Indonesia Establishes Islamic Economy Agency to Propel Sharia Sector Growth
Indonesia Establishes Islamic Economy Agency to Propel Sharia Sector Growth
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Indonesia, home to the world’s largest Muslim population, has taken a decisive step towards becoming a global leader in Islamic economics by establishing a dedicated Islamic Economy Agency, The Halal Times reported. This strategic move aims to accelerate growth in Sharia-compliant finance, halal industries, and Islamic social finance, capitalizing on the rapidly expanding $3 trillion global Islamic economy.
The newly formed agency will serve as a central governing body, coordinating policies, streamlining regulations, and driving innovation within Indonesia’s Islamic economic sector. This initiative underscores the nation’s commitment to becoming a key player in the global demand for ethical and faith-based financial solutions.
The agency will prioritize several critical areas for sustainable growth. This includes strengthening Islamic banking, takaful (Islamic insurance), and sukuk (Islamic bonds, and boosting production in the halal industry, covering food, cosmetics, pharmaceuticals, and modest fashion. It also aims to optimize Islamic social finance through zakat, waqf, and sadaqah, attract foreign investment, and promote digital transformation.
Currently, Indonesia’s Islamic banking assets total $70 billion, representing only 6.5% of the total banking sector—a figure significantly lower than Malaysia’s 40% market share. The new agency is expected to bridge this gap by introducing more competitive products and improving access to Islamic microfinance and digital Sharia banking solutions, leveraging Indonesia’s massive domestic market of over 230 million Muslims.
Beyond finance, Indonesia is positioning itself as a global halal industry hub. Its halal food market is projected to reach $280 billion by 2025. While the government has mandated halal certification, challenges like high certification costs for SMEs and supply chain inefficiencies remain. The agency will address these barriers to help Indonesia become a leading halal exporter.
