By Chadri Jurnalis, S.H., Partner

The Indonesian Financial Services Authority (Otoritas Jasa Keuangan/OJK) has been the centerpiece of discussions on the Indonesian financial industries since its establishment by Law Number 21 of 2011 on the Financial Services Authority. In the area of sharia financial institutions, Indonesia has moved to a comprehensive, one-stop regulatory and oversight model. This means that while previously sharia financial institutions were overseen and regulated by differing institutions – the Minister of Finance for insurance companies, Bank Indonesia for banks and Bapepam-LK for other financial institutions and capital market – those roles now taken by a single authority, OJK. The Indonesian Government recognized the cross sectoral problems in the financial industry, including moral hazard, consumer protection and the instability of financial system. Obviously, establishing one body to regulate and oversee all players in the industry could be aimed to align sharia financing policies.

As it has almost been a year since OJK fully assumed its function, most of the people who are involved and interested in sharia finance are starting to evaluate whether this integration has been fruitful in addressing the problems faced as per the elucidation of the Law as described above. In its function, OJK has taken numerous actions, such as license granting and revocation. However, in practice, the data in sharia financing industry does not yet conclusively show progress. There has been no significant increase in capitalization nor market share sharia banking, or other sharia financial industries. Additionally, while few if any regulatory efforts have been taken by OJK, OJK has left us many regulations to look forward to, which will hopefully bring the expected changes in the sharia financing industry.

Now in November 2014, OJK has just released numbers of new regulations for both the banking and non-banking financial industry in Indonesia. The new regulations have received a variety of feedback. Most has been positive, but some people are still waiting for the implementation before forming an opinion.

Currently, those affected by the new regulations are conducting internal studies and having discussions to prepare their next actions.

On the sharia financial sector, regulations to look forward to include a regulation on the minimum capitalization for sharia banks and an OJK circular letter on an risk profile-based determination on the minimum capitalization for sharia banks.

Other regulations include the provisions on the issuance of sukuk and sharia mutual funds. Such regulations are currently being reviewed in OJK.

Considering by the efforts OJK as put on, and the regulations planned, it may be safe to say that 2015 could be a good year for the sharia financing industry in Indonesia. We will just have to wait and hope for the best.