Faith In Finance: Indonesia's Innovative Path To Sustainable Development
These efforts have been supported by development partners, including the United Nations.
Putut Hari Satyaka, is the Deputy Minister for Development Financing and Investment at Indonesia's Ministry of National Development Planning (Bappenas). He spoke to UN News ahead of a key UN conference on financing for development which begins in Sevilla on 30 June.
UN News: How much money is needed in Indonesia to achieve the SDGs and what is your estimated funding gap?
Putut Hari Satyaka: The existence of an SDG financing gap remains a significant challenge, especially to developing countries. Indonesia is no exception. The financing gap to fully achieve all 17 goals and their targets remains significant. With an estimated $4.2 trillion needed for Indonesia to achieve the SDGs, there is a $1.7 trillion financing gap that is yet to be resolved.
UN News: How can that gap be closed?
Putut Hari Satyaka: We need an integrated and transformative approach, going beyond 'business as usual'. For us, this means two things.
Firstly, we must enhance the use of public finances to be more efficient, resilient and transparent. This includes improving budgetary alignment with SDG targets, strengthening expenditure efficiency, and ensuring that resources are effectively prioritized and utilized for sectors generating spill-over transformative effects to sustainable development.
Secondly, we must be creative and innovative – meaning that we need to scale up the existing innovative financing methods and explore new ones. Some of the most prominent instruments and approaches are blended finance, thematic bonds and faith-based financing.
Indonesia has been making great progress in this regard. We have created an ecosystem of a wide range of innovative instruments, attracting a diverse range of stakeholders and entities, supporting necessary regulations, and developing the enabling environment to nurture the market.
UN News: What is faith-based financing and what has been Indonesia's experience so far?
Putut Hari Satyaka: Faith-based financing, especially within the Indonesian context, refers to financial practices grounded in religious principles, most notably, in the principles of Sharia law in Islam.
As Indonesia has 241.5 million Muslims, 85 per cent of the population, and faith-based social financing like zakat and waqf have been a long-standing practice, deeply rooted in our society.
What is new is the allocation of these instruments towards the SDGs. Indonesia has made strong progress in advancing Sharia finance as part of its inclusive growth agenda.
Sharia financing is now growing by 14 per cent a year, outpacing conventional finance. We are also championing scaling-up, green sukuk, which is a Sharia-compliant bond specifically issued to finance environmentally friendly projects.
This reflects Indonesia's strong commitment to building a competitive financial ecosystem for faith-based instruments, and we will continue to strengthen collaboration, drive innovation, and ensure that faith-based financing plays a central role in our economic development.
UN News: Are you able to raise new funding through these faith-based instruments? Critics sometimes say this is just another way to reach the same funds you could get otherwise.
Putut Hari Satyaka: Yes, we are. With the world's largest Muslim population, there is a massive potential in channeling faith-based financing towards the SDGs.
In 2018, Indonesia issued the world's first sovereign green sukuk, raising $1.25 billion to fund renewable energy and climate adaptation projects.
Between 2019 and 2023, the government raised approximately $1.4 billion through domestic retail green sukuk, engaging individual investors in climate financing. This demonstrates the strong potential of green sukuk, both domestically and internationally.
We also see great potential in Islamic Social Financing. Indonesia's zakat potential is estimated at between $18 billion and $25 billion per year. The actual collection remains below 5 per cent of that potential, so there is clearly a vast opportunity to strengthen social finance.
UN News: What lessons have you learned over the years and what advice do you have for national or subnational governments interested in faith-based financing?
Putut Hari Satyaka: Although we have made great progress in faith-based financing, we have much room for enhancement, improvement and even exploration. Here are a few potential lessons:
First and foremost, awareness raising is key. As many view faith-based financing also as community-based financing, society's participation in these instruments starts with their understanding of their importance and the way the money will be used.
Secondly, we see that the close coordination and concerted actions of relevant stakeholders are crucial. Overlaps are unavoidable without proper coordination. It is coordination – including with subnational governments, where we see room for improvement in order to scale-up faith-based financing in Indonesia.
Finally, building trust takes time. Faith-based financing relies heavily on public confidence, both in the institutions managing the funds and in how the funds are used.
Just like many other financing instruments, we have learned that transparency, accountability and consistent communication are essential to earn and maintain that trust.
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It is important to ensure civil society leadership and engagement in these processes like FfD4. We are also asking for eliminating all economic policy conditionalities that are attached to aid because these conditionalities promote austerity, privatisation and deregulation. We do not want conditionality when it comes to loans. There should be no loans in the first place (for development assistance), rather these should be grants," said Sai. "We must reform financial architecture so that it can guarantee long-term flexible, inclusive, and equitable financing for development. We also need to restructure the global economic governance because currently it is very Global North heavy. We need to have Global South parity. We need to include democratisation of the decision-making processes across the international financial institutions and the multilateral development banks," she added. "We are not going to stop until we deliver on gender equality. We will continue to do our work to demand for a right-based, environmentally-just, decolonial, intersectional, sustainable, and person-centred economic model. We need such an economic model in current times where care, reparations, redistribution and accountability remain central," rightly said Sai Jyothirmai Racherla of ARROW. Shobha Shukla – CNS (Citizen News Service) (Shobha Shukla is the award-winning founding Managing Editor and Executive Director of CNS (Citizen News Service) and is a feminist, health and development justice advocate. She is a former senior Physics faculty of prestigious Loreto Convent College and current Coordinator of Asia Pacific Regional Media Alliance for Health and Development (APCAT Media) and Chairperson of Global AMR Media Alliance (GAMA received AMR One Health Emerging Leaders and Outstanding Talents Award 2024). She also coordinates SHE & Rights initiative (Sexual health with equity & rights). Follow her on Twitter @shobha1shukla or read her writings here
