Enhancing Indonesia's Islamic Economy Ecosystem: Innovative Legal and Institutional Strategic Approach

Abstract

The National Committee for Islamic Economy and Finance (KNEKS), Republic of Indonesia, is the Indonesian government’s innovative and strategic breakthrough in legal and institutional policy. Indonesia is officially a non-theocratic state and adopts the civil law system. The government embraces Islamic economy as a new source of Indonesian economic growth and resilience, and its establishment of KNEKS is a catalyst of the development of Indonesian Islamic economy and finance. KNEKS is led directly by the president and vice president. It is designed with an innovative legal structure, the first of its kind, to address the bureaucratic barriers among stakeholders. Prior to the establishment of KNEKS, the government established the National Committee for Islamic Finance (KNKS), which focused only on the Islamic finance sector. KNKS began in 2019 and was transformed to KNEKS in 2020 by the Presidential Regulation Number 28 of 2020. Since the establishment of KNEKS, Indonesia has recorded tremendous progress and is currently considered one of the Global Top Three leading countries in Islamic economy and finance. This study aims to trace the progress of the Indonesian Islamic economy’s performance after KNEKS’s establishment and scrutinise the regulatory challenges to enhance its role and contribution. This study is expected to be a reference in understanding the legal ecosystem of the Islamic economy in Indonesia, as well as in formulating appropriate policies to enhance the ecosystem.