Businesses are bullish on the prospects for Sharia-compliant products and services, according to new research from the Economist Intelligence Unit
Press release (9/5/12)
A global survey of C-level and senior executives shows that demand for Sharia orientated products and services is strong, and expected to grow. Among the reasons: expanding Muslim populations, rising purchasing power, shifting consumption patterns, and a broader range of products and services on offer. The range of Sharia-orientated products and services is broadening, from food and Islamic finance products to pharmaceuticals, fashion and tourism, among others.
The Economist Intelligence Unit carried out 13 in-depth interviews with executives of companies from the Sharia industry to produce the report, The Sharia-Conscious Consumer: Driving Demand, which is commissioned by Kuwait Finance House. “The research highlights the global nature of this business and the evolving dynamics across different regions,” said Trevor McFarlane, Senior Editor for Continental Europe, the Middle East and Africa for the Economist Intelligence Unit, who directed the study.
The study is based on an online survey of 398 executives worldwide. Here are the key findings of the report:
- The Sharia-conscious consumer market is growing worldwide. More than one-half (54%) of survey respondents say that the market for Sharia-compliant products and services is already significant for their business. Asked the same question but for their business in three years’ time, the number of respondents giving the same answer jumped to 68%. Businesses are seeing this translate into sales: over one-half (51%) of respondents are currently enjoying annual growth in revenue of at least 5%, while 34% are registering higher than 15% growth.
- Religious conviction is a major driver of demand. When asked to select the top three factors influencing demand, most (56%) respondents chose the growing acceptance of Islamic precepts. Muslim population growth in both Muslim (46%) and non-Muslim (39%) countries were also cited as important drivers of demand.
- The market divides into three geographic segments: Muslim majority countries, “mixed culture” countries (eg in South-east Asia), and non-Muslim countries. Muslim-majority countries are seeing the fastest-growing demand. When asked to select the top three regions where Sharia-oriented demand is currently growing strongest, 70% of respondents chose the Arabian Gulf countries, followed by North Africa (36%) and South Asia (34%). In three years’ time, respondents see largely the same trend: around 62% selected the Arabian Gulf countries, while 41% picked North Africa and 38% see growth in demand coming from South Asia.
- Halal food and Islamic finance are the mainstays of the sector, with halal-friendly tourism and Islamic fashion showing future promise. Respondents see food and finance as having the fastest growth, both now and in three years’ time. Improving standards related to issues such as labelling and marketing communications could help to accelerate that growth. More than four-fifths (81%) of respondents say labelling products as halal is an important factor for consumers.
- Lack of professional management among product and service providers is a major barrier to growth. A significant proportion (44%) of respondents says that poor management and insufficient market awareness on the part of producers holds back development of this sector. Almost as many (42%) say that a lack of convincing branding for products and services blocks growth. Standardisation and certification, a troublesome issue within the global market for halal food, is seen by industry experts as a must for further development of the halal food segment.
- Islamic finance is seen as an important enabler for the broader industry. More than one-half (55%) of survey respondents cite access to Sharia-compliant finance as important to their business. An even higher percentage (58%) says that easy access to such finance is crucial for their customers as well.
- Demand for Islamic bonds (or sukuk) is expected to grow. Nearly 30% of survey respondents say they expect demand for sukuk to grow strongly, a view shared especially by those who work in finance. With international banks, particularly European ones, providing less loan capital in order to meet stricter risk management guidelines, banks and other lenders in the Middle East and North Africa (MENA) are expected to take up the slack. Their Sharia-compliant lending is expected to focus on financing infrastructure and construction. This points toward growing future demand for Islamic bonds to finance large-scale projects, particularly around the Gulf.
- In future, firms will have to show that they share the values of integrity and community to which Muslims aspire if they are to win the Islamic market. When considering what best promotes demand for goods and services that comply with Sharia, over half (52%) of survey respondents point to a reputation for honesty and integrity on the part of the company offering the goods or
In future, firms will have to show that they share the values of integrity and community to which Muslims aspire if they are to win the Islamic market. When considering what best promotes demand for goods and services that comply with Sharia, over half (52%) of survey respondents point to a reputation for honesty and integrity on the part of the company offering the goods or services.
The Sharia-Conscious Consumer: Driving Demand is available free of charge at: http://www.managementthinking.eiu.com/sharia-conscious-consumer.eiu/kfh
Joanne McKenna, Press Liaison, +44 (0)20 7576 8188; email@example.com
Trevor McFarlane, Senior Editor, +971 (0)55 221 5208; firstname.lastname@example.org
About the research
The research was conducted by the Economist Intelligence Unit and commissioned by Kuwait Finance House. The findings are based on a global online survey of 398 C-level and senior executives conducted in January and February 2012. The respondents reflect a variety of job functions and industries, although the survey is slightly weighted towards financial services and professional services. Survey participants represent firms with varying company revenue. Slightly over one-half have under US$500m or less in annual revenue, while the remaining have over US$500m. The global company headquarters of respondents are as follows: Middle East and Africa (36%), Western Europe (32%), North America (12%), Asia-Pacific (19%) and other (2%). The online survey was supplemented by desk research and by in-depth interviews with 13 executives of companies producing Sharia orientated goods and services, and independent experts.
About the Economist Intelligence Unit
The Economist Intelligence Unit (EIU) is the world’s leading resource for economic and business research, forecasting and analysis. It provides accurate and impartial intelligence for companies, government agencies, financial institutions and academic organisations around the globe, inspiring business leaders to act with confidence since 1946. EIU products include its flagship Country Reports service, providing political and economic analysis for 195 countries, and a portfolio of subscription-based data and forecasting services. The company also undertakes bespoke research and analysis projects on individual markets and business sectors. More information is available at www.eiu.com or follow us on www.twitter.com/theeiu
The EIU is headquartered in London, UK, with offices in more than 40 cities and a network of some 650 country experts and analysts worldwide. It operates independently as the business-to-business arm of The Economist Group, the leading source of analysis on international business and world affairs.
About Kuwait Finance House
KFH was established in Kuwait in 1977 and is considered to be one of the first Islamic banks in the world. KFH is also enlisted in the bourse and has total assets of KD 13.46 billion.
KFH offers Islamic banking services that include retail, commercial, real estate and cars financing, direct investment, and investment portfolio services.
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