Enhancing halal eco-tourism through Islamic finance to achieve sustainable development goals in Indonesia

Abstract

Indonesia set the target to become a global centre. The Halal industry is being expanded to support the national objective of becoming the global centre for the Sharia economy, a global Halal hub, and the Sustainable Development Goals in 2030. As a dynamic sector of the Halal industry, the global Halal tourism industry is undergoing a profound transformation due to the rising demand for Muslim-friendly destinations and services. According to the National Committee for Sharia Economy and Finance (KNEKS), Halal tourism has been identified as a key driver of national economic growth. Several leading Halal tourism regions include Lombok, Aceh, West Sumatra, Jakarta, Yogyakarta, and West Java. This shows that Indonesia has the potential to become the world's halal tourism hub. The ecological stress affected by tourism practices, such as soil erosion, habitat degradation, waste accumulation, and natural resources exploitation, leads to environmental degradation. However, the main challenges are a lack of government support and finance. The financial challenges include local government revenue shortfalls and local budget deficits. The integration of financial support in the Halal eco-tourism industry through Islamic finance can be a long-term strategy in an effort to achieve the Sustainable Development Goals. There is a gap in determining the appropriate Islamic financial instrument and in comparing the suitable Islamic financial instrument to enhance the development of Halal eco-tourism. The result of this study shows that profitability is the primary factor for investors to invest in a project, followed by the reliability sector, and the last is sustainability sector. Several options for Islamic finance instruments to enhance Halal eco-tourism in Indonesia show that Sukuk is the priority instrument, followed by waqf, and then zakat becomes the last priority. Amid global uncertainty and market downturn, Sukuk is more resilient, especially for the Ijarah contract that generates a fixed amount of return. Sukuk also emphasizes the sustainability factor as it is used for enhancing Halal eco-tourism that preserves nature ecosystem and increases social welfare. Sukuk is a flexible instrument that can be integrated with a waqf scheme, such as cash waqf-linked sukuk, to diversify and strengthen the Sukuk innovation.