Language derived from English in Indonesian island (7)
I believe the answer is:
bengali
'language' is the definition.
(I've seen this before)
'english in indonesian island' is the wordplay.
'english' becomes 'eng' (abbreviation).
'in' indicates putting letters inside.
'indonesian island' becomes 'bali' (island of Indonesia).
'eng' inserted inside 'bali' is 'BENGALI'.
'derived from' is the link.
(Other definitions for bengali that I've seen before include "may be Indian" , "Indic language" , "resident in Calcutta?" , "tongue" , "Asian language" .)