More SMEs in halal industry should embrace Islamic finance

Source: WHS website.

While Islamic finance and the halal industry are clearly complementary, both being based on shari'ah compliance, they diverge more often than converge, said panellists at the Breaking Down the Silos – Halal Food and Islamic Finance plenary discussion, which is a part of the World Halal Summit 2015 Business Forum.

Moderator Rushdi Siddiqui, CEO of Zilzar Technology said, “Halal food makes up 20% of the world’s food production, and yet so (few) of the halal industry players actually use Islamic financing to fund their businesses.”

Badlisyah Abdul Ghani, CEO of CIMB Islamic Bank said that only 5% of halal industry players actually use some form of Islamic financing. He also pointed out that convergence is the best way to ensure the sustainability of each sector in the long term.

As the halal food industry is currently highly fragmented and primarily dominated by SMEs in Muslim countries, more niche Islamic banking facilities are needed. Rushdi suggested the creation of an Islamic bank catered exclusively for SMEs as a way forward to meeting the needs of SMEs in Muslim countries.

It was also pointed out in the session that consumers often misunderstand the guiding philosophy of a halal product. It is about creating an ethical value chain for the product, right from its inception to its place on a store shelf, and that includes the manner in which funds were procured to finance and sell the product.

There is much to be done as well to educate SMEs on the advantages of utilising available Islamic financing facilities. In Malaysia for example incentives such as a 100% stamp duty exemption are available to users of Islamic financing services.

posted from Bloggeroid