The Synergy of Islamic Banks and Muslim-Friendly Tourism: Patterns of Halal Industry Development in Indonesia

Today's halal industry development exhibits very rapid improvement [1]. This is indicated by the contribution of foreign exchange income in various countries that has reached billions of US dollars in total sales, contributing significantly to the countries' economic income [2].

The National Sharia Finance Committee [3] reported that the total Global Islamic Finance Market was US \$2.438 trillion, and in 2023, it is projected to continue to increase to US \$3.809 trillion (up 56%). Meanwhile, in the Global Islamic Commercial Banking Market sector, US \$1.721 trillion was recorded in 2017 and is estimated to reach US \$2.441 trillion in 2023 (up 41.8%). Table 1 indicates the Global Islamic Economy [4] has also reported that consumption of halal industry products has totaled US $4.903 trillion.

The Global Islamic Economy (GIE) indicator [5] in Table 2 measures the strength of the Islamic economy in 73 countries, revealing that Indonesia ranked fourth. This ranking has improved from previous years, 2018 (10th rank) and 2019 (5th rank). Six main industrial sectors are used in their measurements: Islamic finance, halal food, Muslim-friendly tourism, fashion, media and recreation, and pharmacy and cosmetics [6]. One of the six main industrial sectors is Muslim-friendly tourism, one of the most influential halal industries among the other halal industry sectors. Muslim-friendly tourism also forms the core of the halal industry [7, 8], as its existence is recognized when services incorporate elements of Islamic banks, halal food, fashion, media and recreation, as well as pharmacy and cosmetics [8].

Table 1. Total shopping for halal products worldwide

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Figure 1. Projection of Muslim-friendly tourism market growth

Muslim-friendly tourism is a new development concept from the tourism industry that integrates religious and conservative motivations, making it a preferred choice of tourist destinations [2, 9]. This concept prioritizes hospitable service [10], comfort during the journey [11], adherence to sharia [12], and highlights its discrepancy with the current tourism practices that dominate the modern tourism industry [13]. Other terms used for Muslim-friendly tourism include halal tourism, Islamic tourism, halal-friendly tourist destinations, Muslim-friendly tourism destinations, and halal lifestyles [14]. The paradigm and terminology of Muslim-friendly tourism do not exclude Muslim tourists from conventional tourism activities, nor do they exclude non-Muslim tourists from specific tourist destinations. The development of Muslim-friendly tourism also aims to provide greater convenience for Muslim tourists to carry out their religious obligations when traveling [15, 16]. For non-Muslims, Muslim-friendly tourism is expected to provide safe, comfortable, and healthy travel services while introducing Islamic teachings as universal values [17, 18].

Moreover, the number of international Muslim tourists in Figure 1 grew from around 108 million in 2013 to 160 million in 2019 [19]. In 2020, the arrival of Muslims fell to 42 million due to the global impact of the pandemic, which seriously affected the travel sector. More than 90% of travel was done in the first quarter of 2020 before most destinations closed their borders. The international borders opened gradually at the end of 2021, where it was estimated that the arrival of Muslim visitors reached 26 million that year, and it is projected that the Muslim travel market will recover up to 80% in 2023 [20].

In this context, Indonesia has great potential and opportunity to develop Muslim-friendly tourism [21, 22]. Most of the population is Muslim, with 87.2% of 268 million, contributing to 13% of the world's Muslim population [23]. The bonus of natural beauty and culture is a unique attraction for domestic and foreign tourists for traveling and tourism in Indonesia [24-26]. In 2019, around 20% of the 14.92 million tourists who came to Indonesia were foreign tourists. According to the Global Muslim Travel Index (GMTI) report [19], the quality of Indonesian Muslim-friendly tourism in terms of access, communication, environment, and services ranked first among 130 Muslim-friendly tourist destinations, sharing first place with Malaysia (with a tied score of 78). In 2021, Indonesia also ranked fourth on the list of the world's 20 best Muslim-friendly tourism destinations, with a score of 73 [20].

