Indonesia Transforms KNEKS Into Key Islamic Economy Agency

Indonesia, the world’s largest Muslim-majority nation, is making significant strides in strengthening its position as a global leader in the Islamic economy. In a landmark move, the Indonesian government has announced plans to transform the National Committee for Islamic Economy and Finance (KNEKS) into a new, more dynamic institution called the Islamic Economy Agency (BES). This initiative, revealed on July 8, 2025, during the launch of the 2024–2025 State of Global Islamic Economy (SGIE) Report in Jakarta, aims to enhance policy innovation, streamline coordination, and boost Indonesia’s halal industry on the global stage. Spearheaded by former Vice President Ma’ruf Amin and supported by President Prabowo Subianto, this transformation signals Indonesia’s ambition to become the world’s leading hub for Islamic finance and halal products by 2028 or 2029.

A Strategic Shift to Strengthen the Shariah Economy

The decision to rebrand KNEKS as the Islamic Economy Agency (BES) reflects Indonesia’s commitment to fostering a robust Shariah-compliant economic ecosystem. Established in 2016 under Presidential Decree No. 91, KNEKS has been instrumental in coordinating efforts among government bodies, industry players, academics, and civil society to develop Islamic finance and the halal industry. However, the government recognizes the need for a more agile and focused institution to meet the growing global demand for Shariah-compliant products and services. The BES is expected to act as an umbrella body, synchronizing efforts across various sectors to drive innovation and economic resilience.

Former Vice President Ma’ruf Amin emphasized the importance of this transition, stating, “God willing, the national committee will soon be rebranded as the Islamic Economy Agency. I have spoken with Mr. President to fast-track this process.” This move aligns with Indonesia’s broader strategy to integrate Islamic economic development into national planning, ensuring that policies and budgets are aligned to support sustainable growth. The BES will focus on key areas such as halal product development, Islamic finance, and digital innovation, positioning Indonesia to capitalize on the global Islamic economy, projected to exceed $3 trillion in the coming years.

Why the Transformation Matters

Indonesia’s Islamic economy is already a global powerhouse, ranking third in the 2024–2025 SGIE Indicator, behind only Malaysia and Saudi Arabia. This achievement is a testament to the country’s comprehensive policies and institutional support, including the establishment of the Halal Product Assurance Agency (BPJPH) in 2019 and the creation of Bank Syariah Indonesia (BSI), one of the top 10 Islamic banks worldwide. However, challenges such as low financial literacy (39.11% in 2023) and limited access to Shariah-compliant services in rural areas remain. The transformation of KNEKS into BES aims to address these gaps by fostering greater coordination and innovation.

Key objectives of the Islamic Economy Agency include:

• Enhancing Policy Innovation: Developing new regulations to support Islamic fintech and halal industrial zones.

• Strengthening Cross-Sector Collaboration: Uniting government institutions, industry associations, and academics to create a cohesive ecosystem.

• Boosting Halal Industry Growth: Expanding halal certification and promoting Indonesia as a global halal hub.

• Improving Financial Inclusion: Increasing access to Shariah-compliant financial services, especially in underserved regions.

• Leveraging Digital Platforms: Promoting Shariah-compliant e-commerce and digital payment systems to reach younger consumers.

• Supporting MSMEs: Providing education, financing, and digital tools to empower micro, small, and medium enterprises in the halal sector.

By focusing on these priorities, the BES aims to make Indonesia’s Islamic economy more competitive and inclusive, aligning with global trends in ethical and sustainable finance.

Building on a Strong Foundation

Indonesia’s journey to becoming a global Islamic economy leader began with the launch of the Indonesian Islamic Economics Master Plan (MEKSI) 2019–2024, spearheaded by former President Joko Widodo. MEKSI laid the groundwork for coordinated development across sectors like halal tourism, modest fashion, and Islamic finance. The plan’s success is evident in Indonesia’s rise from 10th place in the SGIE rankings a decade ago to its current third-place position. Initiatives like the Indonesia Sharia Economic Festival (ISEF) and partnerships with digital platforms like Bukalapak and Tokopedia have further strengthened the ecosystem.

