MICROCAPITAL BRIEF: OJK Licenses 10 Islamic Microfinance Institutions in Indonesia

Otoritas Jasa Keuangan (OJK), the Financial Services Authority of Indonesia, recently granted operating licenses to 10 Islamic microfinance institutions (MFIs) in the country. The MFIs are funded by unspecified donors wishing to encourage community development tools that observe Islamic law. For example, Islamic lending uses mechanisms such as the sharing of profit and loss in lieu of conventional interest payments. Many of the MFIs are affiliated with Islamic boarding schools, known as pesantren, as part of a strategy to increase financial inclusion in rural areas via “role models such as pesantren caregivers.”

OJK, which is based in Jakarta, seeks to support fair financial practices and ensure a stable financial system.

By Ryan Gauthier, Research Associate