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The Role of Halal Flipbook PDF
Finance in production and investment of halal indestry
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By: Assoc Prof Dr Baharom Abd Hamid Director, Research Management Centre, INCEIF
The Role of Halal
FINANCE IN PRODUCTION AND INVESTMENT OF HALAL INDUSTRY
According to World Bank and the United Nations, there won’t be enough food to feed the global population when it jumps from the current seven billion people to nine billion by 2050 and the food scarcity problem is serious that the next world wars could be fought over food1. Muslim population is expected to increase by 73 percent from 1.6 billion in 2010, to 2.1 billion in 2027 and to 2.8 billion in 2050 representing 25.2 percent of the global population. While the Millennial2 consumers, totalling 0.7 billion in 2027 across OIC countries, represent an increasingly important segment in the Islamic Economy. One third of Muslims today under 15 years old and nearly twothirds under 30. Often referred to as Generation Y. The combined spending power of USD2.45 trillion. Muslim populations globally spent an estimated USD1.24 trillion on food and beverage (F&B) in 2016, a growth of 6.2 percent from the previous year, and is expected to reach USD1.93 trillion by 2022, a CAGR of 7.6 percent from 2016. With 1.7 billion Muslims worldwide, and sizable, as well as to the demand for Halal Food and beverage (F&B). At the same time, there has been convergence with the demand for quality food by non-Muslim consumers wanting organic and sustainably sourced food.
1 Said by Usha Haley, a professor of business management at West Virginia University.
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2 Millennials are individuals born between 1980 and 2000
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This has led to Halal food being increasingly popular among non-Muslims, such as in China and Europe, while Halal food manufacturers are catering to the trend for both religiouslypermissible food and organic food. This has been a recipe for success in many markets, particularly in the U.S and the U.K. While on the other hand, the total assets of trillion in 2016, and expected to surge to USD3.8 trillion by 2022 (Thomson Reuters, 2017/2018). at a remarkable pace and the consumption
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Role of Halal finance in Halal production Halal is big business in today’s world. The growing Muslim population worldwide as mentioned earlier, combined with the increasing demand for Halal products from non-Muslims, has fuelled the rapid development of the Halal industry. But as we know to develop an established Halal industry, one needs to have enough capital to meet such excessive demand from both types of customers. But it should be noted that just like Muslim are cautious about the Halal products at the same time which is coming from halal or haram sources.
Making their financing a guaranteed opportunity for capital and wealth growth.
become a powerful market force across global markets. Taking into consideration the Muslim population and demand from non-Muslim customers for Halal industry, there is greater need to supply and produce Halal products to meet the demand of both types of customers. Therefore, industry not only to make sure the respective sukuk etc. where Muslim and non-Muslim both can invest in Halal industry.
fuelling and vehicle to achieve growth of Halal industry and to meet the current and potential demand for Halal products. Taking into consideration the potential demand for Halal products and directing funding towards the tremendous growth opportunities in the promising Islamic sectors: Halal food, Halal tourism, Halal treatments and cosmetics, conservative fashion, entertainment, digital services through apps or data, and so on. These sectors have not yet fully evolved and are still opportunity for capital and wealth growth.
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Halal investment also has the products like tawaruq (as an example) which could be used to finance short and mediumterms projects by providing short and medium-term financing facilities.
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investments. Although Halal industry is growing rapidly and servicing not only Muslim population but also at the same time has expansion to non-Muslim population. Muslims are also cautious about Halal products but have we thought about the
Role of Halal finance in Halal Investment businesses, therefore in order to complement Halal industry
in one hand will open new portfolios of asset for Halal money their long-term projects. Similarly, Halal investment also has products like tawarruq (as an example) which could be used to
Investors' decisions to invest in Halal industry are closely
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risk mitigation products are limited or not do not match their needs, they might be discouraged to invest. Therefore to adopt better technologies, to purchase Halal industry inputs, or to make other decisions that could
One of the main obstacles for the growth of Halal industry is the lack of consistent availability of financing.
would increase investors’ investment choices not only to have Halal investment option but at the same time to get competitive return. One of the main obstacles for the growth of Halal industry is the lack of consistent
many shariah compliant contracts like Ijarah, Musharakah, Mudarabah, Salam, Istijrar and
projects of Halal industry even non-Muslim money could be chanelled to Halal industry as long as these shariah compliant contracts are used. For example, Halal meat is coming from Brazil to the Muslims world. But if we see there are a lot of Halal money staying outside the current For example, in Turkey USD50 billion are
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production of these Halal goods could take place in a Islamic country. Adding Halal money with Halal industry would boost the Halal industry further, and by having enough are facing funding constraints. To summarise, we can conclude that taking into consideration the current Muslim population and potential future growth, it would pave the way for Halal industry to develop and grow which justify the potential good return for those who invest in Halal Industry. Similarly, Muslims spending on F&B slated to reach USD1.93 billion by 2022, and the Muslim population exceptionally young and growing, brought into the picture then the growth rate of Halal industry would be multi-folded. Halal industry is open for both Muslim and non-Muslim population which justify the potential demand for Halal the Muslims will become exporters of Halal goods to the rest of the world.
Halal goods but at the same time will birth to the new class of Halal investment for Halal money, return on investment without the broader objectives of proving not only Halal goods and services to the Ummah but at the same time creating whole new Halal eco-system. Whereby money is coming through a Halal way, investment in a Halal industry, producing Halal goods and services and
will develop new Halal market economic paradigm i.e. the Halal ecosystem.
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