Halal business: where to invest?

The word "halal" is an Arabic or Quranic word associated with the Islamic way of life, where the literal meaning of the word is "permissible" or "lawful." The meaning of this term applies to any way of life of a person, be it a social, personal, economic, cultural or political issue. In economics, the term is used to refer to Islamic economics as a halal industry.

The opposite of halal is haram, which means “forbidden.” In the Qur'an, Allah has also prescribed what is forbidden and what should be avoided in consumption as well as in human behavior of Muslims and other people. This also applies to aspects of entrepreneurial activity. For example, the consumption of alcohol and pork is prohibited in Islam. At the same time, gambling, pornography, riba (usury), retention of goods, deception of buyers are also prohibited.

Entrepreneurship is an important aspect of life, which is also inseparable from Islam, where it is perceived as halal entrepreneurship. It is within the boundaries of Sharia, which ensures that its activities do not deviate from the principles of Islam.

However, non-Muslims can also be involved in the halal industry and become halal entrepreneurs, provided they comply with all laws. Non-Muslims are allowed to be halal entrepreneurs on the basis of maslah (public interest) and in the interest of the ummah (Muslim community). It should also be noted that anyone who wants to run a business providing halal products and services must obtain a halal certificate for the specific product or service. However, to obtain this certificate, you must meet the Halal standard for the relevant products and services required by the regulatory authorities in the relevant countries. Moreover, all halal standards are developed in accordance with Maqasid al-Sharia (the theory of the goals of Sharia).

A number of significant points distinguish halal entrepreneurship from the entrepreneurship usual for representatives of European countries, including Christian ones. We are talking about the concept:

• What to produce?
• How to produce?
• For whom to produce?
• Amount of specialized knowledge in this area?

In addition, there are certain characteristics of halal entrepreneurs that make them unique and distinguish them from ordinary entrepreneurs. Some of these characteristics include fear of Allah, prioritizing prayer, truthfulness, philanthropy, and knowledge of Islamic law. Business opportunities for halal entrepreneurs extend to the entire global halal industry.

The halal production sector is developing dynamically. Annually, turnover in this area is growing by 5%, and according to experts, taking into account how the world's Muslim population is increasing, by 2025 about 20% of all products produced in the world will be halal. Accordingly, the finances involved in this area are also growing. Already, more than 2 trillion US dollars a year are traded in this area.

Sectors for halal investment

Halal food

The report "Global Islamic Economy" (GIE) said Muslim spending on halal food and beverages (F&B) is projected to reach US$1.9 billion by 2024. Hot growing sectors of the food and beverage market are those that need halal ingredients. For example, gelatin production worldwide is 450,000 tons, of which only 10% is halal. There are also shortages in the supply of other ingredients.

Halal entrepreneurs can leverage the opportunities in these sectors through their innovative halal products and by exploring the gap in the demand and supply chain. This opportunity also applies to halal organic and healthy products, baby food, new exporters, online restaurant booking, retail, social media marketing.

Modest fashion

The target consumer in this sector of the halal industry is Muslim millennials. The market for “modest fashion” in 2024 is projected to reach US$402 billion. It is possible to offer products and services in this market in the form of a “modest” luxurious clothes, “modest” sportswear, clothing for teenagers.

«Modest fashion» how the lifestyle is becoming mainstream among millennials. For example, the release of a “modest collection” clothes from H&M, launch of a “modest fashion collection” as a result of the collaboration between ASOS and the Verona collection. Other success stories making headlines around the world include Vogue Arabia, Harper's Bazaar Arabia, Harper's Bazaar Singapore. In India, the trading platform mubarakdeals.com — another example of success in the “modest fashion” market.

Media and leisure

Halal media and entertainment refers to content targeted at or suitable for Muslims. Member countries of the Organization of Islamic Cooperation (OIC) have noted strong performance in producing more Islamic themed content from the region. This sector of the halal industry primarily targets Muslim millennials. It is predicted that by 2030, 54% of the Muslim population will be under 30 years of age (Thompson and Reuters, 2019).

For example, in Saudi Arabia the ban on cinema was lifted only in 2018. In order to achieve the goal of diversifying the Kingdom's economy and production, it plans to open more than 300 screens across several cinemas by 2030. This will create thousands of opportunities for halal entrepreneurship. These opportunities can be used in other OIC member countries as the industry is growing significantly.

