For a long time, the halal simply meant buying meat from a halal butcher, who slaughtered in accordance with Islamic principles. But the halal food market has exploded in the past decade and is now worth an estimated $632 billion annually, according to the Halal Journal, a Kuala Lumpur-based magazine. That's about 16% of the entire global food industry. Throw in the fast-growing Islam-friendly finance sector and the myriad other products and services — cosmetics, real estate, hotels, fashion, insurance — that comply with Islamic law and the teachings of the Koran, and the sector is worth well over $1 trillion a year, according a recent report in Time magazine.
Time attributes the rise of the halal economy to the world's 1.6 billion Muslims, most of whom are younger and, in some places at least, richer than ever. Seeking to exploit that huge market, non-Muslim multinationals like Tesco, McDonald's and Nestlé have expanded their Muslim-friendly offerings and now control an estimated 90% of the global halal market.
McDonald's, Nestle and Tesco are not only non-Muslim owned and managed companies capitalizing on the growing demand for halal products. New ones, such as Canada-based Al Safa, whose products are found in major North American supermarket chains, are joining the fray.
A Muslim name, some Muslim employees, a logo containing Arabic, date palm tree, and a masjid, slick flyers announcing its Halal food products and a 1-800- number with a message greeting you with a Salam and a recording in English and Arabic.
But Al Safa Halal is not a Muslim owned company, according to Sound Vision website. The Kitchener, Ontario-based entity is actually owned by non-Muslim (Jewish) private investors, cashing in on the North American Muslim market.
Beyond halal food, the global economic crisis has brought attention to Islamic finance as an alternative for both Muslim and non-Muslim customers. In a recent article, the Vatican newspaper Osservatore Romano has voiced its approval of Islamic finance. The Vatican paper wrote that banks should look at the rules of Islamic finance to restore confidence amongst their clients at a time of global economic crisis. “The ethical principles on which Islamic finance is based may bring banks closer to their clients and to the true spirit which should mark every financial service,” the Osservatore Romano said. “Western banks could use tools such as the Islamic bonds, known as sukuk, as collateral”. Sukuk may be used to fund the “‘car industry or the next Olympic Games in London,” the article says.
Investors are attracted by Islamic banking's more conservative approach: Islamic law forbids banks from charging interest (though customers pay fees) and many scholars discourage investment in excessively leveraged companies. Though it currently accounts for just 1% of the global market, the Islamic finance industry's value is growing at around 15% a year, and could reach $4 trillion in five years, up from $500 billion today, according to a 2008 report from Moody's Investors Service.
Pakistan's Islamic banks plan to expand their network of outlets this year to take advantage of rising demand for Shariah-compliant financing according to Pervez Said, director of Islamic banking at the State Bank of Pakistan. These banks have 500 branches, after adding 210 outlets last year. Pakistan is promoting growth in Islamic finance to expand the reach of the banking sector which has less than 25 million deposit accounts. Shariah-compliant facilities are forecast to rise to 277 billion rupees ($3.5 billion) this year from 185 billion in 2008, according to central bank data.
French retail giant Carrefour has been selling Halal products in many Muslim countries for several years now. In fact, Carrefour Malaysia created a unique program in collaboration with the Ministry of Domestic Trade and Consumers Affairs. The company has a dedicated team to monitor and assist small and medium-sized enterprises to develop Halal products, which will be distributed through the Carrefour chains in Malaysia and other countries. Carrefour is the second largest hypermarket in the world, while Carrefour Malaysia set up its Halal Department in 2006.
Carrefour is now looking to expand in several more Muslim countries, including Pakistan. “We are not interested in what I call ‘French North Africa’, so in the west we won’t go beyond Libya. To the east we are looking at markets like Iran and Pakistan. India is too far away for us.” François de Montaudouin, chief executive of Majid Al Futtaim Group, said recently.
