It has been reported that Indonesia could utilize the potential of Islamic finance to fulfil its ambitious infrastructure plans, Standard & Poor's said in a report.

The poor state of infrastructure is hindering the growth of Southeast Asia's largest economy, the report said, while noting that the government is planning to spend more than $200 billion through 2014 to upgrade and expand infrastructure.

It also noted that most infrastructure projects are backed by the private sector while the government is considering various financing alternatives to fund the rest.

"We believe Indonesia can emulate Malaysia's success thus far in utilizing Islamic finance for infrastructure development. This is due to Indonesia's large infrastructure development needs, the government's willingness to attract private capital to fund these investments, and the rising demand for investable assets of a growing domestic Islamic finance market," said S&P credit analyst Allan Redimerio.

Islamic banking hopes small medium enterprises (SME) will grow in Indonesia. National economic condition still depends on SME, Widjanarko says. "Many entrepreneurs emerge. The segment offers a big opportunity for Islamic banking," he said.

In the mean time, Islamic banking is still optimistic about the outlook in 2012, although the global economic condition still hampers. "We are optimistic to reach the development in 2012 despite the unstable international economy," he said.

The Director of Bank Syariah Mandiri (BSM), Sugiharto, agrees. He said, investment grade will influence Indonesian economy. "With the support from Indonesian economy and good investment, we believe that business performance of Islamic bank will increase," Sugiharto said.

However, the improving grade will not impact Islamic banking directly to the business capacity in Indonesia is still small, the chairman of Indonesian Islamic Bank Association (Asbisindo), A Riawan Amin, says. "Recently, the infrastructure financing and capital flow do not involve Islamic banking yet," he said.

To boost Islamic banking, Amin said, the government should have given stimulus. He also suggests, infrastructure financing can be done by syndication of some Islamic banks. "The political will of the government is very important," he added.