Table 3 indicates that Indonesian Muslim-friendly tourism has decreased from first to fourth, while Malaysia remains in first place. On the other hand, the results of the merger of three Islamic banks (Bank Syariah Mandiri, Bank Negara Indonesia Syariah, and Bank Rakyat Indonesia Syariah) on February 1, 2021 [27] until now are relatively not optimal; the penetration of Islamic banks and public awareness in using Islamic bank products also remains low [28]. Islamic bank market share compared to conventional banks is 6.52%, with a composition of 64.8% owned by Sharia Commercial Banks (BUS), 32.74% by Sharia Unit Business (UUS), and 2.46% by Islamic People's Credit Banks (BPRS). This composition can be seen in Table 4.

At the financing post in Table 3 of 413.31 trillion, the composition of the working capital field was 29.37%, investment was 21.91%, and consumption was 50.71%. The placement of some of these sectors can be seen in Table 5.

Table 5 reveals that the placement of financing the Islamic bank of the halal industry was not included in the top five, even though the halal industry has a vast potential to develop [29]. Also, it can be used to support increasing the penetration of Islamic banks, inclusion and public awareness, and market share.

Various studies related to Islamic banks, halal industries, and Muslim-friendly tourism have actually been carried out in several countries, such as in Malaysia by Ab Talib et al. [30] that Islamic banks can try to encourage the manufacturing sector or the processed industry sector, which is an element of strengthening the industrial sector and halal certification. A study of Muhamed et al. [31] focused on document analysis of material related to the halal certification process and procedures. Wajdi Dusuki [32]’s research also stated that financial institutions should not only focus on maximizing profits but also contribute to overcoming socioeconomic problems by channeling financial resources efficiently and productively, thereby increasing production, investment, and trade activities. In addition, Ismail and Mohd Noor [33] emphasized Islamic finance and halal food. In Spain [29], it is stated that Islamic banks can strategically encourage working together to develop Muslim-friendly tourism products. A study in Bangladesh [34] asserted that in building a halal ecosystem, cooperation between the regulatory agency (government and bank) is needed, and the risk management and electronic trade activities (companies and banks) can promote the development of halal ecosystems together.

Table 3. The top 10 destinations of world Muslim tourists

Table 4. Islamic bank performance as of September 2021 (trillion)

3.1 Bank Syariah Indonesia (BSI) and its carrying capacity

Bank Syariah Indonesia (BSI) is one of the halal industrial ecosystems. Referring to the 2019-2024 Islamic Sharia Economy Plan, one primary strategy is strengthening the halal value chain. BSI, with 19,449 employees and 1,244 sub-branch office networks spread evenly throughout Indonesia, has excellent potential to develop and strengthen the halal industry in Indonesia. Table 6 and Figure 2 indicate the total assets in 2021 that reached IDR 265 trillion with total financing of IDR 162 trillion have occupied a market share of 38.24% of Islamic banking in Indonesia [44]. This infrastructure is also one of the forces owned by Islamic banks to contribute actively to the banking industry and the national economy.

The financing scheme segment offered by BSI is four: the wholesale business segment, small and medium enterprise (SME), consumer, and micro [27]. The wholesale business segment provides financing services to government-owned enterprises, both public and regional, state institutions, banks and non-bank financial institutions, multinational companies, regional government, syndicated financing, hospitals, universities, and securities. The SME segment serves financing to private business entities, educational institutions other than higher education and clinics, cooperatives, BMT linkage patterns, and/or plasma core. Next, the consumer business segment is offered to the community with a consumptive/multipurpose purpose for ownership of homes, vehicles, gold installments, and other gold and multipurpose, including financing government programs. Meanwhile, the micro business segment is for individual customers and micro-entrepreneurs, including the distribution of subsidized financing for the community to support government programs. The performance of the financing scheme of each business segment is explained in Table 7.

Of the four segments, the scheme covering the halal industry was the SME and micro business segments. However, the implementation of financing was uneven to the five halal industries, limited to Islamic financial institutions, such as cooperatives and Baitul Mal Wat Tamwil (BMT), halal food, and halal fashion. Meanwhile, Muslim-friendly tourism, pharmacy and media, and recreation had not been fully touched. Likewise, the realization of financing channeled is still far below the two other segments (wholesale and consumer businesses), where in 2021, it reached 49.4 trillion and 82.7 trillion, while SME and micro businesses were 18.3 and 16.3 trillion. Moreover, identification, collaboration, cooperation, and an increase in financing ceilings with other halal industries need more intensive recognition and attention.

