Banking Disruption and the Future of Zakat Management Organisations

Indonesia’s banking system is shrinking in institutions and physical networks as digital services reshape how people manage money. The shift, the writer argues, offers a mirror for organisations that manage zakat.

The analysis traces banking’s origins from the safekeeping of commodities and precious metals in ancient Babylon and Egypt to the medieval Italian banca, or money-changing table. Modern banks later became formal institutions with legal structures, offices and regulated storage systems.

In Indonesia, modern banking emerged during the colonial period with the establishment of De Javasche Bank. After independence, the country reorganised the system through the creation of Bank Negara Indonesia in 1946 and the nationalisation of De Javasche Bank into Bank Indonesia. The industry is now broadly divided among the central bank, commercial banks, and rural banks, including conventional and Islamic institutions.

Banking has also moved beyond custody. It became a source of credit for industrialisation and retail activity, while the industry itself entered a long consolidation process. From a peak of about 240 banks in the 1990s, the number has continued to fall.

Between 2016 and 2026, digital banking reduced dependence on physical infrastructure, while minimum core-capital rules from the Financial Services Authority encouraged mergers and acquisitions. Commercial banks fell from 116 to 105 by mid-2026. Rural banks dropped from 1,633 in 2016 to 1,345 by mid-2025, with the article attributing most of the decline to closures or liquidations linked to governance and competitiveness problems. Bank branches also fell by 6,819 over the previous five years as transactions moved to mobile applications. The analysis presents these changes as a warning and a point of reflection for zakat management organisations.