Felia Primaresti

With a population reaching 240.62 million people in 2023, Indonesia is not only the country with the largest population in Southeast Asia, but also has the largest population of Muslims in the world. The implications of the large number of Muslim people in Indonesia are very significant, especially in shaping public policy. According to a report by The Royal Islamic Strategic Studies Center (RISSC), the influence of Islam can be seen in various aspects of life, including in the educational, social and legal fields.

One of the most striking impacts is the realization of public policies that reflect Islamic values. For example, Indonesia has adopted several Islamic teachings into banking policy by enacting the Sharia Banking Law. The Waqf Law and the Zakat Law are also concrete evidence of how Islamic principles help form the basis of law in this country. Thus, Islam is not only a spiritual aspect in the lives of Indonesian people, but also makes a major contribution to the formation of public policy structures.

Apart from that, the adoption of Islamic values is also reflected in the social norms of society. Daily life is colored by religious practices, such as Ramadan fasting, prayer services, and social activities based on Islamic teachings. In this way, religion not only becomes part of individual identity, but also forms collective culture and values in Indonesian society.

The Minister of Finance of the Republic of Indonesia, Sri Mulyani, said that based on the 2022 halal market report, it is known that the contribution of the halal economy can increase Indonesia’s Gross Domestic Product (GDP) by around USD 5.1 billion per year through exports and investment opportunities. Furthermore, Indonesia also plays a role as the largest halal consumer market in the world with a Muslim population of around 230 million people. Also, based on data from the Financial Services Authority (OJK), the total value of sharia financial assets in Indonesia reached IDR 2,450.55 trillion or around US$ 163.09 billion in June 2023. This data reflects growth of around 13.37% (year to year) with a market share of around 10.94% of total national finance. This growth was supported by 13 sharia commercial banks, 20 sharia business units, and 171 Sharia People’s Financing Banks (BPRS), with asset portion distribution reaching 65.78% for sharia commercial banks, 31.68% for sharia business units, and 2, 54% for BPRS.

With such a large number of businesses growing, Indonesia has a responsibility to ensure that religious diversity is respected and protected. Although Islam has a strong influence on everyday life, it is important to maintain a balance between religious freedom and diversity. In this way, Indonesia can continue to develop as a pluralistic and inclusive country through policies, where all its citizens feel respected and recognized, regardless of their religious background.

In islamic-based business for example, President Joko Widodo firmly showed his commitment regarding inclusivity that he stated to PT. Bank Syariah Indonesia (BSI) as the biggest sharia banking in Indonesia. He said that BSI must be transformed into an inclusive financial institution, serving everyone without exception, while still prioritizing the benefit and welfare of the community. This view reflects the spirit of inclusiveness in sharia banking services, which is also seen in other banks in Indonesia. For example, Bank Muamalat Indonesia noted that around 15% of its customers come from non-Muslim circles. It should be noted that Bank Muamalat is the second largest Islamic bank in Indonesia after BSI.

The positive developments and inclusive value is proven by the interest of non-Muslim communities in sharia financial products. According to Frederica Widyasari Dewi, Chief Executive of Financial Services Business Conduct Monitoring and Consumer Protection at the Financial Services Authority (OJK), products such as deposits that rely on profit sharing schemes are increasingly in demand because they are considered fairer and more transparent. This phenomenon does not only occur in Indonesia, but also in various other countries.

Not only the financial sector, other halal industries also attract the interest of non-Muslim communities. Halal tourism, for example, is one of the sectors that is in demand, with Indonesia ranking second after Malaysia in providing halal tourist destinations. Based on data from the Global Muslim Travel Index (2022), Indonesia is ranked second with a score of 70 after Malaysia with a score of 74 in providing halal tourist destinations. Surprisingly, it is also visited by many non-Muslim people and foreigners who come from non-Muslim countries. This can apparently happen because according to GMTI data, Indonesia has four main indicators in halal tourism services, namely ease of access, communication, environment and service.

