While this seems like a remarkable growth rate to sustain (and it would be set back greatly if the country's recent economic success that has led the country to have its sovereign debt upgraded to investment grade), it might be possible. The Islamic finance industry has become much more institutionalized and there are many more global heavyweights eying the Indonesian market (such as Al Rajhi Bank in Saudi Arabia and Standard Chartered Saadiq Islamic window), in addition to the interest from across the Strait of Malacca.
To get an idea of the required growth rates to hit these targets, I made a few very simplistic calculations, based on the historical growth rates in Islamic banking in Indonesia (36% per year 2005-2010 and 49% last year), as well as expectations for near-double digit growth rates for banking overall in Indonesia (according to a survey conducted by PwC [pdf]). My assumptions used 25% growth 2011-2014 for Islamic banking, slowing to 18% for 2015-2020, with growth rates for banking overall in the country of between 8-10% annually for the entire period of 2011-2020. Here's the evolution of the Islamic banking assets in the country under those (relatively unscientific, though probably lower for the next couple of years than Bank Indonesia's projections) assumptions:
|Year||Low Estimate||High Estimate||Size ($bn)|
While it is a bit presumptuous to project so far into the future on such flimsy evidence (I basically took the historical growth rate and subtracted 10% for the next few years and cut it in half for the out years). However, consider the projected size of Islamic banking assets in 2020 against the size of the entire banking sector today (est. at ~$400 billion, if the 4% number is correct): it would be about 21% (which happens to be the share of Islamic bank assets in Malaysia). That being said, while I don't have confidence in my numbers being at all accurate in predicting the future growth, I think the exercise points out the reasonableness of Bank Indonesia's targets, even if growth slows quite measurably in the next 8 years (and even total bank assets continue to grow rapidly).
One area where growth has been slow, at least in the non-sovereign space, is sukuk issuance. The sovereign sukuk could be boosted by plans from the government to use project-based sukuk to finance at least one of its development and infrastructure projects under its long-term economic development masterplan [pdf].
These articles further confirm my idea that Indonesia will be one of the primary growth areas in Islamic finance, something I mentioned in my newsletter at the beginning of 2012. On a related note, I am starting to put up the back issues of my newsletter on my website. It might take me a while to get them all up, but so far, I've put up the last 3 months of newsletters. It is still better to subscribe, which you can do on the right hand side of the blog, since going forward, there will be about a month lag in the newsletters up on my website.