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Figure 2. The market share of the Islamic banking industry as of December 2021

Table 6. Indonesia Islamic bank financing structure in 2021 (million)

3.2 Muslim-friendly tourism in Central Java and special region of Yogyakarta Provinces

The development of Muslim-friendly tourism in these two provinces refers to Central Java Governor Regulation Number 6 of 2015 and the Special Region of Yogyakarta Regulation Number 1 of 2019 concerning Amendments to the Regional Regulation of the Special Region of Yogyakarta Number 1 of 2012 concerning the Master of Tourism Development Region of the Special Region of Yogyakarta 2012-2025.

The regulation explicitly has not fully regulated Muslim-friendly tourism. However, the existing tourist destinations in broad outlines have carried out the development and governance, referring to the IMTI and GMTI criteria in terms of access, communication, environment, and tourism services (ACES) [45, 46].

Table 7. Indonesian Islamic bank business segmentation (trillion)

Table 8. Service criteria (score <3)

The criteria guidelines measure the existence and completeness of Muslim-friendly tourist destinations by giving a score of 1-5. The greater the score obtained, the greater the availability of the completeness of Muslim-friendly tourism facilities. ACES criteria are described in sub-criteria and indicators that can be explained as follows: (1) Access is the ease of access to tourist destinations with air, sea, and land transportation modes. Air access is the availability of airlines, both domestic and international. Sea access is the availability of sea travel route services. Meanwhile, land access is the availability of train and other transport services in the city and between cities/provinces, and adequate infrastructure, including road quality, CCTV, street lighting, directions, and other supporters; (2) Communication assesses and considers Muslim-friendly tourism facilities with five sub-criteria, including Muslim visitor guides, stakeholder education, marketing media, tourism guides, and digital marketing; (3) Environmental criteria focus on evaluating the arrival of the number of domestic and foreign tourists, the availability of Wi-Fi/internet networks, and regulations. In this case, the quantity of extensive Muslim visits will signal and be attractive to other Muslims about the convenience of a destination tourist destination. Wi-Fi/strong internal network availability is in several places, pages, and tour stories in various forms of website platforms, applications, and others. Government regulations prove the government's seriousness and commitment to implementing Muslim-friendly tourism; (4) Services include several facilities that support Muslim tourists to continue to meet their religious needs, including halal restaurants, representative mosques/mushola, international airports, hotels with water-friendly facilities, and attractions/tourist attractions in nature, culture, and artificial, equipped with basic Muslim tourism needs. Comfort guarantees and halal in each section are evidenced by a halal certificate from the authority as a value-added in attracting Muslim tourists.

The implementation of the Muslim-friendly tourism of Central Java and the Special Region of Yogyakarta Provinces from each ACES criteria had a mean, reaching scores of 4 and 5. Nevertheless, some criteria still obtained scores of 2 and 3, i.e., communication criteria for indicators of availability of guidance for Muslim tourists and organizing workshops, training, and seminars, criteria for the environment in government commitment, and service criteria for availability of worship and availability of Islamic heritage site (attraction). It can be seen in Table 8.

Table 8 demonstrates that there was still a score below 4. In this case, Muslim-friendly tourism stakeholders are expected to improve services in the future.

3.3 The synergy of Islamic banks and Muslim-friendly tourism

Islamic banks are one of the Islamic finance sectors with a strategic role in the halal industry development in Indonesia. Naturally, Islamic banks play an active role in becoming supporters and drivers in strengthening Muslim-friendly and other halal tourism. The development of Muslim-friendly tourism is also one of the efforts to generate the value of benefits that contribute to state income and improve community welfare [47, 48].

The currently in Figure 3 applied pattern of Islamic bank cooperation and the halal industry is in the partial form of financing, where only a few halal industries, such as halal food and fashion, have not yet been covered in other halal industries; there is no sustainable joint commitment yet. Alternatively, suppose only Islamic banks collaborate with two other halal industries (halal pharmaceuticals and media). In that case, it also will not provide multiple positive impacts on the development of other halal industries since the four halal industries are characteristic (one by one).