The halal cosmetics industry is also in great demand by non-Muslim communities. This happened to the “Wardah” brand with its “halal” branding which the brand echoed. Non-Muslim communities are starting to make Wardah cosmetics their choice because Wardah has a wide variety of products, of high quality, suitable for all skin types regardless of the halal aspect which is used as a benchmark by Muslims (Aisyah, 2021). All of this shows that Islamic-based economic development in Indonesia does not only pay attention to the needs of Muslims, but also universal values that can be enjoyed by everyone. This initiative not only creates inclusivity in society, but also strengthens the economy as a whole by expanding market share and increasing competitiveness on a global scale.

Law Number 33 of 2014 concerning Halal Product Guarantees reflects the real implementation of the impact of religious teachings in the realm of policy and business and also shows how the Indonesian government is serious about capturing business opportunities from this Islamic teaching-based industry. Through this regulation, the state shows its commitment to integrating religious values into the practical aspects of daily life, especially in the food and consumer products industry. Halal auditors are the main pillar in this system, playing a crucial role in ensuring that products in circulation comply with established halal standards.

This regulation requires business actors to register their products to obtain halal certification. This creates a positive incentive for businesses to follow halal guidelines, while building consumer confidence in the products they buy. In addition, pricing for halal certification is a determining factor in this ecosystem, indicating that compliance with halal standards is not only a moral responsibility, but also has a significant economic dimension. I prefer to call this phenomenon “halal business” because the existence of clear and defined halal standards in this law not only creates clarity for producers and consumers, but also opens up new business opportunities. Business actors can develop marketing strategies that focus on the halal aspects of their products, reach a wider market and attract customers who prioritize religious values in their purchases. On the other hand, the government also gets the advantages from the pricing scheme from the mandatory halal certification. Thus, Law Number 33 of 2014 is not only a legal instrument, but also a catalyst for the growth of the economic sector based on halal principles in religion.

This halal lifestyle has clearly played a central role in the economic dynamics of Indonesia, a country with a majority Muslim population. According to data compiled from the State of the Global Islamic Economy (SGIE), in 2020, the Indonesian Muslim community spent an astonishing amount of 204.2 billion US dollars on a halal lifestyle, making it the highest in the Southeast Asia region. These figures provide a clear picture of the size of the market and the economic impact of halal principles in everyday life. In addition, the largest expenditure of Indonesian Muslims in the context of a halal lifestyle is mainly focused on food consumption, reaching a striking figure of 190.4 billion US dollars. This reflects people’s awareness of the importance of halal aspects in their consumption choices. Meanwhile, the financial, fashion and tourism sectors also play an important role in halal lifestyle spending, each reaching significant figures: 36 billion US dollars, 18.8 billion US dollars and 9.37 billion US dollars.

Within the framework of food consumption, another definition of “halal business” is restaurant products and brands that have halal certification from the Indonesian Ulema Council (MUI) as it explained in advance. Ownership of this certificate plays a significant role because it  is regulated by Law Number 33 of 2019 concerning Halal Product Guarantees and Government Regulation Number 31 of 2019 concerning Implementing Regulations. So in other words, all food and beverage products are required to be labeled as “halal” as long as they do not contain pork and alcohol. This is what differentiates the halal F&B business sector from the non-halal one in Indonesia.

Whereas in other sectors, in the tourism and cosmetics sector for example, what differentiates it from other tourism and cosmetics (the non halal one) is the branding. An example is the cosmetic brand from Indonesia “Wardah” which emphasizes halal branding and several other cosmetic brands that still have halal certification from MUI such as Emina, Mineral Botanica, Amara Halal Cosmetics and others. Or, if we talk about the halal tourism sector, it is also well known such as Bandung Grand Mosque, the Al-Jabbar Gedebage Mosque, the Golden Dome Mosque, and the Kasepuhan Palace in Cirebon

The expansion of Islamic banks adhering to Sharia principles is rapidly increasing in Indonesia. Even after experiencing a slowdown due to the impact of the pandemic and global uncertainties, the national Islamic banking industry in Indonesia has successfully recorded significant growth. Based on OJK data, in June 2023, the market share of Islamic banking in Indonesia has expanded to 7.31% of the total national banking industry.This happens because its presence is expected to bring and contribute to the benefit of the people and is in accordance with what Islam teaches (Sukmadilaga & Nugroho, 2017). The benefit or welfare of the people in the concept of Islamic teachings is the implementation of the maqashid shariah teachings which consist of protecting religion, hearts and minds, heredity, materials and the environment (Prastowo).

