Islamic Finance

Indonesian Islamic fintech introduces haj savings feature targeted at millennials

JAKARTA – Indonesian Islamic peer-to-peer lender Ammana Fintek Syariah has introduced a haj financial planner and savings deposit feature on its platform in collaboration with the country’s haj fund management agency (BPKH).

The fintech’s CEO Lutfi Adhiansyah Muftie told Salaam Gateway the long waiting time to go to the haj makes the feature suitable for millennials and younger Indonesians who can slowly build up their haj funds. The feature can only be used by people who have accounts with the fintech, either as fundraisers or lenders. Ammana currently has 1,717 fundraisers and 2,288 lenders on its platform.

It is hopeful its new feature will gain traction as there are limited options currently available for haj deposits. Currently, haj bridging funds and haj deposit savings programmes are provided by Islamic banks and the ones involving fintechs don’t connect directly to the ministry of religious affairs’ haj system or the BPKH. Ammana Finitek Syariah’s does, and it hopes this direct connection will give it an edge over its competitors.

“We differentiate ourselves with competitors by three things: First, while other payment fintechs have deposit amount limitation, only up to 20 million rupiah, we have unlimited deposit amounts, like the Shariah banks, since we are verified by LPS,” said Lutfi, referring to the Indonesia Deposit Insurance Corporation.

“Secondly, we also have a reseller feature that enables our customers to earn additional income by selling MSME products in our ecosystem in addition to their existing salary if they earn a fixed income. They can set some of their additional income to be settled as haj deposit savings to accelerate their savings.

“And thirdly, they can speed up their deposit savings by participating in the projects (that are raising funds on the platform) so they can earn additional returns on investment to be allocated into haj savings,” said Lutfi.

In Indonesia, the full cost  of a pilgrimage under the government-subsidised scheme is around $2,500. A prospective pilgrim saves in an approved programme until their money reaches 25 million rupiah (around $1,700) to secure allocation for a haj place. They pay the rest of the full cost a month before departure. The waiting time varies between 11 years and 39 years across 33 provinces, with the average duration being 20 years.

Ammana Fintek Syariah and BPKH hope the new feature will attract young Indonesians who may not yet have a regular income, such as university students.

The platform’s reseller feature, according to Lutfi, also offers opportunities and alternatives for BPKH that typically invests haj deposit funds in Shariah-compliant instruments such as gold and sukuk, given the current volatile market conditions amid COVID-19.

“Our reseller program offers big returns on investments (ROI). Biller financing (telco phone credit agent) for instance, there are 500 transactions each hour and 25% profit margins for each transaction on average. They sell 10,000 rupiah phone credit for 12,500 rupiah price tag. This kind of returns could only happen in technology-based investments,” said Lutfi.

“We have seen 5% profit margins a day for a project and you can imagine if the (haj) fund invested for 30 days,” he added.

Lutfi is optimistic the new feature will gain traction among younger Indonesians. When it was announced on May 21, it attracted attention after it was posted on IG Live by local celebrity and Instagram influencer Teuku Whisnu. His story was viewed by more than 500 people that converted into 50 active users for the feature, according to Lutfi.

He considers the 10% conversion rate good considering it was a soft launch event and three days before Eid al Fitr.

Amana Fintek Syariah is aiming for 1,000 users by the end of 2020.

“I was inspired to launch this feature because of my own haj experience,” said Lutfi, who is actively seeking to get more young Indonesians to start saving for the haj.

He went to the haj in 2019 when he was 32-years-old and saw that most of his fellow pilgrims were above 50, he said.

Ammana Fintek Syariah was established in July 2017 and secured a licence from the Financial Services Authority (OJK) last year. In 2019, it disbursed 17.6 billion rupiah ($1.29 million) in financing.

(Reporting by Yosi Winosa; Editing by Emmy Abdul Alim

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