Former Nixon adviser and now an American-Muslim commentator, Robert D. Crane, recently described "the universal principles of what may be called Islamic economics, not the glitzy stuff of the so-called Islamic banks but the maqasid al shari’ah or universal and essential purposes of justice as taught principally in the haqq al mal of classical Islamic thought, first revived in the modern era by Grand Mufti Ibn Ashur’s book, Maqasid al Shari’ah, published in 1946 and translated by the International Institute of Islamic Thought in 2007". Crane says that "these provide a new paradigm ready to replace the bankrupt paradigm of concentrated power that dominates in both socialism and capitalism."
The dramatic growth of interest in Halal business and finance can be measured by many international conferences and expos held each year to bring together various regional and international players. A number of major events are planned this year in Asia, Middle East and Europe.
While the Islamic finance is still early in its early development stage, I see it as a crucial vehicle to ensuring in the future that significant part of the wealth of Muslim investors is invested with Muslim businesses in Muslim nations to help them develop. Already, the biggest foreign direct investors in Pakistan are Muslims from Dubai, Malaysia and the Middle East.
APP reported that Malaysia topped the list of investors making Foreign Direct Investment (FDI) in Pakistan during first six month of year 2008, according to data released by Ministry of Foreign Affairs. The Foreign Direct Investment during the first five months of current financial year reached US$ 1.8 billion registering an increase of 1.5 percent, export reached to US$ 8.2 billion with a growth of 20 percent and foreign remittance at 2.9 billion registered an impressive increase of 15pc.
The May Bank of Malaysia made the biggest investment of US$ 907 million in banking sector followed by Saudi Arabia with an investment of US$ 750 million in steel sector and UAE with an investment of US$ 500 million in power sector in Pakistan.
The global economic meltdown has not deterred the foreign investors, including Malaysia, from investing in Pakistan, as the Pakistan’s economy showed extreme resilience and defied the economic recession with registering growth in FDIs, Export and Foreign Remittance.
Islamic bonds, called Sukuk, are a great way for Muslim nations to raise development funds from Muslim lenders, rather than do Euro or dollar offerings in Europe and America. This Islamic bond market is also beginning to develop.
It is important for Muslim businessmen and entrepreneurs to seize the opportunity from the projected phenomenal growth of the halal markets. There are a whole range of products and services from food and medicine to finance to travel and entertainment that can come out of the halal movement. It is clearly a mutli-trillion dollar opportunity during the next three to five years.
Related Links:
Halal Journal
Top 10 Islamic Funds Performance
Islamic Finance News
Pessimism is the Ultimate Kufr
Islamic Finance Summit
Foreigners Eying Farmland in Pakistan
FDI Rising in OIC Economies
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McDonald's, Nestle and Tesco are not only non-Muslim owned/managed companies capitalizing on the growing demand for halal products. New ones, such as Al Safa, whose products are found in North American supermarket chains, are joining the fray. Here's the Al Safa story from Sound Vision:
A Muslim name, some Muslim employees, a logo containing Arabic, date palm tree, and a masjid, slick flyers announcing its Halal food products and a 1-800- number with a message greeting you with a Salam and a recording in English and Arabic.
But Al Safa Halal is not a Muslim company. The Kitchener, Ontario-based entity is actually owned by non-Muslim (Jewish) private investors, intent on cashing in on the North American Muslim meat market.
While one of Al Safa Halal's proprietors, David Muller, refused to speak with Sound Vision, he directed our call to its Customer and Consumer Relations Manager AbdelKader Muhammad. Muller also would not disclose exactly who and how many people owned Al Safa Halal, saying this information is confidential.
Providing Halal meat products for Muslims was the first type of business Muslims in North America established long ago. After Masjids, the Halal grocery store became a need of the Muslim community in North America. Such stores have become part of the landscape.
Enter Al Safa Halal. While it was only launched last year, it emerged from the company MGI Packers, which is based in Kitchener, Ontario, Canada and had been in business as a slaughterhouse since 1987.
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Agence France-Presse AFP Singapore is reporting as follows:
Assets held by the world’s 100 biggest Islamic banks grew 66 per cent in 2008 from the previous year despite the financial turmoil that clobbered mainstream lenders, a report said Friday.
The top 100 Islamic banks held assets totaling 580 billion US dollars last year, up from 350 billion dollars in 2007, according to an annual report by The Asian Banker, a magazine for financial professionals.
