Indonesia is using Islamic social finance—zakat and waqf—as first-loss risk capital to help micro, small, and medium enterprises build repayment histories and become bankable, addressing the gap between MSMEs’ job-creating role and banks’ reluctance to lend without collateral.

The approach is being embedded through a two-tier national-regional structure and joint guidelines that place Sharia economic targets directly into provincial development plans, with Bank Indonesia’s 3SP program linking producers, financing, and literacy efforts on the ground.

By blending social funds with commercial Islamic finance, Indonesia aims to create a more resilient domestic funding channel, sustained poverty reduction, and a replicable model that enhances its influence in shaping the global Islamic economy.

Put the jobs question to a banker in Jakarta, Lagos or Dhaka and most will point you to small business. That’s hardly surprising: micro, small and medium-sized enterprises (MSMEs) make up more than 90 percent of firms in the developing world, and they hire most of its workers. Now ask the same banker to lend to a shop owner with no land title to pledge, and the enthusiasm tends to fade.

That tension has rarely mattered more. Developing economies are squeezed by geopolitical fragmentation, supply chains that keep breaking and global financial conditions that won’t loosen. The old recipe of borrowing abroad and hoping capital markets stay calm looks increasingly shaky. It hasn’t shielded emerging markets from external shocks, and it hasn’t narrowed the wealth gaps inside them. MSMEs feel this first and hardest.

The 13th Indonesia Sharia Economic Festival (ISEF) 2026 in Jakarta, organised as part of Bank Indonesia’s Islamic economic and financial development agenda, offered one answer. Yet the most telling part of the festival wasn’t the halal products on display. It was the policy machinery behind them. So it’s fair to wonder why a central bank, one that spends........

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