Islamic economy is the last great untapped market

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Muslims account for 26 percent of the global population – about 2.2 billion people – and the colossal potential of the Islamic economy is ripe for the picking.

This growing and increasingly well-heeled demographic spent around $2 trillion on halal products in 2021, according to the latest State of the Islamic Economy report.

The industry has evolved beyond Islamic finance to include convenience food, pharmaceuticals, tourism, media, clothing, cosmetics and more.

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In the West, second and third-generation Muslims are seeking faith-aligned products that chime with modern consumer lifestyles – such as Islamic Deliveroo, halal ice-cream, tech-assisted smart hijabs and even Muslim Barbie dolls. 

And like the rest of the world, Muslims are becoming increasingly globally connected, tech-savvy and label-conscious.

Muslims want brands they love. For too long, the Islamic consumer has been subjected to poorly-executed branding or crudely stereotyped marketing.

Unequivocally, the modern Muslim presents an opportunity for savvy marketers and investors. But despite the impressive top-level numbers, some industry teething challenges persist.

Certification confusion

In its simplest terms, halal is an Arabic word that means “permissible” or “lawful”. This generally means pork-free, alcohol-free, gambling-free and interest-free. Halal meat must be slaughtered by specific methods. 

As with all modern certification methods, guaranteeing practices and provenance along the supply chain can prove challenging.

Smart countries know that halal regulation schemes can attract more investment, stimulate trade and boost industry. As such, a handful of nations have historically jostled for rubber-stamping supremacy in the last two decades.

For all its solid business credentials, the halal sector often comes up against regulatory bottlenecks. The hand-wringing and disagreement of the various regional and global certification bodies has historically bred a culture of inertia.

This is one area where the global halal economy must look to evolve as it grows into a more robust industry. Smart blockchain and AI may have a role to play here.

Nevertheless, Malaysia, with its large Muslim population, has long reigned as the global doyen of halal. The Asian nation is home to a highly developed Islamic finance sector and is seen as one of the bellwethers of worldwide halal accreditation standards.

Malaysia has been named the top global halal economy for the ninth consecutive year by the Global Islamic Economy Indicator 2022, followed by Saudi Arabia, the UAE and Indonesia.

New entrants to the top 15 include the UK and Kazakhstan. Turkey and Singapore moved up to reach the fifth and seventh positions, respectively.

Shaky starts

Around a decade ago, Dubai had designs on becoming the world’s halal hub. The Dubai Islamic Economy Development Centre (DIEDC) was established to transform the emirate into the “capital of Islamic economy”. There was much hullabaloo surrounding the opening of what was pitched as a game-changing all-in-one hub. 

But today, there is little talk of DIEDC. As one pundit tells me, “The Muslim economy is growing but it’s still fragmented. They didn’t have the time to wait. It requires enormous investment.” 

But where there has been a lull in Dubai’s halal push, Saudi Arabia has stepped in. The kingdom is undergoing rapid social and economic transformation and is witnessing a boom in the halal economy.

In October 2022, Saudi Arabia’s Public Investment Fund announced the launch of Halal Products Development Company. The new body will invest in localising production and increasing efficiency, including plans to certify and export to global markets. 

Strong backing needed

As the halal sector expands, it will require government funding and vision for optimal, exponential growth. Robust and patient policies must be drawn up to underpin startup finance, investment mobilisation and regulatory clout.

In a sea of conflicting regulatory bodies, competing nations, and mixed messaging, halal startups and businesses must negotiate a fragmented market. Greater collaboration is needed, not only among businesses, but also between trade bodies and governments. 

Moreover, education and awareness of the sector’s value – whether funded by governments or trade bodies – need to be conveyed to investors, venture capitalists and buyers. 

Make no mistake, the Nikes and the Nestlés of the world have caught on to the size of the halal market. They have been bringing out limited add-on ranges and designs aimed at Muslims in the last few years – with varying success. 

But while global conglomerates can afford to invest in niche loss-makers as the sector finds its feet, that is not the case for the world’s many Islamic fashion designers, entrepreneurs, and boutique startups. 

With support, homegrown SMEs will seize the opportunity to inject the halal economy with the dynamism, depth, innovation and choice it needs.

Perhaps a true measure of the Islamic economy’s success will be seen in the arrival of the Muslim world’s first globally recognised brand – a halal Nike or Kellogg’s.

And in the meantime can we do away with the sub-par branding as soon as possible? 

Alicia Buller is Opinion Editor at AGBI