Dubai Islamic Economy Development Centre (DIEDC) published the results of the State of the Global Islamic Economy Report 2018/19, titled ‘An Inclusive Ethical Economy’. The sixth report in the series was commissioned by DIEDC and produced by Thomson Reuters in collaboration with DinarStandard and the Dubai International Financial Centre (DIFC).
The State of the Global Islamic Economy Report 2018/19 estimates that Muslims spent $2.1 trillion across the food, beverage and lifestyle sectors in 2017, and forecasts spending to reach $3 trillion by 2023. By category, food and beverage leads Muslim spend at $1.3 trillion, followed by fashion at $270 billion, media and recreation at $209 billion, travel at $177 billion, pharmaceuticals at $87 billion and cosmetics at $61 billion.
The Islamic economy has proven its ability to keep pace with the latest developments in technology and investment. Companies are adopting blockchain for payments to ensure halal compliance, and track food, cosmetics and pharmaceutical products from the manufacturing facility to the retailer. Meanwhile, artificial intelligence (AI), virtual reality (VR) and the internet of things (IoT) are today attracting more investments than ever before.
Companies in the Islamic economy space are also tapping into the growing trend for natural and vegetarian products, from organic halal cosmetics to life-saving vaccines free from animal components.
There is significant scope for growth in the Islamic economy, with only $745 million in disclosed private equity investments in the last three years, far below the approximately $595 billion in global private equity and venture capital investments undertaken in 2017. While more government backing is needed in certain segments, there has been a nuanced focus on areas that can drive the advancement of the Islamic economy, especially regulation.
More companies are active in halal food than in any other sector of the Islamic economy. The product offering is expanding proportionately with the rising number of halal-certified ingredients, and companies are diversifying their portfolios to cater to increasingly sophisticated tastes. Regulatory oversight of halal food production is steadily improving, with the UAE and Malaysia taking the lead. With Muslim spend on food and beverages forecast to reach $1.9 trillion by 2023, there are significant opportunities for investment and the establishment of global halal food brands.
For its part, the Islamic finance sector is fast becoming a force to reckon with, especially in member states of the Organisation of Islamic Cooperation (OIC). Islamic banking penetration is on the rise, most notably in the UAE, while Islamic finance overtook conventional loans in Malaysia in 2017 as the main driver of growth of the domestic banking system. The sector has moved beyond the core hubs of the UAE and Malaysia to include new entrants from East Africa to Central Asia as governments seek to bolster financial inclusion. Sukuk issue continues to thrive – one of the key milestones for 2017 was the first dollar-denominated sukuk worth $1 billion by an issuer from the GCC region. The value of assets in the burgeoning sector was estimated at $2.4 trillion in 2017, and is expected to surge to $3.8 trillion by 2023.
Halal travel is expanding through offering cultural, historical, religious and beach holidays. Muslim-friendly beach resorts are proving particularly popular, while governments in the Middle East as well as the Far East are enhancing services and facilities as the number of Muslims traveling abroad increases. Mainstream travel services are becoming Muslim-friendly, from timeshare holiday apartments in Dubai to a growing selection of apps and websites catering to Muslim travellers. Indeed, the digitalisation of halal travel is poised to drive the sector forward, boosted by the customisation of tour packages as halal travel companies harvest insights from data analytics. Muslims spent $177 billion on travel in 2017, and the number is projected to reach $274 billion by 2023.
Modest fashion has firmly moved into the mainstream, from models in hijabs walking down the catwalks for luxury brands to European fashion magazines sporting Muslim models on their covers. A notable shift has seen high street retailers launch their own modest fashion lines, from Macy’s in the USA to Marks & Spencer in the UK and H&M worldwide. Meanwhile, Malaysian actress Neelofa became the first hijab-wearing ambassador for French cosmetic brand Lancôme. Modest fashion brands continue to launch in OIC member countries, and Muslim millennials are setting new trends in both Muslim- and non-Muslim-majority countries. Muslim spend on clothing hit $270 billion in 2017 and is forecast to reach $361 billion by 2023.
Halal media and recreation is also broadening its appeal, from the big screen to a Muslim ‘Netflix’ for children. The Middle East is experiencing growing demand for Arabic content, with Netflix developing a local series. Meanwhile, the UK held its first Muslim literature and culture festival, MFest. Muslims spent $209 billion on media and entertainment in 2017, and this number is estimated to hit $288 billion by 2023.
As is the case with halal food, the halal pharmaceuticals and cosmetics sector continues to expand along with the rise in halal certification of products and ingredients. Halal nutraceuticals are increasingly focusing on functionality. Furthermore, the halal pharmaceuticals segment has witnessed the emergence of a new concept, halalopathy, that combines spiritual healing with halal-sourced medication. In 2017, Muslim spend on pharmaceuticals reached $87 billion and is predicted to hit $131 billion by 2023, while halal cosmetics expenditure was estimated at $61 billion and projected to reach $90 billion by 2023.