Muslim tourism

Global travel spending by Muslims is projected to reach US$274 billion in 2024. Opportunities in this sector of the halal industry can be created by realizing both demand and supply in the market. Demand for Muslim travelers includes leisure, business, healthcare and religious travel. On the other hand, the supply side includes transportation (bus, train, flights), accommodation (hotels, villas, resorts, apartments, family stays), food and beverages, travel agencies, attractions and activities, Muslim friendly guides and much more that related to travel and tourism.

Such supply and demand are based on the needs of the Muslim faith. Halal entrepreneurs have potential market opportunities in the tourism industry to cater to religious needs, which include halal food, prayer facilities, water-efficient toilets, Ramadan services and amenities, halal spas, gender-segregated swimming pools and gyms, guarantees to eliminate any non-halal activities.

Halal pharmaceuticals

The halal pharmaceutical industry will grow by US$134 billion in 2024, and the market expansion could be even greater as the target consumer is not limited to just the Muslim population. Demand for halal medicines among Muslim consumers is growing. Additionally, it has gained acceptance among non-Muslim consumers due to its ethical aspect and halal compliance requirements, which include Good Manufacturing Practices (GMP) as a precondition before fulfilling other halal certification requirements. This quality guarantee sets a high standard in the market, which allows Halal to become a recognized value in the pharmaceutical industry worldwide. A number of pharmaceutical companies in Malaysia are leading the industry as Malaysia is the first country to develop the most comprehensive Halal standard. for the pharmaceutical industry.

Halal cosmetics

Halal cosmetics and personal care products — another rapidly developing market in the global halal industry. It is expected to grow by US$95 billion in 2024. The product base of this industry has expanded to include personal hygiene products, decorative cosmetics (face, eyes, lips, nails), and perfumes. In addition, these product lines are used for hair, face, skin and beauty care. Some hot sectors of this industry that will grow — These are halal nail polish, lipstick, halal face cream, perfume and perfumes. Potential growth was identified through e-commerce. Cosmetics and personal care products are in demand even by men, as they also care about their appearance. Halal certification, i.e. "Halal" logo also provides a huge competitive advantage.

Potential markets for halal entrepreneurs are among the top 15 countries in the GIE ranking, with Malaysia leading the way with the highest GIE score, followed by the UAE in second place. Other markets on the list include Bahrain, Saudi Arabia, Indonesia, Oman, Jordan, Pakistan, Kuwait, Qatar, Brunei, Sudan, Turkey, Iran and Bangladesh respectively. Interestingly, Brazil ranked third in the halal food and beverage industry.

Halal production in Russia

The demand for halal products around the world is increasing, and Russia intends to fill this niche by increasing the export of halal products. For this purpose, a national Competence Center in the field of halal products and services has been opened in Russia.

The production of halal products in Russia has doubled since 2019, according to Roscongress. According to experts, by 2024 the export of these products to Arab countries will reach the level of 400 million US dollars, and by 2030 — 700 million US dollars. Russia is already negotiating with Oman about the supply of halal products to this country — Thus, in January 2023, Rosselkhoznadzor reported on how country representatives visited Russian meat processing plants to assess their compliance with halal standards. Entering Oman will allow establishing trade ties with other Gulf countries interested in halal products.

One of the promising areas in the production of halal products for export — halal deer meat, sausages and semi-finished products from it. In the regions involved in reindeer husbandry, production and processing capabilities are now being increased; for example, the Ministry of Agriculture reports that a new factory has opened in the Yamalo-Nenets Okrug, focused on the production of venison products according to Halal standards. For now, local production satisfies regional demand, but in the future these products can also be exported.

Among the positive trends, there is a constant increase in popularity and trust in halal products on the part of the non-Muslim part of consumers (“Muslims make for themselves; there is additional religious control of raw materials, production processes; they do not use “chemistry” and “pumping”, specificity slaughter and cutting, makes the meat taste better and more."

National halal standards are being introduced in Russia for the first time. GOSTs were developed by the Project Technical Committee for Standardization No. 704 “Halal Products and Services,” which includes Roskachestvo. The new standards were approved by orders of Rosstandart dated December 30, 2022. We are talking about GOST R 70401-2022 “Processes for the production of halal food products. General requirements for halal food products" and GOST R 70405-2022 “Halal products and services. General terms and definitions." The documents will come into force on March 1 and June 1, 2023, respectively.

When developing the first national halal standards, the requirements of international standards were taken into account, which in the future will facilitate Russia’s integration into international halal standardization systems as an equal partner and create favorable conditions for Russian manufacturers to enter the global halal market, Roskoshestvo noted.