KUALA LUMPUR, Sept 9 — Halal businesses should seize the opportunities to better position themselves and embrace sustainability as well as digitalisation which can provide stronger platforms to rebound as the economy recovers, said Bank Negara Malaysia (BNM) today.

BNM deputy governor Datuk Abdul Rasheed Ghaffour said the halal industry would stand to benefit as Islamic financial institutions had developed into matured institutions that were now offering a wide range of financial solutions to meet the varied needs of customers.

“We have observed the increasing prominence of Islamic financial institutions in supporting the halal sector in recent years.

“Although only 21.9 per cent of Malaysian halal-certified companies used Islamic finance in 2018, the number of applications from this segment has doubled to 10,800 in 2020, amounting to RM63 billion,” he said in his opening remarks at a panel session titled “Evolution of Islamic Finance in the Halal Economy and Contribution to Global Economy Recovery” that was held virtually today.

The session was held in conjunction with the World Halal Business Conference 2021.

Malaysia’s domestic halal market is currently valued at about RM300 billion, contributing seven per cent of the country’s Gross Domestic Product (GDP), and projected to grow further to RM400 billion, to account for 11 per cent of GDP by 2030.

Abdul Rasheed said the value proposition of Islamic finance had extended the ability of Islamic financial institutions to offer beyond bank-based credit intermediation.

According to him, the universal scope of business under the Islamic Financial Services Act 2013 allows Islamic financial institutions to mobilise different sources of funds towards delivering meaningful solutions.

“One example is the provision of value-added services to small and medium enterprises (SMEs) such as marketplace and advisory services in trade facilitation alongside supply chain finance capability,” he said.

To date, five Islamic banks are already offering such services through the Halal Development Corporation’s Halal Integrated Platform and more are expected to join the digital platform this year.

Moving forward, he called on Malaysian financial institutions to take advantage of the strong government-to-government ties and multilateral strategic cooperation in the halal sector between countries to offer Islamic trade finance to halal industry players.

Abdul Rasheed said increasing interest from Asean countries, which makes up 42 per cent of the global Muslim population, as well as demand from non-Muslim dominated Asian countries such as Japan, South Korea and Vietnam provided a huge halal consumption base for domestic halal businesses to tap on.

“Currently, three Malaysian financial institutions have leveraged their extensive global network and strategic partnerships to assist halal exporters in gaining access to new markets,” he added.

Abdul Rasheed said Malaysia’s halal food and beverages segment, which makes up 80 per cent of Malaysia’s halal production and 86 per cent of total halal exports, may be adversely affected by climate change.

In the effort of incorporating sustainability practices, the Islamic financial institutions had also put together a lot of efforts and resources in place, underpinned by the concept of value-based intermediation, he noted. — Bernama