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Figure 3. Partial synergy

New forms and patterns of halal industry development can be started from the development of Muslim-friendly tourism. Islamic banks conduct cooperation and work together with Muslim-friendly tourism. Figure 4 gives point that muslim-friendly tourism is also a significant component of the halal industry. Why is it? First, Muslim-friendly tourism involves and mobilizes human transfer from one place to another, so it requires excellent service to synergize with other government and private institutions/organizations. The second is to foster motivation that positively impacts the emergence of other halal industries as in Figure 5. If a country develops Muslim-friendly tourism, it will automatically also develop five other halal industries. Logically, if Muslim tourists when visiting a place to eat, they need halal food. When going to make financial transactions, they will look for Islamic banks. When they intend to shop for fashion, they will look for halal fashion for themselves and souvenirs. When tired, not feeling well, or even wanting to dress up and decorate, they look for halal medicine and cosmetics. They need halal media and recreation for news, films, entertainment, and others.

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Figure 4. Six halal industrial ecosystems

Islamic banks and Muslim-friendly tourism initiated cooperation, collaboration, and working together to build links and matches that strengthen each other, mutually beneficial, and mutual support among stakeholders in a halal industry partnership.

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Figure 5. Simultaneous-holistic synergy

Islamic banks and Muslim-friendly tourism in Figure 6 realize the simultaneous-holistic synergy, among others, first by building a partnership cooperation connection in a forum and a halal industry. This connectivity will open the space for Islamic banks and Muslim-friendly tourism. The development of ample sharia space in the economy is not enough to rely on the market (commercial sector) but also on an integrated ecosystem and connect to the social sector so that it can achieve broader penetration, both local and global. Second, optimizing the role of Islamic bank stakeholders and Muslim-friendly tourism in accordance with statements [49-54] that five parties involved: academicians, business, community, government, and media (ABCGM), called Penta helix.

Academics are a source of knowledge that plays a role in conducting research for developing prototype Islamic bank services and Muslim-friendly tourism that is relevant to the development of science and technology. Businesses, both individuals and business entities, play a role as people who carry out and maintain value-added and build networks with other businesses. The community has a role as an accelerator promoting and creating social civilization and change, creating good and impressive images and services. The government acts as a policy maker, regulation, coordinator, and supervisor of the halal industry ecosystem. Meanwhile, the media plays an essential role in building a brand image of social change being built in the community so that access to information is easily obtained and on target. Ease of access to information will invite and add new collaborators to create social changes that impact the community jointly. Here, the role of Islamic banks can facilitate in identifying Muslim-friendly tourism stakeholders.

Third, improvement of ACES (access, communication, environment, and services) infrastructure. ACES, as explained above, is an indicator used to measure and assess the availability of Muslim-friendly tourism. The more complete the availability of ACES criteria, Muslim-friendly tourist destinations will be more representative. In this case, Islamic banks play a role in providing injections of financial services and financing in providing these ACES criteria. The fourth is the intensity of the education and literacy of the halal industry. The collaboration of the implementation of this program is carried out by holding a variety of work programs together periodically in Halal fest, such as seminars, workshops, bazaars, exhibitions, scholarships, and others. The fifth is innovation and technology transformation. Here, Islamic banks and Muslim-friendly tourism also need constantly innovating service providers in accordance with the times. Digital innovation will change existing business activities. Also, the expansion of marketing and market access is carried out by digitalizing marketing. Adapting this technology will create a new offer to existing customers to be more loyal, and data collection will then be recorded, which ends in deep learning customer engagement always to provide an appropriate and satisfying service.

Sixth is a cluster of halal industry development. The synergy of Islamic banks and Muslim-friendly tourism will encourage the growth of other halal industries, either the food sector, clothing, pharmacy, media, and recreation, or even the new halal industry. This halal industry cluster is carried out in two large clusters: goods (physical products) and services (non-physical products/services). Physical products are related to food consumption, fashion, pharmacy (drugs), and cosmetics. Meanwhile, services focus on finance, tourism, health care, and media. Clustering is supported by stakeholders that will facilitate the identification of the halal industry to develop it. The halal cluster must also be guaranteed easy access to various other halal industrial products, such as banking access, financing, and others, to support business activities and other halal cluster expansions.

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Figure 6. Stages of simultaneous-holistic synergy