The Indonesian Financial Services Authority (OJK) has issued a new circular letter, Number 6/SEOJK.03/2023* which took effect on 21 February 2023, allowing conventional commercial banks to convert to Sharia commercial banks. This move aims to cater to the needs of Indonesia’s Muslim community and promote financial inclusion. Under this regulation, conventional banks can establish a Sharia supervisory board and a Sharia business unit to meet the requirements for conversion.

This new regulation provides clarity and guidance for conventional banks looking to make the switch, ensuring that Sharia commercial banks operate in accordance with Sharia principles.

The conversion of conventional banks to Sharia banks is expected to promote healthy competition and innovation in the banking industry. This is likely to lead to the growth of the Sharia banking sector in Indonesia, the world’s largest Muslim-majority country.

*Financial Services Authority Circular Letter Number 6/SEOJK.03/2023 of 2023 concerning Changes in Business Activities of Conventional Commercial Banks to Become Sharia Commercial Banks.