough to persuade him to quit his conventional bank job and move to an Islamic lender, he said.

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

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

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

XBank Indonesia advises people against taking out mortgages and other loans. But it’s hard to measure the impact 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.

BUSINESS OPPORTUNITIES

Sunarso, president director of Indonesia’s biggest lender by assets, Bank Rakyat Indonesia (BRI), acknowledges people had left jobs at financial institutions he has worked at for religious reasons.

However, he views the hijrah trend as an opportunity 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 form the country’s biggest Islamic lender, Bank Syariah Indonesia (BSI).

BSI’s chief executive Hery Gunardi told Reuters it planned to cater to the growing community of more religious millennials in a bid to double its assets.

In fintech, some startups have also been trying to align with Islam, to tap a bigger slice of Indonesia’s multi-billion-dollar internet economy.

Dima Djani, founder of Islamic lending startup ALAMI, expects Islamic financial products to really take off in two to three years as the hijrah movement matures, impacting people’s “lifestyle, their looks, their food and their travel” as they learn more about their religion.

“But in the end, as they continue to learn and shift their behaviour … they will shift their finances,” added Dima, who previously worked at foreign banks. He said due to high demand, he planned to expand ALAMI into an Islamic digital bank later this year.

Reuters

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.