The global Halal economy and the Islamic fi nance industry are natural economic partners as both contribute toward the sound and prospering Halal ecosystem. The Halal industry is going global by virtue of its qualitative strength, essential elements of religion, health and holistic wellness. Halal, which simply means permissible and lawful, is associated with a religious and spiritual foundation under Islam. The scope of Halal is beyond religious practices and is all about a sense of morality and guide to living a good and wholesome life. Halal has turned into a brand and is being accepted globally. The Halal industry, which is valued at about US$560 billion a year, serves to meet the needs of Halal-conscious clients and is growing at an estimated annual rate of 20%. The global Halal products and services sector is growing at 8% yearon- year and currently valued at US$3.2 trillion (excluding Islamic fi nance) which is expected to reach US$12.14 trillion by 2024, according to Hexa Research.

1. 19©
29th
November 2017
SECTOR FEATURE
Dr Nafis Alam
is an associate
professor of
finance at
Henley Business
School of the University of Reading
and Lokesh Gupta is attached to
RM Applications as the head of
consulting. They can be contacted at
n.alam@henley.edu.my and lokesh@
rma.com.my respectively.
Halal has turned into a brand and is
being accepted globally. The Halal
industry, which is valued at about
US$560 billion a year, serves to meet
the needs of Halal-conscious clients and
is growing at an estimated annual rate
of 20%. The global Halal products and
services sector is growing at 8% year-
on-year and currently valued at US$3.2
trillion (excluding Islamic finance)
which is expected to reach US$12.14
trillion by 2024, according to Hexa
Research.
Drivers for the Halal industry
The importance of religion, as well
as fulfilling religious obligations, is
the foremost driver for the increase in
demand for Halal products and services.
The second driver of the industry’s
growth is a sizeable and growing Muslim
population. According to Pew Research
Center, Muslims stand second after
Christians, with around 1.8 billion people
(24.66% of a 7.3 billion global population)
which is expected to grow to 3.1 billion
(32%) by 2060 (see Chart 1). The third
key driver is the growing strength of
Halal economies and the increase in
the purchasing power of consumers in
general. There are other drivers such as
growing urbanization and the demand
and growing awareness for a hygienic,
pure and quality and wholesome
lifestyle.
The current status and future
growth of the Halal industry
The growth of the Halal industry has
been observed to be rising and is giving
good revenues to companies in this
industry. All sectors of the Halal industry
are flourishing and further seeing
increasing demand and growth rates
for each of them. The Halal-conscious
consumer market is set to have a lot of
options to choose from various sectors
and the industry is booming and quickly
catching up as per the Thomson Reuters
report of 2016-17.
The following are some of the key
segments of the Halal industry:
• Halal food: The global expenditure
of Muslim consumers in the food and
beverage sector is US$1.17 trillion
(16.6% of global expenditure) which
is expected to reach US$1.9 trillion by
2021, a compound annual growth rate
(CAGR) of 9% from 2015. The Halal
food space is a global value chain and
the leading players are from OIC and
non-OIC countries. Australia, Brazil,
Canada, France, New Zealand and
the US are the biggest Halal suppliers
in the west. In the east, Malaysia,
Indonesia, Thailand, the Philippines,
India and Singapore are the leading
Halal product suppliers to the world.
• Halal fashion: Halal or modest
fashion for Muslim consumers is
driven by an underlying Islamic
foundation to preserve modesty. The
dressing of a Muslim is different from
the norm whereby full body coverage
with a headscarf or veil is commonly
practiced. The global expenditure of
Muslim consumers in the clothing
and footwear sector is US$243 billion
(11% of global expenditure) which is
expected to grow to US$368 billion by
2021 with a CAGR of 7.2% from 2015.
• Halal cosmetics: Halal cosmetics
and personal care products are
taking off and are seen as the next
emerging sector. It has been observed
that generic creams, makeup and
Halal: The way to go forward
The global Halal economy and the Islamic finance industry are natural economic partners as both contribute
toward the sound and prospering Halal ecosystem. The Halal industry is going global by virtue of its qualitative
strength, essential elements of religion, health and holistic wellness. Halal, which simply means permissible and
lawful, is associated with a religious and spiritual foundation under Islam. The scope of Halal is beyond religious
practices and is all about a sense of morality and guide to living a good and wholesome life. ASSOC PROF DR
NAFIS ALAM and LOKESH GUPTA explore.
HALAL
Chart 1: Global population projections (2015-60)
Source: Pew Research Center
Note: Percentage indicates growth projection for each religion
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
Populationin‘000
34%
70%
3% 27%
5%
0% 15%
Christians
3,054,460
2,276,250
2060
2015
Muslims
2,987,390
1,752,620
Nones
1,202,300
1,165,020
Hindus
1,392,900
1,099,110
Buddists
461,980
499,380
Folk
religion
440,950
418,280
Others
59,410
59,710
Jews
16,370
14,270

2. 20©
29th
November 2017
SECTOR FEATURE
HALAL
medicines may contain gelatine,
animal fat and other animal residues,
which may not be in compliance with
Islamic law. Halal cosmetics and
pharmaceuticals ensure products
are free from non-Halal ingredients.
