As the Southeast Asian technology market continues to grow, Indonesian tech startups are developing at an even faster pace than ever before. With the largest Muslim population in the world, it is natural that these companies are now looking to service the Halal economy and the sharia needs of the masses.
In the 2019/2020 State of Global Islamic Economic Report, Indonesia was placed 5th out of 73 countries. The report demonstrates the importance of the Halal market globally and how several sectors are highly influenced by the buying habits of Islamic communities.
Understanding the halal economy
Prominent sectors of the Halal economy are those such as food, fashion and cosmetics, but there are also sharia rules concerning finance, tourism, media and pharmacy. To fully embrace a Halal lifestyle, Muslims must ensure that their purchase of goods and services are compliant with sharia laws.
This need for sharia compliance has led to a market that is currently worth around $2.3 trillion USD globally, with growth expected to reach over $3 trillion USD by 2023. It makes sense, therefore — particularly for Indonesian tech startups to cash in on this market — especially since they have over 229 million Muslims in their country.
The Indonesian government has weighed in firmly behind the Halal economy with a “blueprint of Islamic economy developments” being implemented along with other new initiatives, including the recent development of Halal Park, a shopping facility that sells only Halal products. There are also plans to build a bigger Halal retail centre in the coming years, further cementing the status of Muslim-friendly shopping.
Fintech embraces halal economy
Indonesian tech startups can clearly see the value of catering to the broader audience in their country. To do so, they must consider sharia values. When it comes to financing, there are strict Muslim laws and companies wishing to be considered Halal must ensure that their funding comes from financial institutions that uphold sharia law.
Enter Alami, a peer-to-peer lending service, which provides financing for small-to-medium-sized businesses while maintaining Halal practices. To help them develop, they received a sizable investment from VCs last year, which they are hoping will help them revolutionise the Halal financing system in Indonesia.
Fintech is a particularly important growth area in Indonesia, as many people there do not have access to traditional banking and rely on payment systems such as GoJek’s GoPay or GoBills to manage their everyday finances. Almost everyone in this vast country has access to a smartphone and the internet, so startups offering online financial services clearly have a lot of potential.
The rise of halal eCommerce
Traditional eCommerce platforms are tackling the sharia economy head-on too, with the more prominent names like Bukalapak, Tokopedia and Shopee rapidly building on their sharia strategies. These multi-million dollar companies are cognisant of the need to service the 87.2% Muslim population in Indonesia to sustain their development and growth.
The companies selling food, cosmetics and clothing work to ensure that the products on their sites are suitable for the Halal lifestyles of their Muslim shoppers. Carrying food and cosmetic brands that have been certified as Halal opens up the market for them and offering clothing that is in line with the religious belief system of Muslims is also essential.
Tokopedia has taken things a step further with their specific sharia-compliant Salam section, which offers Muslim women’s clothing, donation and alms payment services and a mutual trust savings facility. Other companies are expected to follow suit in the near future by launching Muslim-specific pages on their platforms.
The company Evermos is also big on compliance with Islamic laws while offering a resale marketplace to those with little capital but dreaming of having an eCommerce platform. Its impressive social commerce model has garnered funding to the tune of $8.25 million USD in the series A funding drive and is undoubtedly a company to keep a close eye on for the future.
While these companies are on the large end of the tech scale in Indonesia, many new, smaller startups are emulating their roadmap. It makes sense for Indonesian tech startups to build in sharia-compliance and tap into the massive Muslim marketplace in the country.
With a government committed to helping develop the Halal economy, the scope for startups in the country to plugin to this growth area is phenomenal. With potentially 229 million Muslim consumers on your doorstep, taking their needs and wants into consideration is a no-brainer.