By: Khaswar Syamsu, Head of the Halal Science Center of IPB University and Muti Arintawati, the President Director of LPPOM
MSMEs are one of the most essential pillars of the Indonesian economy. How does halal certification play a role in the development of MSME businesses?
Based on data from the Ministry of Cooperatives and SMEs, the number of Micro, Small, and Medium Enterprises (MSMEs) currently reaches 64.2 million, contributing to the Gross Domestic Product of 61.07% or 8,573.89 trillion rupiahs. MSMEs’ contribution to the Indonesian economy in their ability to absorb labor reaches 97% of the total workforce and can collect up to 60.4% of total investment.
This shows the great potential that can be explored to improve Indonesia’s economic conditions, especially after the COVID-19 pandemic. On the other hand, the government has enacted Act No. 33 of 2014 concerning Halal Product Assurance (UU JPH), which requires halal certification for all products entering, circulating, and trading in the territory of Indonesia. Products from the MSE scale are not exempted from the obligation to be halal certified.
Unfortunately, halal certification for MSEs is not always smooth. There are several challenges in realizing MSEs as the spearhead of improving and developing the Indonesian economy. Mainly related to the guarantee of halal material supply, the capacity of human resources (HR) halal guarantors, and the financing aspect for halal certification.
Assurance of Availability of Halal Material Supply
Halal products can only be produced from halal materials (raw materials, additional materials, and auxiliary materials) and processed in production facilities that are free from contamination of haram and unclean materials. Therefore, halal certification needs to prioritize critical category materials upstream used by MSEs downstream, such as slaughtered products (meat and derivatives).
Based on a study by the National Committee for Sharia Economics and Finance and the Halal Science Center of IPB University (2021), the number of Slaughterhouses (RPH)/Poultry Slaughterhouses (RPU) that have been halal certified is still low, which is less than 15% of the total 1329 RPH/RPU throughout Indonesia. RPH/U is the first link in the halal supply chain.
This figure will be even lower if it includes data on Slaughterhouses (TPH) and Poultry Slaughterhouses (TPU) for traditional markets that only require a small area from the residential area to the market. The low number of halal-certified RPH/RPU will make it challenging to ensure the availability of halal materials and trace the halalness of the materials used by MSEs.
This will make it difficult to certify halal MSEs, especially those that use meat and/or meat derivatives as the most critical ingredients in halal certification. Support from the Regional Government and the Ministry of Agriculture is essential to drive halal certification of RPH/RPU in each region.
Other upstream products—such as sugar, oil, wheat, sauce, flour, and flavors—used by MSEs as raw materials and additional materials are produced by large industries in Indonesia that generally already have halal certificates. If there is a guarantee of the availability of halal material supplies for MSEs, then most of the challenges in MSE halal certification can be resolved.
To answer this challenge, there needs to be a Halal Food Distribution Center in each region. This halal food distribution center must also be supported by the availability of Halal RPH/RPU facilities from livestock production centers in the surrounding areas.
Human Resource Development
Unlike Large Enterprises, MSMEs have a limited number and capacity of human resources. To ensure the halalness of products consistently and continuously, a competent halal supervisor is needed, at least one person for each Halal MSE.
The competencies that must be possessed include knowledge of halal fatwas that underlie halal certification standards, understanding of critical points of prohibition of materials and production facilities, and how to prepare a list of halal materials along with valid supporting documents. Planning, implementing, and evaluating the Halal Product Assurance System (SJPH) to guarantee the halal production process is consistent and continuous is also a must.
In many cases, SMEs need help to provide competent Halal human resources. The existing human resources also require training, guidance, and assistance to understand the requirements and procedures for halal certification and prepare the halal certification requirements listed in the SJPH. Universities can do this through the Halal Science Center (HSC) or other competent training institutions. To increase competitiveness in global competition, MSMEs must also be educated on financing and using Sharia digital platforms, food safety, hygiene (good manufacturing practice), development of digital applications for upstream and downstream value chains, and digital/online marketing (e-commerce). Therefore, the Smart and Halal MSME Center must integrate training, guidance, and assistance in halal, thayyib, sharia finance, and digital application aspects in the industrial era 4.0.
Financing Aspect
Cash flow and MSME profits are relatively smaller than large-scale businesses. This is why MSMEs are reluctant to take care of halal certification of their products or pay halal certification fees.
The halal certification process certainly requires costs. There is a need for halal supervisor training to prepare human resources who are responsible for the consistent and sustainable halal production process. Then, the audit process by the Halal Inspection Body (LPH) is in the form of field verification. Sometimes, laboratory testing of materials and products and other administrative costs are required.
The process of examining and testing the halalness of MSEs can be carried out through two channels, namely the Halal Inspection Body (LPH) for general/regular registration and self-declaration of business actors accompanied by the Halal Product Process Companion (PPPH) for those who meet the requirements. This is regulated in Article 79 of PP No. 39/2021 and the Regulation of the Minister of Religion (PMA) Number 26 of 2019 concerning implementing Halal Product Assurance.
It is undeniable that both still require financing. To overcome the financing problem, the government has provided free halal certification financing facilities for MSEs that meet the requirements of Article 81, paragraph 1 of Government Regulations No. 39 of 2021, concerning the Implementation of the Halal Product Assurance Sector. The government subsidizes the cost of halal certification for MSEs from the State Revenue and Expenditure Budget (APBN). Unfortunately, the limited source of APBN funds is also feared not to guarantee a sufficient budget to cover the halal certification costs of all MSMEs in Indonesia. Other potential sources of funds that may be explored are the MSME development budget from ministries and related government agencies at various levels, Corporate Social Responsibility (CSR) funding sources from BUMN and large-scale businesses/industries, and assistance from Islamic community organizations. Suppose all the challenges in the MSME halal certification process can be overcome. In that case, we hope that Halal MSMEs will become the driving force for improving and developing the Indonesian economy and the spearhead of the mainstay to make Indonesia the world’s halal center. God willing. (***)
