Integrating Islamic Finance And The Halal Industry: A Malaysian Perspective


By: Muhammad Issyam Bin Ismail

Shariah Department of Hong Leong Islamic Bank



The stature of Malaysia’s Islamic finance industry is indisputable as evidenced by its total value of USD405,985 million in Islamic finance assets as of 2016 (Thomson Reuters, 2017). Unfortunately, the industry’s annual growth rate is experiencing a slowdown from 24.2% double-digit growth in 2011 to single-digit 8.2% in 2016 (IFSB, 2017). Therefore, to address this, the industry needs to seek new opportunities and generate innovative ideas for continued growth.

Apart from Malaysia’s successful domestic Islamic finance industry, it is also internationally recognised for its halal industry. In the State of the Global Islamic Economy Report 2017/2018 published by Thomson Reuters, Malaysia is ranked first for its halal food. However, even though the global halal economy and the Islamic finance industry are natural economic partners, they are far from fulfilling their combined potential for a holistic Islamic economy (MIFC, 2016). For example, in Malaysia, the halal certification process emphasizes on the substances and processes in producing halal goods, and this does not include measuring the financial management perspective of the halal goods producer – an area where Islamic finance industry can get involved in. Currently, this is not a requirement under any regulation and certification process, but if properly tapped can provide abundant opportunities for the Islamic finance industry to improve its growth by providing Shariah compliant financial products to the halal industry players. 

Halal Industry in Malaysia: Massive Opportunities

As at April 2017, the value of the global halal market is USD2.3 trillion, and the core of it is the halal food sector which is worth USD660 billion. Meanwhile, the global Muslim population is also expected to grow and make up 26% of the world’s projected population of 2.2 billion by 2030. In Malaysia, the total number of Muslims accounts for 61.3% of the total population and the figure is expected to escalate to 72.4% by 2050. As for Malaysia’s halal industry, the figure is expected to rise from 7.5% in 2016 to 8.7% by 2020. The gross output value of the halal industry in Malaysia also increased by 9% yearly (Department of Statistics Malaysia, 2017) and the halal industry exports have been experiencing an uptrend since 2012 and achieved the highest record of RM43.4 billion in 2017 (HDC, 2018).

Read Full in I-FIKR Digest Issue 2 / May 2018


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