Islamic economies, already a significant part of the global economy, are set to become even more important over the next decade. V Shankar, Group Executive Director and CEO, Europe, Middle East, Africa and Americas at Standard Chartered Bank, says that contrary to popular belief, the Islamic economy is more than just Islamic finance and halal food.
"Early emphasis on halal finance and food is progressively transforming into broader commercial activities as users seek shari'ah-compliant alternatives across the full range of goods and services," he said.
Islamic finance is becoming an important part of emerging economies in the Middle East and Asia as well as in the OECD countries. Islamic finance sector assets are estimated to be around US$1.4 trillion and are expected to grow at 15% to 20% a year. Expenditure in the halal food and lifestyle sector was estimated to be US$1.6 trillion in 2012 and is expected to grow by 50 per cent by 2018, he noted.
"So, what is driving this growth? There are three powerful forces at work: demographics, devotion and disposable income, or what I like to call the three 'D's. Firstly, the Muslim population globally is 1.6 billion, or about 23% of the global population. More importantly, it is the youth segment within this population that is growing twice as fast as the rest of the world.
"Secondly, this diverse and dispersed group of people, who span several continents, are drawn together by the devotion to their religion. According to a recent report by Thomson-Reuters, seven out of eight Muslims consider religion a very important element of their lives. Thirdly, with the inexorable shift in growth and wealth creation from the West to the East, and the rise in oil prices, the disposable income of this group is increasing," he explained.
Post the past decade's financial crisis, many parts of the world are facing the twin challenges of rising unemployment and growing inequality in the distribution of wealth and incomes. Businesses, and the capitalist system itself in many ways, are fighting to restore their credibility.
"The focus of companies is changing from the singular pursuit of maximising shareholder value to a more nuanced theme of wider stakeholder value creation and engagement. In this context, the value system of Islam, with an emphasis on ethics and social responsibility, has much to offer.
"The Islamic economy, on the back of its value system, has the potential to cross religious boundaries and to attract participants with diverse backgrounds who are seeking ethical practices and values in all aspects of commerce-related activities," he added.
Read the full report about the Islamic Economy here.
