Halal Product Certification Bill in Indonesia expected to transform markets

Source: Wardah website. How to wear red lipstick.

Close to 90% of the population in Indonesia is Muslim and thus interested in halal certified products, notes Euromonitor in a blog post.

Halal beauty products was a relatively niche area until the end of the review period, said Euromonitor, naming Paragon Technology and Innovation as the most prominent player in this area at the end of 2015. Its Wardah brand in cosmetics and skincare has allowed the company to capitalise on the growing popularity of halal beauty products in 2015, with its value share reaching 2% that year.

Things are expected to change as Indonesia passed the Halal Product Certification Bill in September 2014 that stipulates all products, including beauty brands, must be halal-certified by 2019. This requirement covers product ingredients, production machinery and equipment, as well as the entire value-chain process, with international manufacturers consequently starting to work towards halal certification, Euromonitor notes.

Some early adopters include L’Oréal Indonesia, which built a manufacturing plant in Indonesia at the end of the review period and now has around 145 of its ingredients halal-certified so as to meet the needs of Indonesian consumers. Colgate-Palmolive is another early adopter, with the company launching a halal toothpaste featuring miswak (Editor's note: miswak [مسواك] refers to twigs from a particular tree that were traditionally used for cleaning the teeth).

Unilever Indonesia also joined this trend in 2015 with the launch of Sunsilk Clean & Fresh, which is targeted at women who wear hijabs daily. The company partnered with New York based Francesca Fusco, a leading scalp treatment specialist, to launch this new variant. Incorporating citrus vitamin complex, Sunsilk Clean & Fresh nourishes hair strands while offering a clean and fresh sensation for the scalp which helps hijab-wearers feel more comfortable.

According to Euromonitor, halal beauty products are expected to gain further prominence over the forecast period as a result of the implementation of the Halal Product Certification Bill. Manufacturers will have to move quickly to ensure their existing ingredients and products are compliant in the short-term. This is especially crucial for international giants, which dominate sales in multiple beauty and personal care categories. While coping with securing halal-certification for existing ingredients, international manufacturers will place a greater emphasis on steering ongoing product innovation efforts towards halal offerings.

The blog concludes that there is a window of opportunity for local brands such as Wardah to take advantage of the gap before international manufacturers obtain halal certification and start to capture the interest of local consumers. "This will have to be done through heavy marketing campaigns, including sampling, in order to create awareness among local consumers, given that sales of local halal beauty brands remained limited over the review period," states the blog post.

Hashtag: #halaldariawal ("completely halal")

IFSB core principles for Islamic finance regulation approved by council

The Islamic Financial Services Board (IFSB) has announced that the Council of the IFSB at its 26^th Meeting, held in Jakarta, Indonesia on 2 April, approved the adoption of a new standard on Core Principles for Islamic Finance Regulation (CPIFR) (Banking Segment), known as IFSB-17.

Core Principles for various financial sectors have become a standard tool to guide regulators and supervisors in developing their regulatory regimes and practices. The Standard has been developed with the participation of IFSB member regulatory and supervisory authorities, the Basel Committee on Banking Supervision and multilateral organisations including the International Monetary Fund (IMF)/World Bank in the working group. It aims to complement the Basel Core Principles in assessing the strength and effectiveness of regulation and supervision by the regulatory and supervisory authorities in countries with a significant Islamic banking industry. 

For the conventional sector, such assessment is carried out by the respective regulatory and supervisory authorities, peer reviews and by third parties, including by the IMF/World Bank as a part of their Financial Sector Assessment Programme (FSAP) for the banking, insurance and capital markets sectors to assess the strength and effectiveness of regulation and supervision.

The IMF/World Bank have completed over 84 FSAPs in several MENA and IFSB member countries, which, in certain cases have included an assessment of the Islamic banking, capital market and insurance sectors. However, many FSAP reports have either not reviewed Islamic finance sectors at all, or identified the absence of applicable Core Principles for Islamic finance as a major hurdle for not performing a regular assessment.

The IFSB said that the CPIFR will provide a set of Core Principles – along with the associated assessment methodology – for the regulation and supervision of the Islamic financial services industry (IFSI), taking into consideration the specificities of the institutions offering Islamic financial services (IIFS) in the banking segment, the lessons learned from the financial crisis, and the objective of complementing the existing international standards, principally the Core Principles for Effective Banking Supervision issued by the Basel Committee on Banking Supervision. The differences in the operational and shari`ah characteristics of Islamic finance products in various jurisdictions highlight the need for standardisation of the prudential supervision framework at the international level, the IFSB noted.

“It is envisaged that these Core Principles will be used by jurisdictions as a benchmark for assessing the quality of their regulatory and supervisory systems and for identifying future work to achieve a baseline level of sound regulations and practices for Islamic finance. The CPIFR will promote further integration of Islamic finance with the international architecture for financial stability, while simultaneously providing incentives for improving the prudential framework for Islamic finance across jurisdictions so that it is harmonised and consistently implemented across the globe,” explained Jaseem Ahmed, Secretary-General of the IFSB.


With the IFSB-17 Standard adopted, the IFSB also expects to prepare, in the coming years, Core Principles for the Islamic insurance (takāful) and Islamic capital market sectors. An initiative in which the Core Principles assessment methodology would be pilot tested in specific jurisdictions is also on the books.