Explore Shariah Compliant Investments And Halal Stocks In Indonesia
Indonesia, the world’s largest Muslim population is seeing a huge opportunity in Shariah-compliant stocks. If you are living in Indonesia or you are interested in Indonesian stocks and want to find out which Stocks are halal in Indonesia to make your investments as per Islamic principles, then this blog is for you.
To know comprehensive facts about Shariah-compliant stocks and Halal Equities in Indonesia, read this blog till the end. In this 5 minutes of reading, we will help you explore interesting facts about Shariah-compliant equities in Indonesia that you might have missed!
Let’s get started
Islamic capital market in Indonesia came into existence long back but it did not advance itself as desired and one of the key reasons is said that the government did not fully support and promote it adequately. Despite being the world’s largest Muslim population, the Islamic capital market in the country did not produce required innovative Shariah-compliant products to compete with the conventional capital market unlike other countries with smaller Muslim populations did in a very short period of time. Its neighboring country Malaysia, has become a leader in the Islamic finance industry across the world by introducing alternative and innovative ways of doing Shariah-compliant investments that have benefited their nationals a lot, be it saving taxes or be it mobilizing and increasing their wealth.
According to Bloomberg, as the growth ratio of Shariah based products in Malaysia is strong, about 50% of banking assets by 2030 are expected to be Islamic.
Would you like to know more about Halal Investments in Malaysia? Read this blog on Shariah Compliant stocks in Malaysia
Slowly, Indonesia opened its eyes and realized the importance of Halal Investments, Shariah-compliant equities and started further strengthening the advancement of Islamic capital markets. As a result, in 2015 OJK – the Financial Service Authority in Indonesia started to build awareness, promotion and also designed a comprehensive road map aiming at guiding the development of Islamic capital market by enabling it to take steps to strengthen regulation, develop new Shariah-compliant products and put in place the best human talent to achieve this.
Why Invest In Shariah Compliant Stocks In Indonesia?
The Islamic market in Indonesia is part of the financial industry that is mainly regulated by the financial services authority or the OJK, particularly the Directorate of Islamic Capital Markets. The first Islamic mutual fund was issued in the year 1997 and that has marked the beginning of Shariah compliant financial market in the country.
Shariah Compliant stocks in Indonesia are increasing in demand and on a continuous rise due to some strong reasons.
1- Indonesia has the largest Muslim population in the world which fuels their need to make their investments in Halal Stocks and Shariah compliant equities.
2- Shariah compliant stocks are slightly less risky as Shariah compliance screening methodologies keep out high interest-bearing and highly leveraged companies. This feature attracts Non-Muslims also to invest in Shariah Compliant stocks.
3- In Indonesia, the situation since the government supports and promotes Shariah Compliant products, the overall investment climate in Shariah Compliant stocks is considered favorable.
4- Shariah Compliant products are regulated in Indonesia.
List Of Top 5 Companies In Indonesia By Market Capitalization And Their Shariah Compliance Status
| Company | Market Cap (IDR) | Shariah Compliance | Compliance Risk Factor |
| Barito Renewables Energy PT Tbk | 1508.44T | Not Compliant | Not Likely to Turn Compliant |
| Bank Central Asia Tbk PT | 1281.44T | Not Compliant | Not Likely to Turn Compliant |
| Bank Rakyat Indonesia (Persero) Tbk PT | 795.23T | Not Compliant | Not Likely to Turn Compliant |
| Chandra Asri Pacific PT Tbk | 774.28T | Compliant | Not Likely to Turn Not Compliant |
| Amman Mineral Internasional Tbk PT | 743.31T | Compliant | Not Likely to Turn Not Compliant |
Indonesia Stock Exchange
The Indonesia stock exchange or the Bursa Efek Indonesia is based in Jakarta and was previously known as the JSX or the Jakarta Stock Exchange. As of September, 2024, there are a total of 346 listed companies on the exchange and 11 major sectors.
An interesting fact about the Indonesian stock exchange you need to know is that the IDX also has an Islamic stock exchange that is known as IDX Islamic, which lists Shariah Screened stocks.
