Indonesia’s Sharia Economy Drives Growth to Become a Halal Market Leader

Indonesia’s Vice President, Ma’ruf Amin, has expressed strong optimism about the potential of the Sharia (Islamic) economy and finance as a driving force for the country’s economic growth. He emphasized that the nation’s human resources and Muslim-majority population make it uniquely positioned to leverage Sharia-compliant economic activities for robust development.

“As a nation with the largest Muslim population in the world, it is fitting that the Sharia economy and finance serve as a key pillar of our national economy. Indonesia has significant potential to grow in this field, and we must harness that potential to its fullest,” Amin stated during his keynote speech at the online seminar, “Awaiting the Awakening of the Sharia Economy,” held on Sunday.

The Potential for Growth in Indonesia’s Sharia Economy

Indonesia, with over 230 million Muslims, has a vast range of resources that can serve as the backbone for developing its Sharia-compliant economy. These resources provide the necessary capital and capabilities for the country to become a global leader in Islamic finance, halal products, and Sharia-compliant business practices. The Vice President noted that Indonesia not only has the supply but also a large and untapped market for Sharia economic development.

Opportunities in Key Sectors

“We are a strong and rapidly growing market for the Sharia economy, which extends across various sectors such as Islamic finance, halal food and products, Muslim fashion, Islamic social funds, and Sharia-based business ventures,” Amin explained.

The halal food and beverage market alone has seen exponential growth over the past decade, while the modest fashion industry has evolved into a global phenomenon, offering business opportunities for Muslim entrepreneurs. Islamic social funds, including zakat (almsgiving) and waqf (endowments), also provide avenues for ethical investments that support social and economic development in line with Islamic principles.

By tapping into these sectors and optimizing the resources available, Indonesia aims to achieve its target of becoming the largest halal producer worldwide. The growing demand for halal goods and Sharia-compliant services worldwide places Indonesia in a prime position to expand its influence on the global stage, particularly as the halal market is projected to reach over $2.4 trillion by 2024.

Indonesia’s Position in the Global Halal Market

However, Vice President Amin acknowledged that despite Indonesia’s potential, there is still work to be done. “We have to admit that we are currently lagging behind not only other Muslim-majority countries but also non-Muslim nations such as Thailand and Brazil, which are significant exporters of halal products. Additionally, the UK has made substantial strides in developing Islamic finance, offering a model of innovation and growth in Sharia-compliant financial services,” he added.

This recognition underscores the need for Indonesia to accelerate its efforts in positioning itself as a global leader in both the halal and Islamic finance sectors. It also calls for learning from the experiences of other countries that have successfully penetrated the halal market, emphasizing the need for quality, innovation, and strategic marketing to capture a larger share of the global halal economy.

Four Key Areas of Focus for Sharia Economic Growth

Vice President Amin highlighted four priority areas that the Indonesian government is focusing on to drive the growth of its Sharia economy and finance sector:

1. Development of the Halal Product Industry: Expanding the production and export of halal-certified products, including food, cosmetics, pharmaceuticals, and consumer goods, to meet the rising global demand.
2. Expansion of the Sharia Finance Industry: Strengthening Sharia-compliant financial services, such as Islamic banking, sukuk (Islamic bonds), takaful (Islamic insurance), and Islamic fintech, to provide a broader range of ethical financing options for businesses and consumers.
3. Enhancement of Sharia Social Funds: Leveraging Islamic social funds, such as zakat, waqf, and sadaqah (charity), to support social welfare programs, economic empowerment, and sustainable development in line with Islamic values.
4. Growth and Diversification of Sharia Business Activities: Encouraging entrepreneurship and innovation in Sharia-compliant business ventures, from modest fashion brands and halal tourism to technology startups that align with Islamic ethical principles.

Government Initiatives to Drive the Sharia Economy

To achieve these goals, the Indonesian government is implementing various policies and initiatives. These include:

• Establishing Indonesia as a global halal hub by providing incentives to local businesses to obtain halal certification and expand their export capabilities.
• Encouraging Islamic financial literacy among the population to increase awareness and adoption of Sharia-compliant financial services.
• Facilitating partnerships between public and private sectors to boost the development of the halal product industry and Sharia-based financial services.
• Supporting startups and small-to-medium enterprises (SMEs) that align with the principles of the Sharia economy, helping them to innovate and grow.

Positioning Indonesia as a Global Leader

As the demand for halal products and Sharia-compliant financial services continues to grow globally, Indonesia’s efforts to develop its Sharia economy aim to set a benchmark for other Muslim-majority countries. By enhancing its domestic capabilities and tapping into international markets, Indonesia is working towards becoming a world leader in the halal industry, positioning itself as a trusted supplier of halal products and a major player in the Islamic finance sector.

The focus on strengthening the Sharia economy is not only an economic imperative but also a way to reflect Indonesia’s identity and values on a global scale. With a commitment to ethical business practices and sustainable development, Indonesia’s vision is to become a powerhouse in the Sharia economy, benefiting both its citizens and the broader Muslim community worldwide.