Escaping the Middle Income Trap
The recent change in leadership at the Ministry of Finance is not merely a routine bureaucratic rotation, but a crucial moment determining the economic direction of Indonesia under the new administration. Amidst this transition period, the new fiscal navigator is immediately faced with an illusion that often seduces many developing nations: an excessive sense of security when observing economic growth figures.
World Bank data notes that in 2025, the Indonesian economy was able to grow by 5.1 per cent, with Gross Domestic Product (GDP) reaching 1.45 trillion USD and per capita income at 5,059.6 USD. These figures are indeed worthy of appreciation and provide technocratic comfort. However, in the science of development economics, comfort is the primary enemy of progress.
For the new Minister of Finance, the greatest challenge ahead is no longer just keeping the old engine running, but how to replace that engine so that the vehicle named Indonesia can accelerate upwards to become a high-income nation.
Before our eyes, the chasm known as the middle income trap lies wide open. World economic history records that many countries have successfully escaped extreme poverty, stepped forward as middle-income nations, and then suddenly ran out of breath. Why? Because they failed to undergo transformation. They continued to rely on old recipes: massive domestic consumption, cheap labour, the extraction of raw commodities, and low-cost oriented investment.
Indonesia currently stands at this critical crossroads. We need a new growth engine. The question is, where will that engine come from? The answer lies in a giant that has been stirring for some time but is often misunderstood: the Sharia Economy and Finance (Eksyar).
This is not merely an empty claim. Referring to 2025 data from the Financial Services Authority (OJK), our total Sharia financial assets have breached the Rp3,131.02 trillion mark, growing convincingly by 8.56 per cent year-on-year. However, interestingly, the market share only reached 11.47 per cent as of June 2025. This means the space to make it a primary lever for the national economy remains very vast.
New Paradigm: Sharia Economy is Not Merely a Religious Agenda
The greatest mistake some people make in viewing the Sharia economy is placing it in a corner as an exclusive sector—as if it were merely a matter of religious worship. From an institutional perspective, the Sharia economy is essentially a policy framework that encourages financing based on the real sector, stimulates entrepreneurship through risk-sharing, ensures equitable ownership, and prevents economic exploitation.
Are these values not identical to the prerequisites for a country to escape the middle income trap? Countries that successfully move up the ladder are always driven by high-value-added industries, a resilient middle class, financing systems pro-productive sectors, and high-quality human resources.
Policy Orchestration and the Urgency of BPES
The Sharia economy has great potential to inject fresh blood into the halal industry and boost exports. However, this engine worth more than three thousand trillion rupiah requires a skilled conductor. If Sharia economic matters are merely handed over in a fragmented manner to sectoral institutions, the impact will be very marginal.
This is where the urgency lies in accelerating the transformation of the National Committee for Sharia Economic and Finance (KNEKS) into the Sharia Economic Development Agency (BPES) so that it can take on the role of the main orchestrator. Through the presence of BPES, the orchestration of Sharia economic policy will have a much firmer execution footing. In this ecosystem, the Ministry of Finance continues to hold a strategic position as the provider of fiscal levers, aligning the State Budget (APBN) with the designs directed by BPES.
Transforming KNEKS into BPES is an urgent task. This step will not only plug the gap of policy fragmentation but also serve as a golden momentum for President Prabowo to fulfil his political promise to advance a people-based economy based on Sharia principles.
Five Structural Strategies to Drive the Sharia Economy
To make the Sharia economy a lever to escape the middle income trap, there are five structural strategies that must be the main focus:
- Changing Position from a Consumer to a Global Halal Producer
We have extraordinary capital. The State of the Global Islamic Economy (SGIE) 2024/2025 report ranks Indonesia 3rd in the world in the Global Islamic Economy Indicator. On the other hand, we face a paradox. As the country with the largest Muslim population, we often remain an “enticing market” rather than a “producing factory”. Halal certification alone is not enough. We need a Halal Industrial Ecosystem. The Ministry of Finance must design fiscal incentives that connect farmers, processing MSMEs, Sharia financing, to global export routes.
- Sharia Financing as a Venture Builder for MSMEs
Our MSMEs are often trapped in the informal sector with low productivity. Conventional banking is often reluctant to approach them due to the cost of funds and collateral regulations. This is where mudharabah and musyarakah instruments must take centre stage. Sharia banks must evolve into venture builders—partners who not only inject capital but also share risks and accompany MSMEs into the supply chains of large industries.
- Transforming Islamic Social Finance into Economic Infrastructure
The narrative of the use of philanthropic funds (zakat, alms, charity, waqf) must be radically changed from “charitable aid” to “productive social investment”. Zakat funds should be prioritised for working capital and high-tech training. The priority allocation of waqf should be shifted towards high-economic-value productive assets, such as hospitals, vocational schools, and innovation centres.