Moreover, according to (Febianto & Kasri, 2007), the general principles of Islamic banking are anti-maghrib (maisir, gharar, and usury) which are considered as restrictions on human greed (Masyita, 2015). Based on this, the main role of Islamic banking in the economy is expected to be able to prevent injustice, provide fair income distribution and gender equality (Permana & Purba, 2008). Furthermore, according to Dhumale and Sapcanin (1998), Islamic banking has a goal not only to achieve goals in the world, but also to achieve goals in the afterlife.

These things are further strengthened by the opinion of Setiawan (2006) who considers that the objectives and critical functions of the Islamic banking system, some of which are to create socio-economic justice and fair distribution of income and wealth, create stability in the value of money (medium of exchange) by the aim of making it a reliable unit of calculation, as a fair payment standard, and as a stable store of value (stability of the value of money), mobilizing savings funds in the form of economic development investments using special means to ensure interested parties get a fair share of the results ( mobilization of savings), and providing adequate services for all financial services contained in the banking system (other adequate financial services).

This is then implemented in Indonesian banking policies which must fulfill at least the four elements of Islamic teachings. Based on OJK’s website, in carrying out its operations, sharia banking has principles that lead to justice, partnership, transparency and universality. These four principles are the main foundation that sharia financial institutions must uphold to ensure sustainability and conformity with Islamic values. First of all, the principle of justice encourages Islamic banking to share profits on the basis of real sales in accordance with the contribution and risks that each party bears. This emphasizes the importance of fair and proportional distribution of profits between investor clients, fund users and the financial institutions themselves. Second, the partnership principle emphasizes that the positions of investor customers, fund users and financial institutions must be equal as business partners. They work together synergistically to achieve benefits, illustrating a fair and sustainable relationship of interdependence.

The third principle is transparency, where sharia financial institutions are required to provide financial reports openly and continuously. This aims to ensure that investor customers can clearly understand the condition of their funds, ensure operational integrity, and increase trust between the parties involved. Finally, the principle of universality emphasizes that sharia financial institutions do not differentiate between ethnicity, religion, race and class in society. In accordance with Islamic principles as rahmatan lil alamin, sharia banking is expected to serve all levels of society fairly and inclusively. This also explains how many non-Muslim customers are interested in sharia financial products.

In addition, the aspects previously described, business opportunities in the Islamic teaching-based sector in Indonesia expand to include the world of education. Azmil Tayeb, in his book entitled “Education in Indonesia and Malaysia: Shaping Minds, Saving Souls,” revealed that Indonesia has around 47,221 Islamic schools, both managed by the government and private. This phenomenon creates a school ratio of one school for every 4,387 Muslims in Indonesia. Meanwhile, in Malaysia, there are around 1,804 Islamic schools integrated into the national education system, equivalent to one school for every 9,616 Muslims. With a significant number of Islamic schools in both countries, the Islamic education sector in Southeast Asia makes an important contribution in shaping the character and knowledge of Muslims.

Sectors such as Islamic fashion, fintech and Islamic applications, Islamic property as well as real estate, are also enlivening the Indonesian economy as the country with the largest Muslim population. Innovation and development in these sectors creates broader economic opportunities, while still upholding Islamic values in every aspect of life. This shows that the potential for business based on Islamic teachings does not only focus on daily needs, but also reaches various aspects of life, including education and the creative industry.

Even though there are business opportunities and Islamic-based policies in Indonesia, implementing them is not easy. As reported by Kompas on August 12 2021, the Indonesian Minister of Investment, Bahlil Lahadalia, revealed that the business licensing process in Indonesia is still a significant obstacle. According to him, obtaining a business permit in Indonesia is not only complicated but also requires costs that are much higher than the value of the business itself. In fact, Bahlil admitted that when he was still an entrepreneur, the process of obtaining a business permit required substantial time and costs.

