EN.MUHAMMADIYAH.OR.ID, JAKARTA – Achieving Indonesia’s clean energy transition and its 2060 net-zero emissions target, innovative and sustainable mechanisms is required. One promising alternative is the use of Islamic financial instruments. Waqf (endowments), for instance, could be utilized to support the development of community-based Solar Power Plants.
The issue surfaced during a public discussion titled “The Potential of Islamic Finance for Community-Based Solar Power Plants.” The event was organized by Muslims for Shared Action on Climate Impact (MOSAIC) in collaboration with Katadata, with support from Lazismu. Took place at the National Library of Republic Indonesia on Wednesday (24/6), the event brought together stakeholders to explore how Islamic economic instruments can help finance renewable energy initiatives.
Islamic Finance as an Alternative Funding Model
MOSAIC Program Director Aldy Permana emphasized that expanding renewable energy is becoming increasingly urgent. Not only to address climate change, renewable energy expansion is necessary to ensure equitable access to energy for communities. He argued that this challenge requires financing models capable of reaching local communities while ensuring long-term sustainability.
Aldy presented four financing schemes for community-based solar power plants projects. Among them, he highlighted Cash Waqf Linked Sukuk (CWLS) as one of the most promising options. According to him, the instrument can reduce both financing costs and investment risks for beneficiary communities.
He also underscored the importance of blended financing, combining grants with soft loans. This model is able to keep electricity affordable while maintaining the long-term viability of renewable energy projects.
“Communities need to strengthen their capacity to manage programs under these combined financing schemes. There is no universally good or bad option. It is rather about which financing model best fits the needs of a particular community empowerment program,” Aldy explained.
Lazismu Highlights Waqf’s Long-Term Potential
Responding to the presentation, Ahmad Imam Mujadid Rais, Chairman of the Central Board of Lazismu, welcomed MOSAIC’s initiative to connect Islamic finance with community-based clean energy development.
According to Rais, the approach has significant potential, particularly when supported by strong collaboration among philanthropic institutions, local communities, and other stakeholders.
“If managed collaboratively, this approach is highly feasible from a philanthropic perspective. We have previously implemented a similar initiative with Kopernik in South Central Timor. Research like this opens exciting opportunities for further collaboration,” he said.
Rais also described Cash Waqf Linked Sukuk (CWLS) as one of the most realistic financial instruments for supporting sustainable social projects. Unlike zakat and infaq, which are intended for immediate distribution to beneficiaries, waqf generates long-term benefits through productive asset management.
He added that implementing such a financing model within Muhammadiyah should be directly connected to community institutions such as schools, mosques, and social service organizations to maximize its tangible impact.
Unlocking Indonesia’s Vast Waqf Potential
Rais noted that Indonesia possesses enormous waqf potential. According to data from the Indonesian Waqf Board, the country’s waqf potential is estimated at nearly Rp180 trillion. However, only several hundred billion rupiah have been mobilized through the CWLS scheme in recent years.
Despite this substantial gap between potential and actual collection, Rais remains optimistic. He believes the key to expanding Islamic social finance lies in developing projects with measurable social impact that can attract broader public participation.
He stressed that programs funded through Islamic charitable resources must be built upon sound governance principles to maintain public trust.
“Public literacy and understanding must continue to improve. At the same time, accountability and transparency in managing these funds should remain our highest priorities,” Rais emphasized.
The discussion demonstrated that Islamic financial instruments have significant potential to contribute to Indonesia’s clean energy transition. Through collaboration among philanthropic organizations, community groups, and other stakeholders, Islamic finance can become an innovative solution for expanding sustainable access to renewable energy while empowering local communities.
With stronger financial governance and greater public literacy, Indonesia’s vast Islamic social finance potential could become a major driving force behind inclusive and sustainable renewable energy development. (Bhisma)