Muslim spending on cosmetics was
US$56 billion in 2015 (7% of global
expenditure) which is expected to
touch US$81 billion by 2021 with a
CAGR of 7%. The leading countries in
the Halal pharmaceutical markets are
Malaysia, Indonesia, Singapore and
Brunei.
• Halal pharmaceuticals: Halal
pharmaceutical products dealing with
medicines must contain ingredients
permitted under Shariah law. Muslim
spending on pharmaceuticals was
US$78 billion in 2015 (7% of global
expenditure) which is expected to
touch US$132 billion by 2021 with a
CAGR of 9%. The leading countries in
the Halal pharmaceutical markets are
Malaysia, Indonesia, Singapore and
Brunei.
• Halal tourism and hospitality:
The Halal travel segment is to offer
services to Muslim travelers who
abide by Islamic religious principles,
including providing Muslim-
friendly services during travel and
in hotels such as Halal food and
Halal amenities. Muslim spending
on Halal tourism was US$151 billion
(excluding Hajj and Umrah) in 2015
(11% of global expenditure) which is
expected to touch US$243 billion by
2021 with a CAGR of 8.25%.
For the Halal industry, the provision
and availability of Islamic financing is
of paramount importance to support
their daily operations by providing
ethical financing. This is also beneficial
for Islamic financial institutions as
they have an opportunity to encourage
Halal companies to utilize Islamic
financing facilities and achieve a wholly
integrated Shariah compliant status.
Halal industries in all sectors have
various financial needs such as trade
finance, risk management, liquidity
management, working capital needs
and other corporate financing needs.
Islamic finance has the opportunity to
provide suitable financing requirements
throughout the value chain within the
Halal economy.
Conclusion
The Halal industry is not free from
challenges especially regarding the
standardization of Halal standards
globally. Fundamentally, it is the same;
however, it may differ by country due to
different interpretations among different
Islamic schools of thought. There is a
need to have global Halal standards
practiced worldwide to achieve the
confidence and trust of Muslim
consumers. There have been initiatives
among the religious authorities of OIC
countries to work toward establishing a
global Halal standard, but there is still a
long way to go. The Halal industry is
huge, diversified and expanding from
Halal food to Islamic banking, serving
the end-to-end needs with universal
appeal. There has been global interest
and various initiatives have been taken
by the governments of OIC and non OIC
countries to strengthen the Halal
industry further as it is a market with
huge potential, high growth and a high
profitability rate.
Continued
There is
a need to
have global Halal
standards practiced
worldwide to achieve
the con idence and
trust of Muslim
consumers
Table 1: Global Halal industry
Halal food Halal fashion Halal
pharmaceuticals
Halal cosmetics Halal tourism and
hospitality
Halal finance
2021
Estimated Muslim
F&B expenditure
to grow to US$1.9
trillion (18.3% of
global expenditure)
2021
Estimated
expenditure by
Muslims to grow to
US$368 billion (CAGR
of 7.2% from 2015
2021
Estimated
expenditure
by Muslims on
pharmaceuticals
to grow to US$132
billion (CAGR of 9.9%
from 2015)
2021
Estimated
expenditure by
Muslims on cosmetics
to grow to US$81
billion (CAGR of 7%
from 2015)
2021
Estimated
expenditure by
Muslims on tourism
to grow to US$243
billion (CAGR of
8.25% from 2015)
2021
Islamic finance's
total global projected
assets are US$3.5
trillion (CAGR of 12%
from 2015
2015
Global Muslim
spending on F&B is
US$1.7 trillion (16.6%
of global expenditure)
2015
Global Muslim
spending on clothing
is US$243 billion (11%
of global expenditure)
2015
Global Muslim
spending on
pharmaceuticals is
US$78 billion (7% of
global expenditure)
2015
Global Muslim
spending on
cosmetics is US$56
billion (7% of global
expenditure)
2015
Global Muslim
spending on tourism
is US$151 billion (11%
of global expenditure)
2015
Islamic finance
market stands at a
US$2 trillion in assets
2015
Halal certified F&B
revenue globally has
been estimated at
US$415 billion
2015
Revenue from Halal
fashion clothing
(women) has been
estimate at US$44
billion
2015
Global Muslim
spending growth rate
on pharmaceuticals
is 4.2% from the year
2014
2015
Global Muslim
spending growth rate
on cosmetics is 4.2%
from the year 2014
2015
Global Muslim
spending on Muslim
friendly tourism is
US$24 billion
2015
Year-on-year growth
Islamic fund – 15%
Sukuk – 14%
Takaful – 11%
Banking – 6%
Source: Author’s view; figures adapted from the Thomson Reuters report 2016-17