The KNEKS, chaired by the President, has been a catalyst for this progress. With regional offices in 33 provinces, including minority-Muslim regions like North Sulawesi, KNEKS has ensured that Islamic economic development is inclusive and far-reaching. The transition to BES builds on this foundation, with a focus on modernizing infrastructure and addressing emerging challenges, such as the need for halal certification compliance by 2026 and the growing demand for Shariah-compliant digital solutions.

Opportunities and Challenges Ahead

The global Islamic economy is expanding rapidly, driven by increasing demand for halal products and ethical financial services. Indonesia, with its population of over 280 million and a growing middle class, is well-positioned to capture this market. The country’s strengths include its large number of Islamic financial institutions, retail-oriented Sukuk, and innovative digital platforms like the Sharia Online Trading System (SOTS). Additionally, partnerships with international players, such as the recent halal cooperation agreement with New Zealand, are easing export procedures for halal-compliant goods, further boosting Indonesia’s global reach.

However, challenges remain. Islamic financial literacy remains low, particularly in rural and eastern regions, with only 12.88% financial inclusion in 2023. The fragmentation of existing programs has also hindered efforts to boost literacy and inclusion. To address this, the BES will work closely with ministries, the National Research and Innovation Agency (BRIN), and institutions like the Indonesian Association of Islamic Economists (IAEI) to streamline programs and enhance public awareness. The goal is to achieve a 50% Islamic economy literacy rate by the end of 2025, a target set by former Vice President Ma’ruf Amin.

A Vision for Global Leadership

The establishment of the BES is a pivotal step in Indonesia’s quest to become the world’s leading Islamic economy by 2028 or 2029. Former Vice President Ma’ruf Amin expressed optimism about this goal, citing Indonesia’s moral legitimacy and strategic policies. The country’s focus on digital transformation, including Shariah-compliant fintech and social commerce platforms, aligns with global trends in ethical and sustainable finance. For instance, partnerships like the one between HAQQ Association, KNEKS, and PT BUMR Industri Terhubung Indonesia are leveraging blockchain technology to enhance transparency and accessibility in Shariah-compliant financial services.

Moreover, Indonesia’s emphasis on sustainability and ethical practices resonates with global environmental, social, and governance (ESG) standards. By combining halal certification with strong sustainability credentials, Indonesian companies can tap into international markets like Saudi Arabia, Malaysia, and the UAE. The upcoming Halal Indo 2025 exhibition, scheduled for September 2025, will further showcase Indonesia’s potential as a global halal hub, promoting a modern and sustainable halal ecosystem.

The Role of Stakeholders in Driving Success

The success of the BES will depend on collaboration among stakeholders, including government agencies, industry players, academics, and community organizations. The Sharia Economy Society (MES) and the Indonesian Association of Islamic Economy Experts (IAEI) will play key roles in shaping policies and fostering innovation. Additionally, the involvement of major institutions like Bank Indonesia, the Ministry of Finance, and the Indonesian Council of Ulama (MUI) ensures that the BES will have the authority and resources to drive meaningful change.

The government is also investing in education and research to build a skilled workforce capable of competing in the global Islamic economy. Initiatives like the National Financial Literacy and Inclusion Strategy (SNLKI) 2021–2025 and partnerships with universities such as Universitas Indonesia and Universitas Gadjah Mada are enhancing financial literacy and supporting innovation in Islamic finance.

Looking Ahead: A Bright Future for Indonesia’s Islamic Economy

As Indonesia transitions from KNEKS to the Islamic Economy Agency, the country is poised to solidify its position as a global leader in the Islamic economy. The BES will serve as a catalyst for innovation, coordination, and growth, addressing challenges like low financial literacy and limited access to Shariah-compliant services. By leveraging digital platforms, fostering international partnerships, and empowering MSMEs, Indonesia is building a resilient and inclusive economic ecosystem that aligns with its cultural and religious values.

The transformation of KNEKS into BES is more than a rebranding—it’s a bold statement of intent. With strong government support, strategic policies, and a commitment to sustainability, Indonesia is on track to achieve its vision of becoming the world’s leading Islamic economy. As the global halal market continues to grow, Indonesia’s efforts to innovate and collaborate will ensure that it remains at the forefront of this dynamic and rapidly evolving sector.