THE US$2.2 trillion global halal market is estimated to grow at a compounded annual growth rate of 7.3% in the next five years, but around 90% of Malaysian small and medium enterprises (SME) are not halal-certified, meaning that they are unable to tap into the opportunities of the burgeoning market.“
As of 2018, approximately 90% of SMEs in Malaysia are not halal-certified, owing to various reasons including the lack of understanding and knowledge of the process, as well as the cost of certifying premises and the supply chain, ” says CIMB Islamic Bank Bhd chief executive officer Ahmad Shahriman Mohd Shariff.
Speaking on the back of the final part of this year’s SME Thought Leadership series – the Business Highlights for 2020 forum – he highlights that the development of the halal economy goes beyond halal food and beverage products to include banking and finance, as well as lifestyle sectors.
He says, “Being halal-certified and halal-ready also helps prepare businesses for long term capital planning, particularly if they are considering tapping into the Islamic capital markets through Shariah-compliant listing.”
Malaysia has inherent strengths when it comes to Islamic finance and by extension, the halal economy, as it tops the latest Global Islamic Economy Indicator (GIEI) in the Global Islamic Economy Report 2019/20.
This ranking, he says, is a reflection of how well Islamic finance has been developed to support the Malaysian economy and to contribute to the global Islamic finance space.
Over the years, the government has made significant efforts to eliminate barriers and provide incentives for Islamic finance to become a recognised economic force globally, which Ahmad Shahriman says has helped accelerate the growth momentum and global interest of Malaysian Islamic finance solutions and halal businesses.
He adds, “This can be utilised by the SMEs as an excellent opportunity to expand and promote their businesses.”
Islamic finance also paves a sustainable path forward with Bank Negara Malaysia’s value-based intermediation (VBI) principles, which aims to deliver the intended outcomes of Shariah through practices and offerings in order to generate positive and sustainable impact to the people, planet and profit.
“Islamic finance’s VBI concept is a natural fit with sustainability principles and are well-aligned with the tenets of environment, economic and socially (EES) responsible investments that are deemed crucial in ensuring a sustainable economic framework.
“Our advice to SMEs is to always consider Islamic finance as a first option because it will give Malaysian businesses an edge when it comes to expanding into new markets, especially in the halal sector. The association with Islamic finance also tends to strengthen a company’s EES positioning and branding, ” Ahmad Shahriman opines, adding that CIMB Islamic was among VBI’s earliest proponents.
The convergence of these factors mean that Islamic finance can aid businesses in prioritising halal certification, supporting them in Shariah-compliant financing and facilitating their day-to-day transactions through propositions such as CIMB HalalBizReady.
Aside from that, Ahmad Shahriman says that SMEs can also leverage the CIMB Halal Corridor initiative, which will enable them to tap into the halal market through networks connecting businesses, consumers, buyers and sellers within new and established trade ecosystems to access the global halal goods and services market.
“Although the CIMB Halal Corridor initiative is at the early stages of development, we are seeing good traction and interests from various parts of the world who are interested in trading with halal buyers and sellers in Malaysia.
“With sustainability now being a core pillar of CIMB Group’s current growth strategy, CIMB Islamic has been progressively embedding EES principles into its businesses and processes to fully embrace the sustainability agenda. Our aim is to make Islamic finance synonymous with responsible lending and the EES agenda, ” he concludes.
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