The assets of the Islamic finance sector, which were estimated at over $2 trillion in 2016, are expected to surge to $3.8 trillion by 2022, said the State of the Global Islamic Economy Report 2017-2018 issued by the Dubai Islamic Economy Development Centre (DIEDC).
Both Muslim-majority and Muslim-minority countries are recognizing the segment’s potential, with banks becoming fully-fledged Islamic institutions, and governments encouraging Islamic Finance to improve financial inclusion, added the report titled ‘Outpacing the Mainstream’ issued in collaboration with Thomson Reuters.
The report was released on the sidelines of the fifth edition of the Islamic Economy Award, held under the patronage of Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, at the Ritz-Carlton DIFC. The report was launched by Mustafa Adil, head of Islamic Finance at Thomson Reuters, in the presence of Abdulla Mohammed Al Awar, CEO of DIEDC. Although Malaysia leads the Global Islamic Economy Indicator for this year, the UAE has been ranked first among 10 countries in three sector indicators – Modest Fashion, Halal Media and Recreation, and Halal Pharmaceuticals and Cosmetics.
Sultan bin Saeed Al Mansouri, UAE Minister of Economy and chairman of DIEDC, said: “This year’s Global Islamic Economy Indicator testifies to the success of the UAE in pioneering an appropriate Islamic economy ecosystem within a short period, when compared with other nations that have been active in fostering this niche economic system – especially in the halal industries space. Sharia-compliant sectors are central to the Islamic economic system and attract the most investment –thereby facilitating an Islamic economy-friendly environment.”
He highlighted that the indicator evaluated the health of the Islamic economy ecosystem across more than 73 countries, based on equally weighted key metric categories, including governance, awareness, and social considerations. The UAE’s exceptional performance highlights the synergy between the government’s wise vision and the practices of the private sector. Al Awar said: “Over the past few years, the findings of the report have continually provided us with new insights and perspectives to better understand the dynamics of consumer behaviour among Muslims across key markets. Each year the report offers fresh facts and statistics that project a promising future for the Islamic economy sector.”
“Year-on-year, we are witnessing a surge in demand for products that are manufactured in compliance with stringent environmental sustainability, safety and health standards. The meticulous adherence of Islamic economy products to such standards across the production, distribution and supply value chain explains their increased attractiveness and uptake among larger segments of the world population today.
“The decline in oil prices has led to a fundamental shift in the nature of the economies of the GCC region and led to a greater focus in developing non-oil productive sectors. This trend has positioned the halal industry and trade in a prime position as growth drivers of the economy for the coming years,” he added.
Nadim Najjar, managing director of Mena at Thomson Reuters said: “For the fifth consecutive year, the State of the Global Islamic Economy Report presents the latest developments and trends from the Islamic economy while also highlighting its future direction.
“The Islamic Economy is at the cusp of major growth and widespread recognition, having gained traction as Muslims increasingly assert their religiosity and traditional values in their economic decision making. Awareness about the concept of Halal is on the rise, and companies are responding to these consumer needs. Also, for the first time, we have done an assessment of the future state of the Islamic Economy and what it look like by 2030, which could see the emergence of numerous scaled global enterprises, if core challenges and opportunities are addressed.”
The State of the Global Islamic Economy Report 2017/18 said that the Sukuk industry continues to mature, with a number of debut Sukuk issuances over the past year and more in the pipeline. Further propelling growth is the adoption of Islamic FinTech, be it the world’s first Shariah-compliant robo-advisory firm, or the first Sharia-compliant gold platform. Notably, such endeavours have been achieved through utilizing crowdfunding.
The report estimates that Muslim spend across food, beverage, and lifestyle sectors at $2 trillion in 2016, accounting for 11.9 percent of global expenditure. By category, F&B leads Muslim spend at $1.24 trillion, followed by clothing and apparel at $254 billion, media and entertainment at $198 billion, travel at $169 billion, and spending on pharmaceuticals and cosmetics at $83 billion and $57.4 billion respectively.
The report found Halal Food to be the largest and most diverse sector of the Islamic Economy. New entrants have come into the market, and product offerings have firmly moved beyond being meat-focused to include candy, readymade meals, snacks and children’s food.
Established players are expanding at home and abroad, through franchising. Multinationals have also made major investments in Muslim-majority markets, anticipating rising demand. Meanwhile, Private Equity investment and sovereign wealth funds have been particularly active, and a number of Halal Investment Funds are in development.
The International Halal Accreditation Forum, established in the UAE in 2017 and overseeing 19 certifiers globally, is a further positive development for the industry. With Muslim spend on food and beverages growing at nearly double that of global growth, there are significant opportunities for investment and the creation of global Halal Food brands, with spending expected to reach $1.93 trillion by 2022.
Family-friendly Travel is getting its moment in the sun. The number of Muslims travelling is at an all-time high, and there is corresponding demand for travel that adheres to Islamic values, be it hotels and beach resorts, to dining options and airlines. Halal hotel chains are also emerging and family-friendly attractions are being developed in the GCC. Along with a plethora of new online agencies catering to Muslim tourists, the Muslim equivalents of Airbnb have emerged. Muslims spend on travel was $169 billion in 2016, and is forecast to reach $283 billion by 2022.
As for modest fashion, designer brands and boutiques have recognized that Modest Fashion is trending, developing new lines and Ramadan collections. Start-up Modest Fashion brands have also been making inroads around the world, particularly for Hijabs, gaining traction by spreading the word through social media. Modest athletic apparel is a notably trendy segment, with Nike getting in on the act as well as Danish label Hummel. Muslim spend on clothing was $254 billion in 2016, and is forecast to reach $373 billion by 2022.
Halal Media and Recreation is challenging perceptions and adapting to the needs of Muslim millennials. New films are being released, TV channels are going on air, and mainstream media is increasingly embracing Islamic content, be it on Buzzfeed, or Amazon Channels offering films and documentaries about Muslim culture and life through streaming-service Alchemiya. Muslim spend on media and entertainment was $198 billion in2016, and is forecast to reach $281 billion by 2022.
The Halal Pharmaceuticals and Cosmetics sector is quickly moving out of its niche status, especially Halal cosmetics. Companies continue to open and make their presence felt on retail shelves and online. Multinational companies are also recognizing the segment’s potential, notably US-based Orly teaming up with Muslimgirl.com to create and launch six Halal nail polishes, just in time for Ramadan. Halal Pharmaceuticals are equally gaining traction, especially biologics and nutraceuticals, while Halal-certified vaccines for dengue fever, polio and Meningococcal meningitis (for Hajj) are soon to be launched worldwide. Muslims spend on pharmaceuticals was $83 billion in 2016, and is forecast to reach $132 billion by 2022, while spend on cosmetics was estimated at $57.4 billion, and to reach $82 billion by 2022.