Indonesia Drops to Fourth in Global Islamic Economy Report Amid Financing Challenges

Indonesia has fallen to fourth place in the State of the Global Islamic Economy (SGIE) 2025/2026 report, a decline from third position. A key factor contributing to this drop is the persistent challenge faced by halal micro, small, and medium enterprises (MSMEs), which continue to depend on conventional financing.

Researchers at the Center of Sharia Economic Development (CSED) INDEF highlight that despite Indonesia's large Muslim population and strengths in halal sectors like fashion and tourism, its sharia finance sector lags significantly. This imbalance prevents the formation of a complete halal ecosystem, where the industry and finance should ideally support each other.

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Indonesia can become a giant in the halal industry, but in the financial sector, we are still relatively small, both in terms of industry and market share.

Nur Hidayah, a researcher at CSED INDEF, explained that many certified halal MSMEs struggle to access competitive financing from sharia institutions. This forces them to rely on conventional lenders, hindering the integration of sharia principles throughout the halal supply chain, from production to financing.

To address this, experts urge the government to implement affirmative policies that bolster the sharia finance industry. Currently, sharia finance holds only about 11% of the national market share. Efforts are needed to deepen the sector, improve public literacy, strengthen Islamic social finance, and foster innovation to increase its market presence and competitiveness.

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MSMEs that already have halal certification still rely on conventional financing because they face difficulties obtaining competitive financing from sharia financial institutions.