Which country has the most muslim population in the world? It's not Saudi Arabia, Iran, or Pakistan. According to PewResearch.org data in 2015, Indonesia's muslim population has reached 220 million or around 87% of the total population, the largest in the world.
This year, Indonesia's muslim population is estimated to reach 229.62 million. The runner up is India, with a muslim population of 176.2 million, and in the third place is Pakistan, with 167.41 million muslims.
The large muslim population is a great foundation for Indonesia to develop sharia-based investments, including sharia capital market investments. The month of Ramadan 1441 Hijri is a special moment for muslims. Many investors seek consumer shares in the sharia category for profitable returns in this holy month.
The demographic resource for the development of Islamic investment is also supported by regulations and fatwas of the Indonesian Ulema Council (Majelis Ulama Indonesia/MUI). On April 18, 2001, the MUI National Sharia Council (DSN-MUI), for the first time, released a fatwa directly concerned to the capital market, i.e. Fatwa Number 20/DSN-MUI/IV/2001 concerning Investment Implementation Guidelines for Sharia Mutual Funds.
On September 12, 2007, Badan Pengawas Pasar Modal dan Lembaga Keuangan (Bapepam-LK)—now Otoritas Jasa Keuangan (OJK) also issued a List of Sharia Securities (Daftar Efek Syariah/DES), comprising shares that complied with sharia principles. From 2001 to 2008, MUI has released 20 fatwas related to the Indonesian Islamic capital market, which effectively wiped out the perception that the shares were not sharia or haram.
Nowadays, the public has become more familiar with Islamic stocks. Other capital market products that have gained popularity are sharia mutual funds, sukuk (Islamic bond)—corporate and state sukuk—sharia ETFs, and sharia asset-backed securities (EBA). The operation of the Islamic capital market in Indonesia is supervised by DSN-MUI and OJK.
Islamic stocks are stock securities that are aligned with Islamic principles. A few of the criteria include companies which do not run businesses related to,
- gambling and games classified as gambling, illicit goods or services (haram li-dzatihi) such as alcohol and cigarettes;
- trading that is not followed by the delivery of goods/services;
- interest-based banks;
- interest-based financing companies; and
- trading that contains risks and elements of uncertainty (gharar) and/or gambling (maisir), including conventional insurance.
Also, sharia shares are company shares with total interest-based debt compared to total assets of no more than 45%, and total interest income and other non-halal income compared to total revenue and other income is less than 10%.
Meanwhile, Islamic mutual funds are alternative investment that collects and manage funds from the public according to Islamic principles in the capital market. Sharia mutual funds were first recognized in Indonesia in 1997.
Islamic mutual funds have different criteria from conventional mutual funds in general. This difference lies in the selection of investment instruments and investment mechanisms that must not conflict with Islamic principles. Another difference is the entire portfolio management, screening and cleansing process. The cleansing funds are then channeled for social and humanitarian activities.
There are three sharia stock indexes in IDX that that can be used as benchmarks for investors. They are Indonesian Sharia Stock Index (ISSI) released on May 12, 2011, the Jakarta Islamic Index (JII) released since July 3, 2000 and Jakarta Islamic Index 70 (JII70) released since May 17, 2018.
Unfortunately, after 43 years of the Indonesian capital market—established August 10, 1977—the contribution of the Islamic capital market is still small. The market is growing, but the number of investors who prefer the sharia principle is not much. IDX data recorded that total sharia investors as of January 2020 reached 70,132 investors, or rose 2.2% from 68,599 investors at the end of 2019. The ratio of sharia investors is only 6.3% out of 1,118,733 investors on the IDX.
The results of the 2016 National Financial Literacy and Inclusion Survey by the OJK in 2016 also disclosed that shares of non-sharia financial products and services (including Islamic capital markets) were the most preferable. The people’s choice still lies in savings (9.1%), insurance (1.9%), deposits (1.6%), and current accounts (0.9%).
Nevertheless, attempts to grow the Islamic capital market have never stopped. Analysts also believe the future of Islamic stocks is reasonably good. Moreover, shares listed in the JII and ISSI indexes are also gaining in strength, indicating the potential for stock prices to skyrocket.
Besides, as stated by the OJK, the virtue in the Islamic capital market is the investors are looking for blessings, too. It means that investment choices should bring goodness; and not just profits, but profits that comply with the sharia law.
"In the Islamic capital market, we also seek blessings. If you [investors] only pursue returns, you will revert back to the conventional capital markets. Therefore, it is not solely about pursuing yields," said the OJK Capital Market Supervisory Chief Executive Hoesen in the opening of Syariah Investment Week 2019 on the IDX, Thursday, November 21, 2019.
Shariah Stock Investment at Mandiri Sekuritas
To support the sharia capital market, PT Mandiri Sekuritas, a subsidiary of PT Bank Mandiri (Persero) Tbk (BMRI), is geared up to better facilitate Islamic investors.
Mandiri Sekuritas provides sharia service for clients who would like to invest in the stock market in accordance with Sharia principles. Mandiri Sekuritas has obtained a license to implement the Online Trading Sharia System (SOTS) from DSN-MUI to serve sharia stock investments to customers. In addition to Islamic stocks, Mandiri Sekuritas also holds a license as a Retail Sharia Government Securities Distribution Partner and is an Mutual Fund Selling Agent (Agen Penjual Efek Reksa Dana/APERD) for sharia mutual fund products.
The special traits of sharia stock transactions include:
- Stock products traded are classified as halal (according to DES issued by the IDX), focusing on the ratio/profit-sharing system and risks between investors and issuers.
- The transaction system that is used conforms to the sharia law.
- The Customer Fund Account (RDN) follows sharia principles, so it does not apply transaction interest.
A prospective investor only needs to open a security account at Mandiri Sekuritas. Once the account is opened, the investor will receive a MOST account (username & password) and a Sharia Fund Account (RDN) number in two separate emails.
After depositing funds by transferring to the sharia RDN number, the investor is welcome to visit www.most.co.id/syariah. Clients may download MOST App from most.co.id website for PCs, and Google Play Store or Apple App Store for mobile phones; and afterwards, you can immediately trade sharia stocks.
With all these conveniences, what else are you waiting for? Happy investing, and enjoy Ramadan Kareem!
