The Sharia Market is Increasingly Interested, It's Time for Startups to Fill Opportunities

Islamic economics is one of the topics in presidential election debate The last one was last April. Regardless of the participants' answers, the choice of this topic in the presidential debate indicates that Islamic economics and its derivatives are increasingly gaining a place in the country's economy.

Now, after Joko Widodo and Ma'ruf Amin were inaugurated as President and Vice President of the Republic of Indonesia, the stretching of the sharia economy is increasingly visible. One of them is reflected in a number of digital companies that are trying their luck in an economy based on Islamic values.

The first indicator can be seen when Tokopedia and Shopee visited the office of Vice President Ma'ruf Amin last November. President Commissioner Agus Martowardojo and Vice Chairman Leontinus Alpha Edison who representing Tokopedia to Ma'ruf's office came first. Two weeks later, Shopee did similar visit by bringing their top brass to meet Ma'ruf who is the chairman of the Indonesian Ulema Council (MUI) and an important figure in the domestic Islamic finance industry.

The visit of the two e-commerce giants can be said to be a new round of their competition in the Islamic market. Tokopedia with the Tokopedia Salam feature, while Shopee with Shopee Barokah.

Another indicator is the entry of a number of conventional investors into sharia-based businesses. It can be tracked from investation Golden Gate Ventures, Agaeti Ventures, and RHL Ventures for Alami, a local sharia-based fintech startup. The emergence of a number of new startups that focus on providing sharia product services or startups that are expanding their reach into the sharia market has also marked the growing interest in the sharia market in Indonesia, such as Qazwa, Waqara, Investree, LinkAja, and Akulaku.

This growing interest in digital companies entering the Islamic market indicates one thing is clear: there is great potential waiting to be worked on. The number is clearly not small considering that Indonesia is a country with the largest Muslim population in the world.

The State of Global Islamic Economy Report 2019/2020 recorded Indonesia's score at 49, perched in 5th place out of 73 countries. The score was calculated from a number of sectors such as Islamic finance, halal food, Muslim-friendly tourism, fashion, media and recreation, as well as pharmacy & cosmetics. Halal food and Islamic finance are the two largest sectors that contribute to this assessment.

The report shows that the overall sharia market in Indonesia has grown quite significantly, from 10th place last year to 5th this year. The biggest factor is said to be because the state now has a blueprint for developing a sharia economy and a number of fresh initiatives such as the Halal Park which was inaugurated a few months ago.

Of the six sectors in the report, Indonesia is in the top 10 in 3 sectors, namely 5th in the Islamic finance sector, 4th for Muslim-friendly tourist destinations, and 3rd in the fashion sector. Consumption of halal or sharia products in Indonesia is indeed very large in almost all sectors, especially in the halal food sector. Indonesia is listed as a country with a halal food consumption value of US$173 billion (Rp2.400 trillion) or the largest in the world.

Meanwhile, in Islamic financial institutions, Indonesia seems to be on the right path. Indonesia's Islamic financial assets are observed to be in seventh place with a value of US $ 86 billion or Rp. 1.200 trillion. This figure is predicted to continue to grow in line with the implementation of the 2019-2024 Islamic Economic Master Plan.

Actors

There are several startup players in Indonesia who are entering the sharia market and halal products. In general, they are divided into two, namely those who have been established to provide products needed by Muslims and those who have expanded their services.

However, their number is not that many. Some of them are Ammana, Alami, Dana Syariah, Qazwa, Duha Syariah, Syarfi, Bsalam, GoHalalGo, Waqara, Umra.id, Hijup, and Hijabenka. It should be noted that almost all of these names are only divided into two types of services: sharia fintech and umrah marketplace. As for investors, the Financial Services Authority (OJK) noted that as of October 2019 at least there were 6 venture capital companies registered operating. Ma'ruf himself had claimed that there were 31 sharia fintechs in Indonesia, more than any other country.

On the other hand, there are several conventional startups that are trying their luck in the sharia business. Some of them are Bukalapak, Tokopedia, Shopee, LinkAja, to Investree. Take Tokopedia for example through Tokopedia Salam. Their expansion is quite aggressive. Through this feature, they have transformed into a marketplace for travel agents for Umrah pilgrimages to other supporting equipment for Muslim worship. In addition, Tokopedia claims that it provides around 21 million more halal products on their platform.

Opportunity is still wide

Referring to the relatively few sharia business actors, the economic opportunity of this type to grow is clearly large. By relying on the State of Global Islamic Economy report above, Indonesia has the opportunity to widen the capacity of sharia business in various sectors.

In halal products, for example, there are a number of sub-sectors that can be of concern to local business actors such as halal-certified e-commerce products, halal-concept retail, or halal food technology. Don't forget, the money circulating globally in the halal food business will reach US$2 trillion or around Rp28.000 trillion in 2024. And Indonesia is not listed as the top 10 halal food producers, but as the largest market in the world.

The same opportunities also exist in the halal tourism sector, sharia finance, Islamic clothing, and media & recreation. Especially in tourism and finance, startup players can take a closer look at this. Because tourism has been facilitated by the government through halal tourist area. Meanwhile, the government can say that Islamic finance has now become an alternative to support the country's economic growth. The contribution of sharia finance to the national economy's finances is still at 8,73 percent. That means there's still a lot of room to grow and transform into a machine alternative driver of economic growth.

Before going there, Indonesia still has a sizable amount of homework. STIE SEBI's sharia economic observer, Azis Setiawan, said that the government's blueprint for the sharia economy and halal industry had not been fulfilled.

"I think blueprint The existing ones must be sharpened again and those who can translate are the relevant government agencies," Azis said DailySocial.

According to Azis, digital companies engaged in the sharia economy have not really filled the market potential in Indonesia. The lack of public knowledge of sharia products and the halal industry is one reason, but he underlined that Indonesia is a country with the largest Muslim population in the world.

"Take the example of halal tourism. There is a matter of sharia lodging, halal culinary, the needs are many. The perspective must also be global because those who come from various countries," he added.

Azis believes that the government is able to make the Islamic economy an alternative driving force for Indonesia's economic growth. However, he suggested that the government as the full policy holder should be faster in implementing plans and responsive to existing developments like Malaysia if they don't want to be left behind.

"Maybe we have missed Malaysia by about a decade or two for this Islamic economy," he concluded.