What is the Islamic Economy?

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- What is really meant by the term ‘Islamic Economy’ …

- What is really meant by the term ‘Islamic Economy’
- How can Dubai play a real leadership role?
- What are the implications for the global markets?

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  • Islamic economy is a productive economy. Unlike present inflationary economies, Islamic economy is inflation-free economy. Earning income from lending, speculative activities, taxation, and financial corruption are forbidden. On the individual level, Islamic economy recognizes the right of everyone to live on or above specified standard of living.
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  • 1. What is the Islamic Economy? ~ and why Dubai? Sayd Farook, Global Head Islamic Capital Markets, Thomson Reuters Abdalhamid Evans, Editorial Director, Global Islamic Economy Summit
  • 2. • The Islamic Economy is emerging as a new economic paradigm that will be driving economic growth over the coming decade. • Bringing together diverse elements across various industry sectors, spanning geographic regions and crossing cultural boundaries, this inaugural Summit will be the defining event of the Global Islamic Economy. • The Global Islamic Economy Summit is organized by Thomson Reuters and Dubai Chamber of Commerce & Industry, held under the patronage of HH Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, on November 25-26th 2013 at Madinat Jumeirah, Dubai, UAE. • The Global Islamic Economy Summit will create the context in which the various Islamic Finance sectors and Halal Food, Travel, Lifestyle, SME Development and Infrastructure converge, creating a new landscape of economic opportunity. Islamic Economy
  • 3. Six pillars of the Islamic Economy Islamic Finance & Insurance • Islamic banking • Islamic asset management • Takaful • Retakaful • Sukuk and capital markets • Waqf endowments Halal Food • Agriculture, ingredients and manufacturing • Retail • Logistics • Research and product development • Food services Halal Lifestyle • Cosmetics • Personal care • Pharmaceuticals • Fashion • Entertainment • Art and design • media / news media Halal Travel • Hospitality • Tourism • Meetings, incentives, conferences and events (MICE) • Healthcare • Hajj / Umrah SME Development • Technology and innovation • Venture capital financing • Incubation • Training Islamic Economy Infrastructure • Training and education • Compliance • Standardization • Research • Muslim consumer marketing and research • Government services Islamic economic sectors are diverse, each with its own challenges and unique opportunities
  • 4. Islamic Finance & Insurance Key Features of the Islamic Finance and Insurance Sector 72% of Muslims are non-banked Sukuk market is expected to grow by 10% or more Global Islamic banking assets of $1.3trillion in 2011, expected to reach $2 trillion by 2014 Average annual growth of 19% over the last four years Growing 50% faster than overall banking sector in several core markets Over 50% of the growth will come from emerging Islamic finance markets Top 20 Islamic banks make up 55% of the total Islamic banking assets, concentrated in 7 countries, (GCC, Malaysia and Turkey) The global Takaful business will reach $20bn by 2017, with 62% of current premiums coming from the GCC Islamic finance and insurance is the most prominent sector in the Islamic economy, with impressive growth rates and a global spotlight Is Islamic finance making an positive impact on the markets it is operating in? Is it making a difference to ordinary consumers?
  • 5. Halal Food Key Features of the Halal Food Sector The global market for Halal foods is estimated at $685bn a year Muslim countries’ food industry imports are valued at $126bn, 12% of global food imports GCC food market was worth $83 billion in 2012, expected to rise to $106bn by 2017 (AT Kearney) According to IFANCA, US consumers spent $15bn on Halal products in 2011 Food production dominated by non-Muslim countries such as Australia, New Zealand, Brazil, USA, EU, India The Halal food sector is an influential sector within the global food industry, with its own challenges and issues across the entire supply chain With food production dominated by non-Muslim countries, how can we ensure the quality of Halal standards for consumers?
  • 6. Halal Lifestyle Key Features of the Halal Lifestyle Sector The Halal Lifestyle market was valued at $2.1 trillion in 2011. The Muslim population of 1.6 billion is growing at twice the rate of the global population Global Muslim apparel market at USD $96 billion Muslims represent ‘the fastest growing consumer segment in the world’ (AT Kearney) Over the next 30 years, 70% of global population growth will be in Muslim countries (The Future Report) University of Malaysia estimates the halal cosmetic & personal care market to be worth between US$5 bn and $14bn in Muslim-populated countriesThere is increasing preference for natural and organic beauty and personal care products, which are considered halal-friendly. Halal lifestyle is a sector gaining in prominence as Muslim consumers around the world are increasing identifying with their Islamic roots Are multinationals appropriately targeting this economic segment? Is there an opportunity for SMEs in this high-growth segment?
  • 7. Halal Travel Key Features of the Halal Travel Sector With growing economic prosperity in Muslim countries, Halal travel is becoming a major segment of the global tourism industry In a challenging global economic environment, how can travel sector stakeholders address this lucrative, yet underserved, market segment? MENA markets represent 60% of total global tourism expenditure Muslim tourists globally represent a major niche market worth $126.1 billion in 2011 (excluding Hajj & Umrah) Muslim tourism growing at 4.8% through 2020, higher than the global average of 3.8% Global Muslim tourist spending is 12.3% of the worldwide total Halal travel to grow 20% over next decade (Global Futures and Foresight)
  • 8. SME Development Key Features of the Islamic SME Development 62% of the Muslim world is under the age of 30, compared to 51% globally Muslim countries rank much lower (avg 117) in getting credit for SMEs, compared to developing countries (avg 89) The Halal food sector in non-Muslim countries is primarily driven by small businesses, plus the presence of some MNC’s Arab youth unemployment is 35% for men and 45% for women (Nasser Saidi June 2013) Arab world needs 60 million new jobs by 2020 (Nasser Saidi June 2013) Only 10% of MENA SME’s get bank financing SMEs play a major role in most Muslim countries and their development is vital to the overall growth of their respective economies Are SMEs being supported to become major players in their respective economies? What support should governments provide to SMEs?
  • 9. Infrastructure Development Key Features of the Islamic Economy Infrastructure Sector Of the 300 Halal certification agencies worldwide, only 30% are registered legal entities (IHI Alliance 2011) There are no global standards for Halal food or an international regulatory framework for the Halal market No mandatory Shariah rules for Islamic finance either, only three set of standards: At the Central bank level – the Islamic Financial Services Board (IFSB) develops best practice standards and regulations that central banks can adopt On the industry level - the AAOIFI develops Shariah, Accounting Auditing and Governance that individual financial institutions can adopt On a bank level – Shariah scholars and in house Shariah review teams regulate the day to day activities of each institution Islamic economy infrastructure is scattered, with limited convergence on Halal standards across markets How important is standardization and convergence for the Islamic economy? Is the current scattered landscape a hindrance for growth?