The Future of Sharia-Based Employment Insurance for Indonesia’s Employment Insurance Agency (BPJS Ketenagakerjaan): Learning from Malaysia

Abstract

The growing Islamic economy worldwide has inspired the launch of “Indonesia’s Islamic Economic Masterplan 2019-2024” in May 2019. The blueprint aims to establish a sustainable domestic Islamic market and make Indonesia the key player in the global Islamic economy and finance hub by developing several sectors such as Islamic banking, Islamic capital market, social security, and Islamic social sectors. Data from Indonesia’s Financial Authority shows a huge gap between conventional and Islamic insurance regarding their contribution to Indonesia’s GDP in the third quarter of 2018. The former contributed 31,7%, while the latter only had 1,13%. It seems that Indonesia, home to the world’s largest Muslim population, is left behind among other Muslim majority countries to create an Islamic economic market. In contrast, Malaysia with fewer Muslim inhabitants has succeeded in building a feasible sharia economic market and Islamic insurance in its social security institution called the Employees’ Provident Fund (EPF). This study uses a comparative study to observe phenomena and analyze differences and similarities to be interpreted or evaluated, and comparisons will be made between Indonesia and Malaysia as units of analysis. Our findings indicate that the probability of developing Islamic insurance in social security institutions not only depends on the precise scheme that BPJS Ketenagakerjaan will introduce as the provider but also on the willingness of the national government to build a new regulatory framework.