The global Islamic halal economy is expected to reach a market value of $7.7 trillion by 2025 boosted by growth in key sectors notably food and beverages, and islamic finance.
Under Islamic law, ‘halal’ refers to anything that is acceptable, permitted, and lawful, in contrast to ‘haram,’ which signifies what is forbidden or disapproved.
The halal status of goods and services, such as food, medicine, cosmetics, and other items, dictates what Muslims are allowed to use. This status also encompasses aspects like the production process, raw materials, and product storage.
According to the Nigeria Halal Markets Report of 2023, consumer spending on key halal lifestyle-products is estimated to grow by 6.9% CAGR, from $2.3 trillion recorded in 2022 reaching $3.2 trillion in 2027.
From a sectoral basis, this is how the growth is projected to evolve by 2027.
Food and beverage represent the largest sector by spend in the halal economy, with Indonesia, Nigeria, and Bangladesh as the top halal food consumer markets in the OIC (Organisation of Islamic Cooperation).
In Africa, Nigeria is the second-largest halal economy after Egypt. Both Egypt and Nigeria are also among the top 10 halal economies globally. Nigeria’s Muslim consumer spend is over two times that of Algeria, which has the 3rd largest Muslim consumer spend in the region.
Top 5 countries in terms of Muslim consumer spend in Africa:
- Egypt
- Nigeria
- Algeria
- Morocco
- Tunisia
Islamic Finance
Halal does not stop at basic goods and services, it is a moral framework that also applies to financial and investment products. For instance below are the key guidelines for halal financial products:
- Transactions must not involve ‘riba’ (interest)
- Investments are prohibited in ‘haram’ (unlawful) assets or commodities such as pork products, alcohol, military equipment, and other forbidden items
- Investments must avoid ‘gharar,’ which refers to transactions involving excessive uncertainty or those that conflict with principles of transparency and certainty in business
An example of halal investment is Islamic business financing, which operates through innovative models such as profit-sharing, Sharia-compliant insurance, and sukuk—an Islamic financial certificate that represents ownership in an asset.
Unlike conventional bonds, which function as IOUs where investors receive interest payments, sukuk investors acquire partial ownership of a business and receive profit payments over time. These profit payments, made in place of interest, ensure compliance with Sharia law.
Islamic finance is a rapidly growing industry, attracting not only Muslims but a broader set of ethical finance stakeholders. While the geographic scope of industry leaders has traditionally been limited, with the slow adoption of recent technological advances, the past year has seen substantial improvements.
Islamic finance assets, valued at $3.958 trillion in 2022, are expected to rise steadily over the next five years with a CAGR of 8.5%, reaching US$5.954 trillion worth of assets by 2027.
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The top 5 Islamic Financial Markets in order are:
- Iran
- Saudi Arabia
- Malaysia
- UAE, and
- Qatar
In conclusion, Malaysia is the dominant economy in the halal sector, a constant leader in the Global Islamic Economy Indicator (GIEI).
GIEI is a weighted index that measures the development of the Islamic economy by assessing the performance across all sub-sectors including Islamic finance. Malaysia retained the top spot in the Global Islamic Economy Indicator (GIEI) for the 10th consecutive year, followed by Saudi Arabia, Indonesia, and the UAE.
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