Opportunities and Challenges of Social Media to the Islamic Banks in Indonesia

Opportunities and Challenges of Social Media to the Islamic Banks in Indonesia

Ahmad Rafiki (Universitas Medan Area, Indonesia)
DOI: 10.4018/978-1-7998-2257-8.ch011
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The Islamic banks in Indonesia have a serious issue of a low market share of 5%. This emerged due to the limited/unvaried product range, low literacy and inclusion level of Islamic finance, unfavorable perception for Islamic banking, and limited distribution networks and outreach. All of these causes could be resolved by using social media, which will bring several opportunities such as transparency and openness, effective marketing channels, stakeholders' relationship, social media content, brand image and reputation, shariah compliance activity, learning and knowledge, and greater personalization. Meanwhile, in using social media, the Islamic banks face few challenges such as network infrastructure, negative comments, information risk management, privacy, and deception. This chapter can be a reference to any institutions, particularly the Islamic banks which associated with digital interfaces and interactions in their daily businesses. Thus expectedly, the Islamic banks could enhance the public trust and establish a good Islamic identity.
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Islamic banks are obligated to conduct their activities in accordance with shariah principles, which strictly forbid any receipts or payments of interest. Other prohibited activities include having or taking usury, gharar (uncertainty) and maysir (gambling). All the guidelines are written clearly in Al-Qur’an and Hadith.

Islamic banking still takes a large portion of 75% on global Islamic finance total asset. Meanwhile, in Indonesia, the largest portion of Islamic finance belongs to the Islamic capital market contributed up to 93% of government sukuk issuance. The total assets of Islamic banks in Indonesia reach US$29.94 billion, which is far behind the total assets of Islamic banks in Malaysia with US$181 billion (GIFR, 2017). Moreover, the Islamic banks in Indonesia have a low market share of 5% which ironically contrasts with the potential as the most Muslim population of 265 million in the world. Among the problem emerged are limited/unvaried product range, low literacy and inclusion level of Islamic finance, unfavorable perception for Islamic banking, lack of talent and qualified employees, limited distribution networks and outreach, and only focus on the retail segment (Bappenas, 2015).

There are initiatives had been started and taken to resolve the above constraints, one of them is through continuous socialization. By then, public awareness is increasing and followed with the creation of public trust among the Islamic banks. These actions are purposely to be done to stimulate the public to use Islamic banks’ financial solutions and promotethe Islamic banking sector in Indonesia.

In promoting products and services, the Islamic banks need to find the best and effective tool to achieve their aim that is to increase its market share. The latest and commonly used is social media. It is a low-cost channel which will enable the Islamic banks to reach a broader audience and then communicate widely their products and services’ offerings. Other uses of this social media are expanded to the recruitment of highly talented employees, and support networks and outreach.

Key Terms in this Chapter

Opportunities: A favorable or advantageous circumstance or combination of circumstances.

Hadith: A collection of traditions containing sayings of the prophet Muhammad which, with accounts of his daily practice (Sunnah), constitute the major source of guidance for Muslims apart from the Al-Qur’an .

Islamic Banks: known as non-interest banking, is a system based on the principles of Islamic or Shariah law and guided by Islamic economics. Islamic banks make a profit through equity participation which requires a borrower to give the bank a share in their profits rather than paying interest.

Transparency: is an element used in science, engineering, business, the humanities and in other social contexts, operating in such a way that it is easy for others to see what actions are performed.

Deception: is an act or statement which misleads, hides the truth, or promotes a belief, concept, or idea that is not true. It is often done for personal gain or advantage.

Challenges: (The situation of being faced with) something that needs great mental or physical effort in order to be done successfully and therefore tests a person’s ability.

Da’wah: an Arabic word which has the literal meaning of “issuing a summons” or “making an invitation”.

Shariah: an Islamic religious law that governs not only religious rituals but also aspects of day-to-day life in Islam. It is literally translated as “the way.”

Al-Qur’an: literally meaning “the recitation” which is the central religious text of Islam, which Muslims believe to be a revelation from God ( Allah ). It is the sacred writings of Islam revealed by God to the Prophet Muhammad during his life at Mecca and Medina.

Privacy: is the ability of an individual or group to seclude themselves, or information about themselves, and thereby express themselves selectively.

Social media: are interactive computer-mediated technologies that facilitate the creation and sharing of information, ideas, career interests and other forms of expression via virtual communities and networks.

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