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Involvement of the Halal Industry in the Stock Market

Devin Halim Wijaya10 September 2024

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In recent decades, the halal industry has experienced significant growth, not only in the food consumption sector but also in various other sectors, including finance. In Indonesia, the halal industry has become an essential part of the economy, supported by the large Muslim population and the government’s commitment to developing the sharia economy. One key aspect of the sharia economy’s development is the involvement of the halal industry in the stock market. This article will discuss the involvement of the halal industry in the stock market, the economic potential it generates, and the challenges and opportunities it faces.

Role of the Financial Services Authority (OJK)

The Financial Services Authority (OJK) plays a vital role in promoting the development of the halal industry in the capital market. One of the steps taken is the provision of sharia-compliant investment instruments through the Sharia Securities List (DES). The latest data from OJK shows that as of July 2024, there were 520 stocks categorized as sharia stocks in Indonesia, with a market capitalization value reaching IDR 4,352.42 trillion . This demonstrates that the halal industry, through sharia stocks, has become one of the significant contributors to the national economy.

Role of the Indonesia Stock Exchange (IDX) through IDX Syariah

In addition to OJK, the Indonesia Stock Exchange (IDX) plays a crucial role in developing the sharia capital market through its IDX Syariah platform. IDX Syariah provides various products and services to support the development of the sharia capital market, including the Jakarta Islamic Index (JII), the Indonesia Sharia Stock Index (ISSI), and other sharia-compliant securities. IDX Syariah also offers guidelines for investors who wish to invest in accordance with sharia principles, including information related to stock selection criteria based on fatwas from the National Sharia Board (DSN) .

Also read:Islamic Finance and Halal Industry: Way to Islamic Society Supremacy

Economic Potential of the Halal Industry

According to OJK, the turnover value of the halal industry in Indonesia reached IDR 36 trillion . This figure illustrates the enormous potential of the halal industry in the world’s largest Muslim-majority country. This growth is not limited to the financial sector but also extends to other sectors such as food, tourism, and fashion. The halal industry in Indonesia has great potential to continue growing, given the increasing demand for halal products and services, both domestically and globally.

Transformation and Innovation in the Halal Industry

The halal industry is not only based on sharia principles but also encourages innovation and sustainability. Digital transformation has become a key element in the development of the halal industry. Research indicates that sustainability and innovation in the sharia economy are essential for global competitiveness . The development of sharia financial technology (fintech), for instance, helps improve access to sharia financial services and supports financial inclusion.

Also read:The Halal Industry and Food Security

Halal Investment in the Capital Market

Halal investment in the capital market refers to sharia principles that govern how stocks and other financial instruments are traded. According to the Islamic Fiqh Council, halal investment must comply with strict sharia standards, including prohibitions against riba (interest), gharar (uncertainty), and maysir (speculation) . Additionally, companies whose stocks are considered halal must adhere to certain guidelines regarding their business sectors and financial structures. Companies involved in businesses deemed haram, such as alcohol, gambling, and non-halal products, are excluded from the sharia stock list.

Sharia Investment Products on IDX

Through IDX Syariah, the Indonesia Stock Exchange offers a wide range of sharia investment products, from sharia-compliant stocks, sukuk, to Sharia Mutual Funds. These products have undergone a strict screening process based on sharia principles set by the DSN-MUI. Sukuk, for example, is a sharia-compliant bond that does not involve interest and is highly favored by Muslim investors. Similarly, Sharia Mutual Funds manage funds in a way that aligns with Islamic laws and are ideal for investors seeking investments aligned with religious values.

Also read:Ensuring Halal Investments: Indonesia’s Sharia Stock Screening

Opportunities and Challenges

Although the halal industry has vast potential, there are still challenges that need to be addressed. One of them is the lack of financial literacy regarding sharia among the public. Many investors still do not understand the differences between conventional and sharia investments, as well as the long-term benefits of investing in sharia-compliant stocks . However, with proper education and increased awareness of the importance of sharia-based investments, these challenges can be overcome.

Another challenge is the dynamic and often inconsistent regulations across different countries. The halal industry requires international regulatory harmonization to develop more optimally . On the other hand, opportunities remain abundant, especially with the development of technology that allows easier access to halal investments, both domestically and internationally.

Conclusion

The involvement of the halal industry in the stock market is a crucial part of the development of the sharia economy in Indonesia. With support from OJK, BEI through IDX Syariah, and increased public awareness, the halal industry has the potential to continue growing and contribute more significantly to the national economy. However, challenges such as financial literacy and regulation need to be addressed for the industry to thrive fully. By prioritizing innovation, sustainability, and sharia principles, the halal industry in the capital market is poised to become an essential pillar in sustainable sharia economic development.

Also read:Haram Food and its Effect on Financial Freedom