Photo for illustrative purposes only: Children learning Quran at Agung Alfalah mosque in Jambi, Indonesia, on January 22, 2018. Ryan Wijaya Tan / Shutterstock.com

Halal Industry

Bank Indonesia to push for halal value chain model including Islamic boarding schools, SMEs - official


JAKARTA – Bank Indonesia, the central bank, will be proposing a halal value chain model consisting of Islamic boarding schools and small- and medium-sized enterprises (SMEs) to boost the country’s Islamic economy, Anwar Bashori, its head of Sharia Finance and Economic Department told Salaam Gateway.

“As a member of the supervisory board of the national Islamic finance committee, next month we will propose a halal value chain model to the committee’s secretary, the ministry of national development planning, and the ministry of industry, to develop a halal industry ecosystem,” said Bashori.

Indonesia established a National Committee for Islamic Finance (Komite Nasional Keuangan Syariah, KNKS) in July 2017 that held its first meeting in February this year. KNKS is to complete a roadmap for the improvement and expansion of the country’s Islamic finance industry before the end of this year.

The development of the halal value chain is a core element to boost the country’s Islamic finance and Islamic economy industries, said Bashori.

The central bank’s plan is to connect Islamic boarding schools with SMEs to ease business requirements as well as to provide economic opportunities for the Islamic schools.

According to Bashori, there are around 290,000 Islamic boarding schools across Indonesia and an average of 1,200 students are enrolled in each at any one time.

“We’ve been working with the ministry of religious affairs since 2014 on Islamic boarding school economy empowering programs,” said Bashori.

“We have identified around 290,000 schools and will screen them before we choose the ones that have independent business activities such as farming and biogas management,” he said.

The central bank is currently extending entrepreneurship assistance to at least 135 Islamic boarding schools. They include Al Ittifaq Islamic Boarding School in Bandung, West Java, which currently grows 132 types of vegetables on 14 hectares of land. Around 400 students manage the farm that earns up to 15 million Indonesian rupiah ($1,004) per month.

Bank Indonesia’s assistance program also includes paying for 15 machines for weavers in the east Java city of Kediri. The weavers from various SMEs work with around 250 students from Al Mahrusiyah III Lirboyo Islamic boarding school.

“As a part of our study, students can also start to learn about entrepreneurship outside their study hours. Sometimes Islamic boarding schools are also linked with corporates as they become suppliers to the corporates,” said Bashori.

Since 2017, the central bank has also been helping the schools prepare standardized financial statements they can use when seeking financing.

“The key to success of the halal ecosystem rests in the links the different stakeholders have to each other in the chain,” added the central bank official.

Dody Budi Waluyo, Bank Indonesia’s deputy governor for the monetary department said the focus on developing the halal value chain will rest on several sectors, namely halal tourism, agriculture, renewable energy, waste treatment and biogas.

Waluyo said he expects these sectors will develop in a similar trajectory as other relatively established sectors such as food and beverages and modest fashion.

Bank Indonesia is also working on a pilot project for the optimization of the use of zakat to increase the competencies and capacities of businesses. The project focuses on Islamic boarding schools that operate as cooperatives and that produce organic agriculture and creative crafts, as well as those that embark on large-scale projects in halal F&B and modest fashion.

Indonesia’s halal industries of F&B, fashion, and tourism were estimated to have reached $250 billion at the end of 2016, according to the central bank. 2017 data will be made available on Oct 4 and is expected to show a growth of 2-3 percent from 2016. The regulator expects its halal supply chain programs to boost the industry’s growth to 6-6.5 percent a year.

(Reporting by Yosi Winosa; Editing by Emmy Abdul Alim emmy.alim@thomsonreuters.com)

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