The plastic is washed, sanitised and cut into strips then woven on traditional handlooms called chakra.
Incut chief financial officer Cam, says the recycling aspect to their product means less waste is being dumped.
"Our bags not only help the environment but it also helps these communities by providing them jobs in their home towns and remote villages.
Our product is unique and cannot be found in the New Zealand market."
The students said their business is in the running for the national excellence award and it also meets the sustainability helping communities award.
■The Lion Foundation YES is an experiential programme where students set up and run a real business.
Each YES company creates their own product or service and brings this to market.
They learn about business planning and operations and develop a range of personal and business skills to consult with and create networks in their community.
There is a $25,000 national prize pool as well as regional awards, cash prizes and tertiary scholarships.