Shariah Compliant Stocks in Indonesia – Sector Wise
| Sector | Compliant | Non-Compliant | Total |
| Utilities | 1 | 4 | 5 |
| Financial | 5 | 45 | 50 |
| Basic Materials | 14 | 15 | 29 |
| Energy | 24 | 10 | 34 |
| Services | 25 | 45 | 70 |
| Consumer Cyclical | 8 | 6 | 14 |
| Consumer/Non-Cyclical | 23 | 23 | 46 |
| Healthcare | 14 | 2 | 16 |
| Transportation | 9 | 12 | 21 |
| Capital Goods | 24 | 28 | 52 |
| Technology | 7 | 2 | 9 |
| Grand Total | 154 | 192 | 346 |
How Many Halal (Shariah Compliant) Stocks Are There in Indonesia Market?
Islamic Capital Market in Indonesia
With the availability of Islamic indices, the growth of the Islamic capital market is seeing a rise for years now. In Indonesia, Islamic mutual fund’s growth is about 40% each year.
IDX Islamic offers only Shariah compliant products as numerated below:
1. Shariah Compliant Stocks
Shariah compliant stocks in Indonesia are of two types. Some are listed on IDX as Halal stocks that are screened as per the Shariah principles regulated by OJK and the others are private shares and are not listed on IDX. Both are considered as Shariah Compliant stocks and incorporated in the list of Islamic stocks issued by OJK in May and November each year.
For detailed Shariah screening criteria of OJK, read here
2. Sukuk
There are two types of SUKUKs in Indonesia:
i- Government Sukuk issued by the government
ii- Corporate Sukuk issued by the private companies as well as by state-owned companies
3. Islamic Mutual Funds
Indonesian funds following the Shariah principles according to OJK regulation no.19/POJK.14/2015 are allowed to be traded as an Islamic mutual fund
4. Islamic Exchange Traded Fund (ETF)
ETF is an investment instrument that needs to follow the same procedure to be Islamic as Islamic Mutual funds as per the guidance of OJK regulation no. 19/POJK.14/2015
5. Islamic Asset-Backed Security (ABS)
There are two types of ABS issued as per the guideline of OJK regulation No. 20/POJK.04/2015
i- Islamic ABS issued in the form of collective investment contract between Investment Manager and custodian bank.
ii- Islamic ABS in the form of Participation Letter (EBAS-SP)
6. Islamic Real Estate Investment Trust (REIT)
REITs that follow Shariah principles qualify to be listed in the list of Islamic REIT.
The IDX Composite, Jakarta Islamic index and the LQ-45 are some of the primary stock indices of the Indonesian stock exchange.
How It All Started? History And Current Prospects
The rise of the Islamic market in Indonesia has already started with the launch of the ISSI, or the Indonesia Shariah Stocks Index. It is a composite index of Islamic stocks that has all the stocks listed on the Indonesia stock exchange since 2011.
After this, there was the launch of the SOTS or the Shariah Online Trading System. This system facilitated the Islamic investors to carry out stock transactions, based on the teachings of Islam.
Indonesia has the largest Muslim population in the world and therefore, the country has an enormous scope with regards to Shariah compliant financial and capital markets.
The potential for further growth of this Islamic financial market is quite large because the ratio of the market cap to the GDP is still quite low, below 50%!
Indonesia Sharia Stock Index – ISSI and Jakarta Islamic Index 70 (JII 70)
Due to the rise in the popularity and demand for Shariah compliant funds, Indonesia stock exchange recently launched the third Shariah compliant index known as the Jakarta Islamic Index 70 or the JII 70. It has 70 of the most liquid Islamic stocks. The other Islamic index is the Indonesia Shariah stock index which is a composite index of Islamic stocks.
Who Regulates These Stocks?
In Indonesia, the institution that looks after the implementation and application of the Islamic principles is the National Islamic Board of the Indonesian Ulama Council. It issues fatwas that are related to investment activities in the Islamic capital market.
What Would Be The Market Of Shariah Compliant Stocks In Indonesia?
The demand for Shariah compliant stocks has only been on the rise. That is why there was a new index introduced as well. Since the Muslim population is very high in the country, the market for Islamic stocks looks promising. We will discuss it in further details below
About Indonesia
Indonesia is a transcontinental country in South East Asia. It is the largest island country in the world and its capital is Jakarta. It is a sovereign state with presidential and constitutional republic. The country has a mixed economy where both the private and the government sector play an important role.
How Islamicly Will Help You Find Shariah Stocks For Your Market In Indonesia?
Be it any country, any currency or any stock, on Islamicly app you can check out all details instantly! The app gives you all the information about a stock, whether or not it is Shariah compliant, in a matter of a few clicks. So, the app gives you a chance to indulge in only those equity investments that are in accordance with the Shariah Principles. So, wait no more and browse for Shariah compliant stocks in Indonesia now!
