Halal Industry Grows, but Islamic Banking Still Faces Challenges
The growth of the halal industry in Indonesia has not been fully accompanied by the development of Islamic finance, particularly Islamic banking. Challenges regarding regulation, taxation, and the dominance of conventional banking remain significant issues in the development of the sector.
This was stated by the Director of Sharia Ecosystem Infrastructure of the National Committee for Islamic Economy and Finance (KNEKS), Sutan Emir Hidayat, during the Indonesia Update 2026 conference in Canberra, Australia, on Saturday (19/09/2026).
Emir presented a paper titled ‘The Indonesian Path of Islamic Economy and Finance: Contested Governance and Uneven Implementation’, co-authored with Adelina Zuleika, Ishmah Qurratu’ain, and Ryanda Al Fathan.
In the study, Emir and his team examined the development of Islamic economy and finance through an ecosystem approach. “This approach encompasses Islamic finance, the halal industry, Islamic social finance, as well as various supporting infrastructures at both national and regional levels,” Emir stated in a written release on Saturday (19/09/2026).
The study indicates that Indonesia has made progress in building more integrated Islamic economic and financial policies. However, implementation remains uneven across different sectors.
In the Islamic finance sector, specifically banking, structural challenges persist because Indonesia’s financial system has historically been dominated by conventional banking.
Emir and his team also assessed that existing taxation policies and regulations do not yet fully accommodate the specific characteristics of Islamic financial transactions. This condition is one of the factors causing the development of Islamic banking to proceed more slowly compared to the growth of the real halal sector.
Beyond regulatory issues, the study highlights the importance of coordination between central and regional governments. The formation of Regional Committees for Islamic Economy and Finance (KDEKS) in various provinces is one of the efforts to translate national policies into regional development priorities.
However, implementation varies due to differences in institutional capacity, human resources, budgets, and development priorities in each region.
Emir and his team emphasised that the challenges of developing the Islamic economy and finance do not end with policy formulation. Such policies must be translated into more integrated economic outcomes and more equitable benefits.