Besides, obstacles in processing complex halal certification are a serious problem for many Micro, Small and Medium Enterprises (MSMEs). As stated by the General Chair of the Indonesian Halal Product Producers Association (APPHI), Aman Suparman, in his statement on September 19 2023, many business actors feel confused when faced with this situation. Even though the halal industrial sector has great potential in Indonesia, business actors are still faced with significant administrative obstacles. This situation has even encouraged several MSMEs to create their own halal certification for their products, as an effort to meet market standards regarding halal products, especially in the fashion industry sector. The bureaucratic obstacles and administrative complexities faced by business actors are serious challenges that need to be overcome to support the growth of industries based on Islamic teachings in Indonesia.

In the context of halal certification in Indonesia, complexity is increasing with the existence of various community organizations that have their own halal certification bodies, as well as the Indonesian Ulema Council (MUI). The Nahdlatul Ulama Halal Agency (BHNU) and the halal agency owned by Muhammadiyah are concrete examples of the divergence of existing standards. The existence of these various certification bodies creates a situation where standardization is not centralized and varies across institutions, resulting in imbalances and differences in the interpretation of the halal concept.

As a result, halal certificate holders are faced with legal uncertainty that can have a serious impact on their reputation and business sustainability. This concern arises because each certification body has different criteria and procedures, which can create confusion and conflicts of interpretation. Not to mention, changes in policy from one organization to another can be an additional source of uncertainty for certificate holders, resulting in potential legal risks and significant economic impacts. Therefore, further efforts are needed to formulate centralized and aligned standards in the halal certification industry, in order to overcome the complexity and uncertainty that can hamper the growth of the Islamic teachings-based economic sector in Indonesia.

In facing various business opportunities based on Islamic teachings in Indonesia, business actors must pay attention to a number of aspects that have been discussed previously. In addition, there are several recommendations that can serve as guidelines before starting a business based on Islamic teachings in Indonesia. First of all, it is important to collaborate with local partners who have a deep understanding of the cultural and religious landscape. This collaboration helps business actors overcome potential challenges more effectively, while building strong networks at the local level.

Second, developing cultural competence in business is the key to success. This can be achieved by employing staff who have local knowledge and creating a company culture that respects and embraces diversity. Third, transparency in business practices is a crucial foundation. Businesses need to ensure that the products or services they offer comply with Islamic principles, as well as proactively communicate their business practices to address any concerns or misunderstandings that may arise.

Fourth, active engagement with local communities, religious leaders, and other stakeholders can help build trust and deep understanding. This not only creates positive relationships, but can also reduce potential challenges that may arise in the course of business. Finally, flexibility and the ability to adapt to changes in the political and regulatory environment are inevitable aspects. Business actors need to periodically reassess and adjust their business strategies to remain in tune with developing conditions, ensuring long-term continuity and success in Islamic teachings-based businesses in Indonesia.

Reference

Adinugraha, HH (2019). HALAL LIFESTYLE IN INDONESIA. Journal of Sharia Economics , 1-26.

Halal Certification Bodies Need to Have Joint Standardization . (2020, April 8). From NU Online: https://nu.or.id/nasional/badan-ertertification-halal-perlu-miliki-standardization-bersama-7H5fI

Hermawan, H. (2021). Halal Tourism in Indonesia: An Indonesian Council of Ulama National Sharia Board Fatwa Perspective. Journal of Asian Finance, Economics and Business , 0665–0673.

Nugroho, L. (2017). Islamic Banking Capital Challenges to Increase Business Expansion in Indonesia. International journal of Commerce and Finance , 1-10.

Ulya, FN (2021, August 12). The Minister of Investment said, this is the reason why MSMEs are reluctant to obtain business permits . From Kompas.com: https://money.kompas.com/read/2021/08/12/155439726/kata-menteri-investasi-ini-pembebab-umkm-enggan-urus-izin-usaha?page=all