In the same period, Asia’s 300 biggest banks saw their assets rise by a much slower 13.4 per cent, it said.
A financial storm sparked by a crisis in the US housing market swept across the world late last year. Its impact spilled over into the general economy and sent several countries into recession.
Prominent US investment bank Lehman Brothers collapsed into bankruptcy, while several other major Western banks suffered massive losses.
‘Despite the financial turmoil in late 2008 that crippled so many large Western institutions, Islamic banks have continued to grow in prominence and size,’ the magazine said in a press statement.
Emmanuel Daniel, the magazine’s president and chief executive, added: ‘Islamic finance has seen an incredible surge in popularity, based on stronger regulatory regimes and a better international understanding of its dynamics.’
Islamic banking fuses principles of sharia or Islamic law and modern banking. Islamic funds are banned from investing in companies associated with tobacco, alcohol or gambling.
Iranian banks were the biggest players in the global Islamic banking sector, holding seven out of the top 10 rankings and 12 out of the 100, but Saudi Arabian lenders were more profitable, the report said.
Saudi Arabia’s Al Rajhi Bank had the highest net income of 1.74 billion dollars, which is more than five times the earnings of Bank Tejarat, Iran’s most profitable lender.
Iranian banks also took up 40 per cent of the total assets of the top 100 banks, with the UAE, Malaysia, Saudi Arabia and Kuwait accounting for a combined 40 per cent. Smaller banks in 10 other markets accounted for the rest.
Outside of the Middle East, two Islamic banks in Britain made it to the top 100, according to the report.
Asian and North African banks ‘are still very small’ compared with the Middle Eastern players, it said, adding that ‘only Malaysian and Bangladeshi Islamic banks have a significant amount of assets’.
Indonesia, the world’s most populous Muslim nation, had only two banks on the list, Pakistan had three, while regional financial centre Singapore and the Malay Islamic kingdom of Brunei had one each.
Here's a BBC report on Islamic finance in India:
The Bombay Stock Exchange (BSE) in the Indian city of Mumbai has launched a new index which consists of companies that meet the Islamic legal code.
The Tasis Shariah 50 was formed using guidelines from an Indian Shariah advisory board.
Studies have found that most Muslims in India are excluded from the country's formal financial sector.
That is because Islamic law does not allow investment in companies that sell goods like alcohol, tobacco or weapons.
Neither does it allow investment in companies that derive significant profit from interest.
The index is intended to be the basis for other Shariah-compliant financial products.
'Come and invest'
BSE Managing Director and Chief Executive Madhu Kannan said that the new index would attract Islamic and other "socially responsible" investors both in India and overseas.
Continue reading the main story “Start QuoteAll Muslim countries of the Middle East and Pakistan put together do not have as many listed Sharia-compliant stocks as are available on the BSE”
End Quote Tasis Director of Research and Operations Shariq Nisar
"This index will create increased awareness of financial investments among the masses and help enhance financial inclusion," he said in a statement.
Companies included in the index have been screened by Tasis, which is based in Mumbai and whose board members include Islamic scholars and legal experts.
"Before anyone can attract investors, we need to put in place institutional infrastructure, and having an index to track Shariah-compliant stock is important," MH Khatkhatay, senior adviser to Tasis, told the Reuters news agency.
"If you have an ETF (exchange traded fund), for example, you need an index, or if overseas investors want to invest in Shariah index in India, this is an invitation for people to come and invest."
Tasis said the index would "unlock the potential for Sharia investments in India".
"The BSE has the largest number of listed Sharia-compliant stocks in the world," said Shariq Nisar, director of research and operations at Tasis.
"All Muslim countries of the Middle East and Pakistan put together do not have as many listed Sharia-complaint stocks as are available on the BSE."
Stocks will be reviewed every month to ensure they continue to meet the criteria - any which do not will be removed, officials say
Here are a few excerpts from an Express Tribune story on Pakistan's growing meat exports:
Halal meat is also one of the fastest growing segments within the global food trade. Between 2001 and 2009, the global beef trade grew at an average of 10.4 per cent to reach just over $30 billion, according to data available from the UN Food and Agriculture Organisation (FAO). However, the market for halal beef imports in the Middle East and Southeast Asia alone grew by over 18.2 per cent to reach just under $2 billion a year during that same period.
