Rooting neoliberalism into Indonesian Islamic financial institutions through international financial reporting standardisation

Purpose This paper aims to explore how neoliberal ideology is rooted in Indonesian infrastructural powers through the process of international financial reporting standardisation and the forces that divert Islamic Financial Institutions (IFIs) in Indonesia from fulfilling their religious and socio-economic objectives of transparency, justice and accountability, to their stakeholders. Design/methodology/approach This paper, taking a critical perspective, interviewed key actors involved in standard setting in Indonesia to gain insights on their perceptions and experience on the opportunities and challenges from the decision to adopt International Financial Reporting Standards (IFRS) and the impact on sharīʿah standard setting for IFIs in the country. The analysis is informed by the logic of neoliberalism in supporting the IFRS project and suppressing any form of local resistance. Findings The neoliberalism agenda to capture the potential rise of an alternative competing local standards for IFIs was successful through external cohesive powers aided by political and professional elites in ensuring organisations in the country mimic their capitalist counterparts. Research limitations/implications This paper only focused on the views of those involved in the financial reporting standardisation process but not of stakeholders who are not involved in the project as well as actual stakeholders of Indonesian IFIs such as depositors and the public at large. Practical implications Those involved in IFIs need to find an innovative mechanism on financial reporting that can consistently uphold Islamic principles amidst its coexistence within the dominant conventional financial reporting standards. Originality/value This paper enriches the literature on IFRS adoption using the political economy framework of neoliberalism to understand from those involved on the driving forces behind the decisions to adopt and their own perceptions on the consequences of adoption for stakeholders in the Indonesian Islamic finance market.