E-Commerce for Halal Products in Indonesia Booming

Ecommerce for Halal products in Indonesia is booming. The country’s eCommerce market has been growing in value for the past several years. In 2020, its worth stood at US$32 billion. And, it is expected to reach 83 billion dollars by the year 2025.

Factors Behind the Impressive Growth in Halal Products’ Online Trade

• The government has made a conscious decision to become a global Halal hub. They have been making efforts to materialize their dreams.
• Various public and private entities have been collaborating with foreign institutions and trading partners to enhance their capability in increasing Halal trade internally and in the global markets
• The government has been fast digitalizing its economy to support its growing Halal ecosystem

Assistant Director of the Department of Sharia Finance of Bank Indonesia (BI), Misha Nugraha Ramadhan, said in a recently held meeting that transactions for halal products through an increasing number of e-commerce platforms had increased in 2021, both in terms of volume and value.

This phenomenon results in the increasing use of non-cash payment methods in all e-commerce transactions.

“Digital technology has played a significant role in the development of Micro, Small, and Medium Enterprises (MSMEs), including Islamic MSMEs and Islamic finance, both in terms of purchases and payments,” Ramadhan noted at the G20 Presidency Side Event: Synergy Seminar on Building Resilient in MSMEs Post Pandemic, monitored online on May 13.

The COVID-19 pandemic had changed people’s behavior in shopping activities, with the trend of online shopping continuously showing an upward trend.

According to the statistics released by the Indonesian government, the share of halal products through e-commerce was dominated by fashion products, at 91.93 percent; followed by personal care and cosmetic products, at 2.57 percent; food and beverages, at 1.66 percent; and books and stationery, at 1.81 percent.

Furthermore, electronic products contributed 0.45 percent; automotive and accessories, 0.4 percent; and other products, 1.2 percent.

Ramadhan noted that fashion had become one of the main sectors of the halal value chain (HVC) in addition to halal food, agriculture, and Muslim-friendly tourism that had succeeded in encouraging the recovery of the country’s Halal economy.

Challenges Implementing E-Commerce in Indonesia

Indonesia, being the largest Muslim country in terms of population, has an enormous potential to grow its Halal e-commerce sector.  However, it also faces some inherent impediments as well.  These are listed below.

• Policy and regulation uncertainties
• Relatively low internet penetration
• Poor logistics infrastructure
• Low quality in human resources
• Shallow digital payment penetration

What Can the Government Do to Speed up Ecommerce Industry?

As stated above, the Indonesian government needs to step up its efforts if it wants to become a leader in the national and global Halal industries. They could do the following to keep on improving their local Halal ecosystem.

1. Improve its regulatory framework
2. Provide high-speed Internet access to its citizens
3. Improve its infrastructure