Pakistan’s market share within this rapidly growing market is a paltry 2.9 per cent. However, Pakistani exporters seem to be determined to make up for lost time. In the six years ending in 2009, Pakistani red meat exports have risen by an average of 68.6 per cent a year, though admittedly from a very low base.
Yet with the advent of more and more new players, and with surprisingly robust support from the government, Pakistan is on the verge of becoming one of the largest players in the meat trade, at least within the Middle East and Southeast Asia.
Perhaps the single biggest advantage that Pakistan has is proximity. The country is closer to the Middle East than any of its biggest rivals in the market. The three countries with the largest market shares are Australia, Brazil and India, each of which has considerably higher shipping costs to these export markets compared to Pakistan.
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“The Brazilian animal is exactly the same as most of our breeds of cattle. The quality of meat is also the same. The only difference is their ability to market their meat better than us,” said Namazi. He argues that Pakistan can easily displace Brazil as the Middle East’s leading meat supplier.
Iran, in particular, seems to be keen for Pakistani beef. The Iranian government has invested 50 per cent of the capital in the Lahore Meat Company, a dedicated abattoir that will export meat to Iran.
Australian beef, with a powerful branding effort and a larger source animal, has a specific niche market that industry experts believe will be difficult for Pakistan to compete with in the medium term.
India, the one country that could completely destroy Pakistan’s potential in the meat trade, has placed itself outside the global beef market after a 2005 Indian Supreme Court ruling that upheld a ban on cow slaughter as constitutional.
Indian exporters only sell carabeef – meat from buffalo – which is considered inferior and commands lower prices and margins. Nevertheless, Indian exporters dominate the market in Malaysia for the lower end of beef, while Australians command the higher end.
“Malaysia is ripe for a middle-market meat supplier from Pakistan,” said another expert in the meat business. Malaysia has had a free-trade agreement with Pakistan since 2007.
Several companies from Pakistan have entered the red meat export business and even more are in the process of entering the market. The oldest and one of the most successful of these is PK Livestock, a Karachi-based abattoir which has been exporting red meat to the Middle East for over two decades.
Zenith, a Lahore-based exporter, became the first Pakistani company to sell beef to Malaysia, after the Malaysian government relaxed its regulatory requirements for Pakistani exporters.
Others, such as OMC and the Al Shaheer Corporation, have also successfully begun exporting to the Middle East and are aggressively seeking regulatory approvals for markets further afield in Southeast Asia.
Pakistan’s total meat exports may come close to $100 million in 2011 and could surpass the $500 million mark in about five years, according to projections by ASI Partners.
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Despite having the eighth largest herd of cattle and the third largest herd of goats in the world, Pakistan’s animal population is very scattered, which makes procurement of the animals for the abattoir expensive...
Here are excerpts from The Nation's story on halal industry conference in Pakistan:
The speakers at a concluding session of the two days international conference on halal industry in Pakistan stressed the need for focusing on halal industry in the country, as it can give boost to the national economy.
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The conference was organized by Halal Research Council in collaboration with PAMCO and Livestock & Dairy Development Department Punjab in which research papers on various topics like export of Halal products from Pakistan, promotion of Pakistan’s Halal Industry internationally, International Halal Research & development and Certification, opportunities of promotion in the Global Halal Industry and the potential of Halal Industry in Punjab were presented.
In that conference, the MoU was signed amongst Philippine and Mauritius for the sake of promoting the Pakistan Halal products. The main subject of the conference was the proposal from Justice Khalil ur Rehman for the formation of Halal Authority which was unanimously appreciated by all.
Other accepted proposals include the Halal awareness Campaign, Research in the field of Halal and Halal Publications.
http://www.nation.com.pk/pakistan-news-newspaper-daily-english-online/business/20-Jan-2012/pakistan-to-become-halal-industry-hub
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