Indonesian interest in Islamic banking grows, but potential remains untapped

Indonesian citizens are showing increasing interest in Islamic banking, yet this enthusiasm has not fully matched the vast potential within the country's Muslim majority. Islamic finance offers an alternative system based on Islamic principles, prohibiting interest (riba), ensuring fair transactions, transparent contracts, and risk-sharing between banks and customers.

This growing interest is reflected in three key areas: public understanding, product usage, and industry growth. A 2024 National Financial Literacy and Inclusion Survey found that while overall financial literacy in Indonesia reached 65.43% and financial inclusion was 75.02%, the figures for Islamic finance were significantly lower, at 39.11% for literacy and 12.88% for inclusion. This indicates a gap between general financial awareness and specific engagement with Islamic financial services.

Despite the low inclusion rates, the Islamic banking sector is on a positive trajectory. As of September 2025, Islamic banking assets reached Rp1,006.18 trillion (approximately $67 billion USD), capturing 7.49% of the national market share. Financing stood at Rp675.86 trillion, and third-party funds (DPK) reached Rp794.31 trillion, demonstrating growing public trust in Islamic banks for savings and financing.

This growth continued into 2026, with assets rising 10.49% year-on-year to Rp1,061.61 trillion by March. Financing grew to Rp716.40 trillion, and DPK reached Rp811.76 trillion. The increase in DPK is a crucial indicator of rising public confidence in Islamic banks as a place for savings, investment, and transactions.

Financial literacy is a primary driver of interest in Islamic banking. Indonesians who understand the differences between Islamic and conventional banks are more likely to use Sharia-compliant products. Many are drawn to Islamic banking for religious reasons but lack understanding of specific contracts like wadiah, mudharabah, or murabahah. This knowledge gap leads some to perceive Islamic banks as merely conventional banks with different terminology. Therefore, education is vital to boost public interest. Religiosity also plays a significant role, with individuals conscious of avoiding riba being more open to Islamic banking.