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An Inclusive Ethical Economy
State of the Global Islamic Economy
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4 Executive Summary
6 Global Islamic Economy
8 The Global Islamic Economy Indicator (GIEI)
12 Islamic Economy’s Global Ethical Role
18 Technology Megatrends in the Islamic Economy
22 Investments in the Islamic Economy
30 Halal Food
42 Islamic Finance
54 Halal Travel
62 Modest Fashion
76 Halal Media and Recreation
86 Halal Pharmaceuticals
94 Halal Cosmetics
THIS REPORT HAS BEEN PRODUCED IN CONJUNCTION WITH
4 | STATE OF THE ISLAMIC ECONOMY REPORT 2018/19
In the name of God, the Most Merciful, the Most Beneficent
T he State of the Global Islamic Economy Report 2018/19 brings you the latest developments and trends from this economy while also high- lighting the future direction of this sector.
With 1.8 billion Muslims, and Muslim spend estimated at US$2.1 trillion in 2017, the Islamic economy continues its steady growth. But there is significant scope for growth and maturity in the Islamic economy, with a mere US$745 million in disclosed private equity investments over three years, far less than the almost US$595 billion in private equity and venture capital investments that occurred globally in 2017.
While more government backing is needed in certain segments of the Islamic economy, at the same time there was a more nuanced focus on the necessary steps to take the Islamic economy further, especially regulations. We are also seeing certain countries come out as leaders, notably the UAE, Malaysia and, to a lesser degree, Saudi Arabia and Indonesia.
This report estimates that global Muslim spend across life- style sectors was US$2.1 trillion in 2017, while the Islamic finance sector has US$2.4 trillion in total assets. Food and beverage leads Muslim spend by category at US$1.3 trillion, followed by clothing and apparel at US$270 billion, media and entertainment at US$209 billion, travel at US$177 billion, and spending on pharmaceuticals and cosmetics at US$87 billion and US$61 billion respectively.
The Islamic economy has shown it is in tune with the latest developments in technology and investment. Companies have adopted blockchain technology for payments, to confirm halal compliance, or track food, cosmetics and pharmaceuti- cal products from the manufacturing facility to the retailer. In Islamic finance, blockchain and automation is expanding access to financial services.
Smart technologies are being incorporated into clothing, such as the smart hijab, to GPS systems that show the closest prayer spaces. Equally, investment is taking place in artifi- cial intelligence (AI), virtual reality (VR) and the internet of things, showing a readiness to cater to the needs of Muslims in the 21st century.
The Islamic economy is also tapping into the growing trend for ethical products and services. It is a trend that the Islamic economy is perfectly aligned with, from Islamic finance based
on ethical, shariah-based principles, to halal food that height- ens trust between producer and consumer — from the farm to the fork. Blossom Finance is a perfect example, with its blockchain solution to help SMEs raise sukuk finance.
Islamic companies are equally tapping into the growing trend for natural and vegetarian products, from organic halal cosmetics to halalopathy, to life-saving vaccines free from animal components.
Halal Food has more companies than any other sector of the Islamic economy. More and more products are on offer as ingredients are increasingly halal certified, and company port- folios diversify to cater to increasingly sophisticated taste buds, from burgeoning demand for halal-certified mozza- rella, to growing demand for organic food. Multinationals have noted the opportunity, with Haribo opening a halal candy store in London, and Japan’s Mitsubishi Corporation investing in the UAE’s Al Islami Foods. Mergers and acquisitions activity continues, although a number of major investments are still needed to take the sector to the next level — a global halal food brand. Regulatory oversight of halal food production is steadily improving, with the UAE and Malaysia taking the lead. With Muslim spend on food and beverages growing at 6.1 per cent and forecast to reach US$1.9 trillion by 2023, there are significant opportunities for investment and the creation of global halal food brands.
The Islamic Finance sector is fast becoming a force to be reckoned with, especially in OIC countries. Islamic banking penetration is on the rise, notably in the UAE, while Islamic finance overtook conventional loans in Malaysia in 2017 as the growth driver of the domestic banking system. Islamic finance has moved beyond the core hubs of the UAE and Malaysia to include new entrants as governments seek to bolster financial inclusion, from East Africa to Central Asia. Sukuks continue to be issued, including the first dollar-de- nominated sukuk by a GCC issuer for US$1 billion. Islamic investment platforms are being developed that utilise FinTech, from the world’s first shariah-compliant robo-ad- visory firm, to the first shariah-compliant gold platform. A burgeoning sector, assets were estimated at US$2.4 trillion in 2017, and expected to surge to US$3.8 trillion by 2023.
Halal Travel is spreading its wings through offering cultural, historical, religious and beach tourism. Muslim-friendly beach resorts are proving particularly popular, while governments in the Middle East as well as the Far East are expanding
Executive Summary | 5
services and facilities as the number of Muslims traveling abroad increases. Mainstream travel services are going Muslim-friendly, from timeshare holiday apartments in Dubai to a growing array of apps and websites catering to Muslim travellers. Indeed, the digitisation of halal travel is slated to drive the sector forward, bolstered by machine learning and the customisation of travel recommendations as halal travel services harvest data analytics. Muslims spend on travel was US$177 billion in 2017, and is forecast to reach US$274 billion by 2023.
Modest Fashion has solidly moved into the mainstream, from models waltzing down the catwalks in hijabs for luxury brands to European fashion magazines sporting Muslim models on their front covers. A notable shift has been high street retail- ers launching their own modest fashion lines, from Macy’s in the USA to Marks & Spencer in the UK, and H&M world- wide. Meanwhile, Malaysian actress Neelofa became the first hijab-wearing ambassador for French brand Lancôme. Modest fashion brands in OIC countries continue to be launched, and Muslim millennials are setting new trends in both Muslim and non-Muslim-majority countries. Muslim spend on cloth- ing was US$270 billion in 2017, and is forecast to reach US$361 billion by 2023.
Halal Media and Recreation is broadening its appeal, from the big screen to a Muslim ‘Netflix’ for children. There is increasing demand in the Middle East for Arabic content, with Netflix developing a local series, while Turkish TV series continue to be popular beyond its borders, especially with high-end productions like Ertugrul, an Ottoman version of HBO’s Game of Thrones. But it is not just Islamic-themed entertainment that is gaining an audience. Apps and websites are being launched catering to Muslim’s spiritual needs, while the UK held its first Muslim literature and culture festival, MFest. Muslim spend on media and entertain- ment was US$209 billion in 2017, and is forecast to reach US$288 billion by 2023.
The Halal Pharmaceuticals and Cosmetics sectors continue to expand as more products are produced and ingredients are increasingly halal certified. Halal nutraceuticals are increas- ingly focused on functionality, while a new concept in halal pharmaceuticals has been developed, halalopathy, which combines spiritual healing with medicine that is halal sourced. Muslim spend on pharmaceuticals was US$87 billion in 2017, and is forecast to reach US$131 billion by 2023, while spend on cosmetics was estimated at US$61 billion, and to reach US$90 billion by 2023.
6 | STATE OF THE ISLAMIC ECONOMY REPORT 2018/19
Global Islamic Economy
Global Islamic Economy | 7
8 | STATE OF THE ISLAMIC ECONOMY REPORT 2018/19
The Global Islamic Economy Indicator (GIEI)
The Islamic Economy Indicator gives a comprehensive picture of which countries are best positioned to address the multi-trillion-dollar global opportunity.
In its fifth year, the Islamic Economy Indicator has evalu- ated the leading national ecosystems for supporting Islamic economy companies. Islamic economy companies play an impo