Indonesia’s Steady Growth and the Rise of Islamic Finance: BRIS at the Forefront

Consistent and successful growth

• Indonesia has delivered steady and resilient growth over the last two decades, averaging around 5% annually. After the pandemic contraction in 2020, GDP growth rebounded strongly and stabilised near pre-COVID levels. 
• To support credit formation and to lower funding costs, the policy rate was cut to 4.75% in September. It has ample liquidity demonstrated by M2 +6% y/y and deposits +7% y/y.
• This consistency is derived from a combination of strong domestic demand (with a healthy consumer confidence), judicious fiscal policy, and the range of diversification across economic activities, in both industries and services (Manufacturing PMI is still in expansion).

Transition into high-income growth

• Through initiatives such as “Vision Indonesia 2045” and the “8-5-4 Program”, the government aims to reach a high-income status, through institutional reform to reduce poverty and facilitate trade and productivity. This aims to accelerate measures centred on jobs and household purchasing power, providing near-term fiscal support while reforms progress.
• Planned tax reforms and incentives for foreign investment in green energy and technology manufacturing further support this transition. While the gap in education inequality remains, the government is aligning industrial, fiscal, and labour policies to sustain 5-6% long-term growth.

Potential within Shariah banking / what’s affecting it

• As Indonesia holds the world’s largest Muslim population it has become the fastest-growing Shariah finance hub in ASEAN. Islamic banking assets now make up about 9% of total banking assets, a share that continues to rise with strong policy backing. 
• The government has elevated Islamic finance through OJK’s Shariah Banking and Strengthening Roadmap (2023–2027) alongside an integration of Islamic products into state-backed banks. 
• With Indonesia having the world’s largest Hajj quota, a unique development has been Hajj deposits, representing a stable and policy-linked funding source. This now gives Islamic banks a low-cost scheme to support lending growth.

Why Bank Syariah Indonesia stands out

• Bank Syariah Indonesia (BRIS), formed through the 2021 merger of BRI Syariah, BNI Syariah, and Mandiri Syariah, is now the largest Islamic bank in the country. The merger created scale advantages, digital integration, and stronger capitalisation, helping BRIS record industry-leading ROE and dividend growth over the past two years.

• Performance (1H25):
  • Net profit Rp 3.74tn (+~10% y/y); 
  • NIM ~5.7%; 
  • ROE ~16-17%;
  • Financing +~14% y/y led by payroll-based lending and gold financing (~+90% y/y);
  • Deposits +~9% y/y, driven by record Hajj savings in mid-2025.

BRIS leads Indonesia’s Hajj deposit collection, leveraging a large retail customer base and strong government support for Islamic finance. Its sustainable model, therefore underpins competitive margins and resilient loan growth relative to the broader banking benchmark.

• Asset quality:
  • NPF ~1.9%;
  • coverage >190%;
  • cost of credit <1% (showing a disciplined risk management).
• Under new CEO Anggoro Eko Cahyo (with his deep consumer-banking background), strategy centres on retail scale, productivity, and low-cost funding. Product bundling between Gold and Hajj savings aims to lift product holding ratios, strengthen asset quality, and sustain high ROE targets, thereby marking it as a leading innovator among Islamic banks.

Cordoba View

• Indonesia’s growth story remains one of consistency and structural reform. The drive toward high-income status, coupled with rapid digitalisation keeps the medium-term outlook promising. Within this, Islamic banking, anchored by BRIS, offers a compelling structural play backed by demographics, policy, and stable funding. 
• From an investment view, we remain selectively positive on Indonesia’s Shariah banking sector, particularly BRIS: investable for those seeking exposure to domestic consumption and long-term policy-driven growth.

With sincere appreciation to co-author Daaib Chowdhury for his insightful collaboration and contributions that greatly enriched this analysis.

Sources: UN, Bloomberg, IMF, World Bank, Ciptadana Sekuritas Asia.