Indonesian Public Interest in Islamic Banking Grows but Lags Behind Potential

Public interest in Islamic banking in Indonesia is showing increasingly strong development, but it is not yet fully commensurate with the vast potential of the country’s Muslim population. Islamic banking serves as an alternative financial system that operates on Islamic principles, such as the prohibition of riba (usury), transactional fairness, contract transparency, and risk-sharing between the bank and the customer. Public interest in Islamic banks can be observed through three main aspects: the level of public understanding, the use of Islamic banking products, and the growth of the Islamic banking industry itself.

According to the 2024 National Survey of Financial Literacy and Inclusion (SNLIK), the financial literacy index for the Indonesian population reached 65.43 percent, while the financial inclusion index reached 75.02 percent. However, for the Islamic finance sector, the literacy index only reached 39.11 percent and the inclusion index was just 12.88 percent. This data indicates that while Indonesians are increasingly familiar with finance in general, understanding and usage of Islamic financial services remain far lower compared to conventional finance.

Despite the low level of Islamic financial inclusion, the development of Islamic banking continues to show a positive trend. The Financial Services Authority (OJK) recorded that as of September 2025, Islamic banking assets reached Rp1,006.18 trillion, with a market share of 7.49 percent of national banking. During the same period, Islamic banking financing reached Rp675.86 trillion and Third-Party Funds (DPK) reached Rp794.31 trillion. These figures demonstrate that public trust in depositing funds and using Islamic financing continues to grow.

This growth continued into 2026. The OJK stated that by March 2026, Islamic banking assets grew by 10.49 percent year-on-year to Rp1,061.61 trillion. Financing also grew to Rp716.40 trillion, while DPK reached Rp811.76 trillion. The growth in DPK is a significant indicator, as it shows increasing public confidence in Islamic banks as a place to save, invest, and conduct financial transactions.

The main factor influencing public interest in Islamic banking is Islamic financial literacy. People who understand the differences between Islamic and conventional banks tend to be more interested in using Islamic products. Many are actually attracted to Islamic banks for religious reasons but do not understand contracts such as wadiah, mudharabah, murabahah, musyarakah, ijarah, salam, and istishna. Consequently, some people still perceive Islamic banks as being the same as conventional banks, differing only in terminology. This is why education is a key factor in increasing public interest.

Beyond literacy, religiosity is also an important factor. People who are conscious of avoiding riba are generally more open to Islamic banking. Several studies show that Islamic financial literacy and religiosity positively influence the interest in becoming a customer or saving at an Islamic bank. However, religious factors alone are insufficient. The public also considers service quality, ease of transactions, administrative fees, office locations, application security, and speed of service.

Digitalisation also plays a significant role in increasing public interest in Islamic banking. Today, the public evaluates banks not only by their branch offices but also by mobile banking, internet banking, QRIS, fast transfers, online account opening, and payment convenience. The 2024 Annual Report of Bank Syariah Indonesia (BSI) noted that registered users of the BYOND by BSI and BSI Mobile applications reached 7.99 million, with 546 million transactions. This data shows that public interest in Islamic services is increasingly shifting through digital channels.

Nevertheless, interest in Islamic banking still faces several challenges. First, public literacy regarding Islamic contracts and products remains limited. Second, public perception of Islamic banks is not yet fully robust, as some still consider Islamic products to be more expensive or no different from conventional products. Third, the reach of Islamic banking services is not yet evenly distributed across all regions. Fourth, product innovation must be continuously developed to compete with conventional services and fintech.

Based on the data and these factors, it can be concluded that Indonesian public interest in Islamic banking is growing but still has significant room for improvement. The growth in assets, financing, DPK, and digital services indicates increasing public trust. However, the low level of Islamic financial inclusion proves that Indonesia’s vast potential has not yet been fully tapped. Therefore, Islamic banks, the OJK, the government, universities, religious scholars, and the public must work together to strengthen education, expand service access, improve digital banking quality, and prove that Islamic banking is not only compliant with Islamic principles but also professional, safe, easy, and competitive.