Indonesia Leads in Halal Goods but Lags in Islamic Finance, Experts Say

Indonesia's prowess in the global halal market is undeniable, securing the top position in modest fashion and ranking highly in halal food, media, and recreation. However, a significant paradox emerges: while excelling in tangible halal products, the nation struggles to become a leader in Islamic finance, the very sector crucial for supporting its burgeoning halal ecosystem.

The State of the Global Islamic Economy Report 2025/26 reveals Indonesia's slip from third to fourth place in the Global Islamic Economy Indicator (GIEI). This decline, though seemingly minor, highlights a deeper issue. Many Indonesian halal businesses, including small and medium-sized enterprises, still rely on conventional financing and lack adequate access to Sharia-compliant financial instruments. This disconnect prevents the full integration of the national halal supply chain with Islamic finance.

Experts like Setiawan Budi Utomo, an observer of Islamic finance and economics, point to Malaysia as a contrasting model. Despite a smaller Muslim population, Malaysia dominates global Islamic finance. Its success stems from a comprehensive integration of regulations, the halal industry, certification processes, capital markets, banking, sukuk, and international investment. Malaysia, therefore, sells not just halal products, but a complete halal ecosystem.

Utomo suggests that for Indonesia to truly capitalize on its strengths, it must bridge the gap between its robust halal industry and its underdeveloped Islamic finance sector. This requires building a more cohesive and accessible Sharia-compliant financial infrastructure to support and propel the growth of its globally competitive halal economy.