Linguistically, the word halal is derived from the verb “Halla”. Halal refers to anything that is considered permissible and lawful. Halal products are in huge demand. Consumers had spent US$2.02 trillion in 2019 across the six major halal economy sectors. This spending reflects a healthy 3.2% year-on-year growth and is forecasted to reach US$3.2 trillion by 2024 at a 5-year CAGR of 3.1%.
In addition, halal finance or Islamic finance assets were reported to have reached $2.88 trillion in 2019 and are forecasted to reach US$3.5 trillion by 2024. In totality, the global halal economy market size is projected to be worth US$10 trillion by 2030.
Halal is almost always, only associated with food as it makes up 58% of the halal economy. Five other major halal sectors which are less well known to the general public, due to lack of awareness, are fashion (14%), media/recreation (11%), travel (10%), pharmaceutical (5%), and cosmetics (3%). Collectively, consumers spend US$853 billion in 2019 and it is expected to grow to US$970 billion in 2024 in these five sectors.
Besides the six major sectors, Islamic finance is one of the fastest-growing segments in global finance. It is evolving very slowly to adopt fintech, cryptocurrencies, and digital banking. Islamic financial institutions have just started to adopt blockchain technology, and there is substantial room for more innovation and collaboration with halal fintech start-ups for faster and more efficient involvement. Recent growth in halal finance is still solidly based on traditional banking services and products. Innovative ideas are needed to bring halal fintech to the next level and evolve towards globalization.
The rapidly growing global halal market is driven by three major factors. First, sizable and growing Muslim population at 1.8% per annum. Second, growing economic development and hence increasing purchasing power among the Muslims. The last is the emergence of potential non-Muslim who associates halal with ethical consumerism.
Despite high growth, the halal economy is facing challenges with the emergence of Bitcoin and blockchain. Lack of participation in fintech is hindering the halal industry for higher growth. These challenges need to be addressed to allow future growth and most importantly sustainability among the halal communities in a more decentralized future.
Five major challenges faced by halal industry as a whole are no halal payment system, lack of halal awareness, slow fintech adaptation, no standardization and lack of internationalization. These challenges or now had become a problem is due to dilemma among halal community to adapt blockchain. Without adopting blockchain, halal industry would not able to sustain growth in the upcoming years as fintech is reshaping the whole financial ecosystem.
