UNDERSTANDING THE HISTORICAL EMERGENCE OF ISLAMIC FINANCE IN INDONESIA: AN INSTITUTIONAL AND SOCIAL MOVEMENT PERSPETIVE

Despite the rapid growth of Islamic finance globally, studies have not yet attempted to rationalise how it emerged and developed. Therefore, drawing on a dialogue between institutional and social movement theories, this study aims to understand the process that led to the emergence and development of Islamic finance in Indonesia. Based on primary data collected from 32 Indonesian Islamic finance activists and other relevant sources, the study suggests that the emergence and development of the Islamic financial institution in Indonesia was an outcome of the changing approach of the Islamic economic movement in realising its goals, shifting from an experimental outsider initiative to an internally generated one that attempts to effect change from within. Furthermore, the dynamic development of Islamic finance in Indonesia can be framed and categorised into several periods: an introduction period (1983–1992), a recognition period (1993–2004), a crystallisation period (2005–2014), and a centralisation period (2014–present). These results are expected to enrich the literature on the emergence of Islamic finance and provide insights to develop and ‘reform’ the Islamic financial institution to realise its idealism.